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

                                    

Australia Real Estate Report Q3 2012

The Australian commercial real estate market continues to be fairly balanced because, structurally, the industry functions in a way that restricts over-development. It operates in an economy that, despite weak consumer sentiment and structural changes, is performing reasonably well. The economy and sector are underpinned by resources and demand from China, a reducing threat of interest rate rises, low unemployment and a strong infrastructure sector. We caution, however, that our outlook for the economy in 2012 is bearish, and the country will be negatively affected by the expected slowdown in Chinese economic growth.

Having consulted our in-country sources in December 2011, we can confirm that whilst rents in some regions experienced strong growth, it seems our view for a slowdown in Australia’s economic growth has already started to play out.

National Australia Bank’s commercial property survey for Q311 described the short-term outlook for retail property as subdued and forecast to remain negative through much of 2012. Property services firm CB Richard Ellis has said that it detects the long-awaited emergence of Chinese investors into the direct Australian commercial property markets.

Treasurer Wayne Swan has said the IMF''s annual report on Australia''s economy is a strong endorsement of the government. It said the economy’s performance since the onset of the global financial crisis has been enviable.

Some of the key opportunities in the real estate market include: 

• There is a resources boom in Australia at present, built significantly but not entirely on exports to China. This is putting money into the economy and bolstering downstream industries.
• Following the global financial crisis most Australian REITs have deleveraged to a large degree and now have capacity, by way of undrawn facilities among other measures, to invest as opportunities arise.
• The Australian commercial real estate market continues to be fairly balanced because, structurally, the industry operates in a way that restricts over-development. Careful bank lending policies meant that when demand for space dropped off in 2008 and 2009 there was not suddenly a glut of vacant property.
• The natural disasters in Queensland at the beginning of 2011 are providing a significant lift in the level of work for the construction industry and businesses that supply the industry. Also, monetary policy will be kept accommodation in order to drive the post-disaster recovery efforts, although the effects of this will taper off as work is completed.
• The Australian economy is in essentially sound shape. Some key risks to the current real estate market are: Weaker-than-expected growth in China would lead to weaker economic performance for Australia, given that Chinese demand is the largest driver for Australian exports, including coal and iron ore.
•  Weakening investor sentiment could result in a subdued market during 2012. 􀂃 There is a widening gap between the flourishing resources sector and the rest of the economy. 􀂃 We are concerned about weak consumer sentiment in Australia.

Real Estate Report of Australia Q3 2012

Published: June 2012           No. of Pages: 62            Price:  US $ 1175   

 

Table of Contents

Executive Summary . 5
SWOT Analysis . 7
Australia Real Estate/Construction SWOT 7
Australia Political SWOT .. 7
Australia Economic SWOT 8
Australia Business Environment SWOT . 8
Real Estate Market Overview .. 9
Market Analysis - Office. 11
Rents and Yields ... 11
Table: Historic Office Rents, 2010-2011 (AUD per m2/month) 12
Table: Net Office Yields, 2011-2012 12
Table: Terms of Office Rental Contract/Lease, Mid-2011 ... 12
Supply and Demand . 13
Industry Forecast Scenario ... 14
Table: Forecast Office Rents - (AUD per m2/month) ... 14
Table: Forecast Net Office Yields, 2008-2016 . 14
Market Analysis - Retail . 15
Rents and Yields ... 15
Table: Historic Retail Rents, 2010-2011 (AUD per m2/month) 15
Table: Net Retail Yields, 2011-2012 16
Table: Terms of Rental Contract/Lease, Mid-2011 .. 16
Supply and Demand . 16
Industry Forecast Scenario ... 17
Table: Forecast Retail Rents, 2012 (AUD per m2/month) 17
Table: Forecast Net Retail Yields, 2008-2016 . 17
Market Analysis - Industrial .. 18
Rents and Yields ... 18
Table: Historic Industrial Rents, 2010-2011 (AUD per m2/month) .. 18
Table: Net Industrial Yields, 2011-2012 .. 19
Table: Terms of Industrial Rental Contract/Lease, Mid-2011 . 19
Supply and Demand . 19
Industry Forecast Scenario ... 20
Table: Forecast Industrial Rents, 2012 (AUD per m2/month) .. 20
Table: Forecast Net Industrial Yields, 2008-2016 ... 20
Forecast Scenarios 21
Infrastructure Report 21
Table: Australia Construction And Infrastructure Industry Data, 2008-2016 . 21
Table: Australia Construction And Infrastructure Industry Data. 2013-2021 . 22
Construction And Infrastructure Forecast Scenario 23
Table: Largest Expansion Plans .. 27
Macroeconomic Forecast . 29
Table: Australia - Economic Activity, 2011-2016 31
Real Estate/Construction Risk Reward Ratings . 32
Table: Real Estate/Construction Risk/Reward Ratings 32
Australia Business Environment ... 32
Table: BMI Business And Operation Risk Ratings ... 33
Institutions ... 34
Table: BMI Legal Framework Rating .. 34
Infrastructure ... 36
Table: Labour Force Quality ... 38
Market Orientation .. 39
Table: Asia - Annual FDI Inflows, 2008-2010 . 39
Table: Trade And Investment Ratings .. 41
Table: Top Export Destinations, 2002-2009 44
Operational Risk .. 44
Competitive Landscape . 45
Company Profiles ... 48
Bovis Lend Lease (BLL) ... 48
Brookfield Multiplex (BM) ... 50
Laing O’Rourke ... 52
Leighton Holdings ... 53
Mirvac . 56
Stockland Group .. 58
Demographic Data .. 61
Table: Australia''s Population By Age Group, 1990-2020 (''000) . 62
Table: Australia''s Population By Age Group, 1990-2020 (% of total) . 63
Table: Australia''s Key Population Ratios, 1990-2020 . 64
Table: Australia''s Rural And Urban Population, 1990-2020 ... 64
BMI Methodology ... 65
How We Generate Our Industry Forecasts .. 65
Construction Industry .. 66
Bank Lending ... 67
Real Estate/Construction Business Environment Rating .. 67
Table: Weighting Of Indicators ... 68
Sources 71Table: Historic Office Rents, 2010-2011 (AUD per m2/month) . 12
Table: Net Office Yields, 2011-2012 . 12
Table: Terms of Office Rental Contract/Lease, Mid-2011 . 12
Table: Forecast Office Rents - (AUD per m2/month) . 14
Table: Forecast Net Office Yields, 2008-2016 . 14
Table: Historic Retail Rents, 2010-2011 (AUD per m2/month) . 15
Table: Net Retail Yields, 2011-2012 . 16
Table: Terms of Rental Contract/Lease, Mid-2011 . 16
Table: Forecast Retail Rents, 2012 (AUD per m2/month) . 17
Table: Forecast Net Retail Yields, 2008-2016 . 17
Table: Historic Industrial Rents, 2010-2011 (AUD per m2/month) . 18
Table: Net Industrial Yields, 2011-2012 . 19
Table: Terms of Industrial Rental Contract/Lease, Mid-2011 . 19
Table: Forecast Industrial Rents, 2012 (AUD per m2/month) . 20
Table: Forecast Net Industrial Yields, 2008-2016 . 20
Table: Australia Construction And Infrastructure Industry Data, 2008-2016 . 21
Table: Australia Construction And Infrastructure Industry Data. 2013-2021 . 22
Table: Largest Expansion Plans . 27
Table: Australia - Economic Activity, 2011-2016 . 31
Table: Real Estate/Construction Risk/Reward Ratings . 32
Table: BMI Business And Operation Risk Ratings . 33
Table: BMI Legal Framework Rating . 34
Table: Labour Force Quality . 38
Table: Asia - Annual FDI Inflows, 2008-2010 . 39
Table: Trade And Investment Ratings . 41
Table: Top Export Destinations, 2002-2009 . 44
Table: Australia''s Population By Age Group, 1990-2020 (''000) . 62
Table: Australia''s Population By Age Group, 1990-2020 (% of total) . 63
Table: Australia''s Key Population Ratios, 1990-2020 . 64
Table: Australia''s Rural And Urban Population, 1990-2020 . 64

Table: Weighting Of Indicators . 68