Croatia Real Estate Report Q3 2012

The Croatia Real Estate report examines the Commercial Office, Retail and Industrial segments throughout the country in the context of a dour outlook for the economy, which will post a full year recession in 2012.
With a focus on the three principal cities of Split, Zagreb and Zadar, the report covers the rental market performance in terms of rates and yields over the past 18 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk. Exposure to the eurozone sovereign debt crisis is impacting export demand and will also manifest itself as ever-important tourist figures fall in 2012, while severe austerity measures will squeeze consumer and government spending alike. Foreign direct investment will slow and credit streams will tighten as domestic banks feel the knock-on effects of EU banking regulations. 

The property market is inevitably being impacted, last year saw stagnant or falling rents in all cities, while yields fell across the board. Rents were also under pressure from a strong supply pipeline. Retail was a bright spot, with rents increasing in all cities boosted by strong tourist arrivals and consumer confidence picking up slightly as the country emerged from recession. 

The key news in recent times has been the decision by the EU to close negotiations on accession. Croatia is now scheduled to join the EU on July 1 2013. EU membership will have a number of positive impacts on both the economy as a whole and the construction/real estate sector in particular.

Key Points: 

• Large amount of office space due to come online in 2012, but the risk rests on whether there will be significant demand to match. We believe Croatia''s Kukuriku coalition government is well placed to maintain its parliamentary majority and push through with necessary fiscal consolidation and economic restructuring. 
• Croatia''s economy will post a full-year recession in 2012 – we have revised our forecast to a 1.5% real GDP contraction following no growth in 2011 – as flagging external demand weighs on exports and fiscal austerity by the Kukuriku government squeezes domestic demand. 
• We revised our upwards forecast for Croatia''s average consumer price inflation in 2012 to 3.5%, from 3.0% previously. This was largely predicated on the government''s plans to raise the VAT rate to 25% from 23%, effective March 1, and the sustained rise in global energy prices at the start of the year, which will boost imported inflationary pressures. 
• We forecast that Croatia''s construction sector is poised for a further 0.4% year-on-year (y-o-y) contraction in real terms in 2012 – its fourth consecutive year of decline – as businesses remain cautious about making new investments, and the government postpones existing projects.

Croatia Real Estate Report Q3 2012

Published: June 2012          No. of Pages: 63        Price: US $ 1175          

   

Table of Contents

Executive Summary . 5
SWOT Analysis . 7
Real Estate Market Overview .. 9
Zagreb . 11
Split .. 11
Zadar ... 11
Market Analysis – Office 12
Supply And Demand. 12
Rents And Yields .. 12
Table: Historic Rents – 2010-2011 (USD per m2/month) . 12
Table: Terms of Rental Contract/ Leases - Mid 2011 .. 13
Table: Net Yield, 2011-2012 (%) . 13
Industry Forecast Scenario ... 14
Table: Forecast Rents - (USD per m2/month).. 14
Table: Forecast Net Yield, 2008-2016 (%) .. 14
Market Analysis – Retail 15
Supply And Demand. 15
Rents And Yields .. 15
Table: Historic Rents – 2010-2011 (USD per m2/month) . 15
Table: Terms of Rental Contract/ Leases - Mid 2011 .. 16
Table: Net Yield, 2011-2012 (%) . 16
Industry Forecast Scenario ... 17
Table: Forecast Rents - (USD per m2/month).. 17
Table: Forecast Net Yield, 2008-2016 (%) .. 17
Table: Croatia Retail Sales Indicators . 18
Market Analysis – Industrial .. 19
Supply And Demand. 19
Rents And Yields .. 19
Table: Historic Rents – 2010-2011 (USD per m2/month) . 19
Table: Terms of Rental Contract/ Leases - Mid 2011 .. 20
Table: Net Yield, 2011-2012 (%) . 20
Industry Forecast Scenario ... 21
Table: Forecast Rents - (USD per m2/month).. 21
Table: Forecast Net Yield, 2008-2016 (%) .. 21
Forecast Scenarios 22
Infrastructure Report 22
Table: Croatia Construction And Infrastructure Industry Data, 2009-2016 22
Table: Croatia Long Term Construction And Infrastructure Industry Data, 2013-2021 . 23
Construction And Infrastructure Forecast Scenario 24
Macroeconomic Outlook ... 25
Table: Croatia - Economic Activity . 27
Real Estate Risk/Reward Ratings . 28
Real Estate/Construction Risk/Reward Ratings 28
Table: Real Estate/Construction Risk/Reward Ratings 28
Croatia Business Environment .. 28
Table: BMI Business And Operation Risk Ratings ... 29
Institutions ... 30
Table: BMI Legal Framework Rating .. 31
Infrastructure ... 32
Table: Labour Force Quality ... 34
Market Orientation .. 35
Table: Emerging Europe - Annual FDI Inflows ... 36
Table: Trade And Investment Ratings .. 38
Table: Top Exports .. 39
Operational Risk .. 40
Competitive Landscape . 41
Company Profiles ... 44
GTC Real Estate .. 44
Konstruktor-inženjering ... 46
Landmark Property Management 48
Orco Property Group ... 49
TriGranit Development Corporation ... 51
Demographic Data .. 53
Table: Croatia''s Population By Age Group, 1990-2020 (''000) 54
Table: Croatia''s Population By Age Group, 1990-2020 (% of total) ... 55
Table: Croatia''s Key Population Ratios, 1990-2020 56
Table: Croatia''s Rural And Urban Population, 1990-2020 . 56
BMI Methodology ... 57
How We Generate Our Industry Forecasts .. 57
Construction Industry .. 58
Bank Lending ... 59
Real Estate/Construction Business Environment Rating .. 59
Table: Weighting Of Indicators ... 60
Sources 62Table: Historic Rents – 2010-2011 (USD per m2/month) . 12
Table: Terms of Rental Contract/ Leases - Mid 2011 . 13
Table: Net Yield, 2011-2012 (%) . 13
Table: Forecast Rents - (USD per m2/month). 14
Table: Forecast Net Yield, 2008-2016 (%) . 14
Table: Historic Rents – 2010-2011 (USD per m2/month) . 15
Table: Terms of Rental Contract/ Leases - Mid 2011 . 16
Table: Net Yield, 2011-2012 (%) . 16
Table: Forecast Rents - (USD per m2/month). 17
Table: Forecast Net Yield, 2008-2016 (%) . 17
Table: Croatia Retail Sales Indicators . 18
Table: Historic Rents – 2010-2011 (USD per m2/month) . 19
Table: Terms of Rental Contract/ Leases - Mid 2011 . 20
Table: Net Yield, 2011-2012 (%) . 20
Table: Forecast Rents - (USD per m2/month). 21
Table: Forecast Net Yield, 2008-2016 (%) . 21
Table: Croatia Construction And Infrastructure Industry Data, 2009-2016 . 22
Table: Croatia Long Term Construction And Infrastructure Industry Data, 2013-2021 . 23
Table: Croatia - Economic Activity . 27
Table: Real Estate/Construction Risk/Reward Ratings . 28

Table: BMI Business And Operation Risk Ratings . 29

Table: BMI Legal Framework Rating . 31
Table: Labour Force Quality . 34
Table: Emerging Europe - Annual FDI Inflows . 36

Table: Trade And Investment Ratings . 38

Table: Top Exports . 39
Table: Croatia''s Population By Age Group, 1990-2020 (''000) . 54
Table: Croatia''s Population By Age Group, 1990-2020 (% of total) . 55
Table: Croatia''s Key Population Ratios, 1990-2020. 56
Table: Croatia''s Rural And Urban Population, 1990-2020 . 56
Table: Weighting Of Indicators . 60