Residential

There is demand for residential real estate in Slovakia; however buyers are much more cautious. The prices are lower, bringing with them lower quality, which is expected to affect new projects in the next 5-10 years. Investors concentrate on sustainability. Low quality projects on the residential market are certainly a looming concern - "This is the key factor that will affect selling in the next couple of years," explained an expert at the Real Estate and Development Conference, Bratislava on May 3, 2010.

The purchasing power of Slovaks has decreased by only a minimum - the effects of the crisis will be delayed, felt from the second half of 2010, especially in the services sector. The production industry is already going up.

At the moment there are 4000 unoccupied unsold apartments in Bratislava in new buildings. Young families are looking for discounts, good deals - 40-80 m2 apartments. In this atmosphere of oversupply, agencies do not list every apartment, only the ones that have the potential to be sold within 3 months. Around 40% of the current offers on the market are advertized for unrealistic prices, the actual sales price is usually 20% below the publicized price. It is the agents' responsibility is to inform the seller about the realistic price; if the price is right, the property will be sold within a month. If it is not sold within 3 months it is not worth investing in advertizing at the same price. Agents must be creative in using the right wording to target the proper groups and using uncharted marketing channels.

According to the real estate agency RE/MAX SLOVAKIA the sale and rent of property should increase by 15% in 2010. Prices of residential property have fallen by 10% in first quarter of 2010. According to the analyst of Postova Banka the prices of houses and apartments were the lowest in the last quarter of 2009. Prices returned back to the level of the end of the year 2007. Any increase will depend on the labor market.

Doom for the Construction Industry

It will be another two years before the apartments currently being built will be bought. The construction sector has fallen 8-12% since 2008/2009. The price of materials continues to drop, the building sector is no longer about revenue, it is merely about survival. The price of labor is going down. 2010 already brought dramatic decrease, new orders are not coming in, the only possibility is EU funds, PPP funds; this will be the year of dramatic downsizing in the building sector, with massive unemployment.

Commercial Scene

All new projects are mostly retail projects - for example Boria, Aupark in Kosice, Central (also residential) on Trnavske Square, and Trnava. Bratislava has potential for one more shopping center, namely in Twin City (see image to the left) in Mlynske Nivy, between Stare Mesto (Old Town) and Ruzinov districts, by HB Reavis, due to complete in 2014.

The ability to finance such projects depends on the segment. For example industrial real estate is problematic, banks require 80-90% down payment and only provide 10-20% LTV. In the commercial retail & office sectors the banks are more open to finance, but they reserve the right to step back from the project and withdraw financing if it is not progressing according to plan. Investors need to present 40-50% of the preliminary rental contracts just to be able to speak to a bank about possible financing.

Office & Retail

The two flagship waterfront projects of Bratislava, J&T's River Park (small images) and Ballymore's Eurovea (pictured below), both financed by CSOB Bank, have completed reasonably well. The grand opening of the 5-star Kempinski Hotel and the riverside promenade at River Park will be held in June 2010. The opening celebrations of the whole project are expected by the end of the summer, there is 85% occupancy so far, of the total area of 34,000 sq meters of retail and office space. J&T Group has 50% occupancy in the West End Square (final completion 7/2011) and 95% in Tower 115, which is located next to Ballymore's spectacular Eurovea project. Eurovea had its grand opening on April 24. 500,000 people (equal to the entire population of the capital city) visited Bratislava´s newest and most elegant shopping centre Eurovea Galleria in first two weeks since its opening. 30% of their office space and 99.75% of the retail space is occupied. Investors are looking for net effective rent, 10 EUR per sq meter is no longer interesting. Bratislava has the cheapest office space in the whole of Central Europe. The financing of office space in 2010 has also changed - 40% own finances, 40% pre-lease (compared to 2005 when the bank only required 15% own finances).

Andras Patkai ww.ceinvest.sk