Belgrade Real Estate Market Outlook 2013

Belgrade | 3Q 2H 2013
2010
Belgrade | 1H 2010
Real Estate
Market & Trends
Outlook

Real Estate
Market & Trends
Outlook
Belgrade | 3Q 2013

For further market information, please contact
Zana Sipovac
Head of Valuation and Investment Advisory
zana.sipovac@leroy.rs
Srdjan Runjevac, MSc
Senior Valuation Consultant
srdjan.runjevac@leroy.rs
T + 381 11 26 32 300
F + 381 11 32 84 647
17, Cara Urosa Street - Belgrade
office@leroy.rs
www.leroy.rs
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Real Estate Market & Trends Outlook | 1
Table of Contents
ECONOMY OUTLOOK 2
OFFICE MARKET & TRENDS 4
Supply
Demand 5
Vacancy 6
Rents 6
Pipeline 7
Forecast 7
RETAIL MARKET & TRENDS 9
Supply 9
Demand 9
Vacancy 10
Rents 10
Pipeline & Announced 11
Forecast 11
INDUSTRIAL MARKET & TRENDS 13
Supply 13
Demand 14
Rents & Yields 14
Pipeline & Forecast
Sustainability & “Green” building market trends 15
RESIDENTIAL MARKET & TRENDS 18
Supply 18
Demand 19
Pricing 19
Developed & Under construction 19
Forecast 19
Table 1 – Economy indicators
Chart 1 – Belgrade office stock
Chart 2 – Belgrade office delivery, semiannual
Chart 3 – Belgrade office vacancy rates
Chart 4 – Average rent levels
Chart 5 – Office yields
Chart 6 – Structure of retail sale in Serbia
Chart 7 – Shopping center stock in Belgrade
Chart 8 – Big-box stock in Serbia & Belgrade
Table 2 – New retail deliveries
Chart 9 – Prime & secondary rents in Belgrade
Chart 10 – Indicative retail yields
Table 3 – Projects under construction & announced
Chart 11 – New industrial & logistics developments in
Serbia
Chart 12 – Industrial & logistics construction permits
issued in Serbia
Chart 13 – Industrial & logistics construction permits
issued in Belgrade
Chart 14 – Modern warehouse rents in Belgrade &
wider area
Table 4 – Announced developments & pipeline
Chart 15 – Number of constructed apartments in Serbia
& Belgrade
Chart 16 – Number of constructed apartments in
Belgrade municipalities
Chart 17 – Structure of new apartments in Serbia
Chart 18 – Residential construction permits issued in
Serbia & Belgrade
Chart 19 – Residential construction permits issued in
Belgrade municipalities
Chart 20 – No of sold apartments in central Belgrade
municipalities
Chart 21 – No of sold apartments in Belgrade & Serbia
Chart 22 – Average asking prices in Belgrade municipal.
Chart 23 – Average asking rents in Belgrade municipal.
Table 5 – New residential deliveries & announced
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In the first three quarters of 2013, Serbia recorded a
modest economic recovery after it slipped into the
recession in 2012 when a downfall in GDP rate of -
1.7% was recorded. The main Serbian economic
issues, that influenced the latest Fitch rating as BB-with
negative outlook, represents a continuous
increase in budget deficit, increasing public debt,
fragile economic recovery mostly depending on the
automobile industry and high dependence on the
international credit arrangements.
The economy slowdown was also driven by a
decrease in loan instruments that became more
expensive due to high interest rates, as a consequence
of more cautious and restrictive measures instructed
from the banks. Therefore, vast majority of public
and private entities are facing a high level of
illiquidity issues and credit repayment inabilities.
The restructured Serbian government has announced the adoption of
several austerity measures in October 2013 in order to reduce budget
deficits and improve the conditions for economic growth in 2014.
Without implementation of strict and unpopular measures, including
layoffs in the public sector and ending the long term process of
restructuring companies, expected improvements will not be
possible in the short term.
According to the official data, after the negative GDP growth rate of -
1.7% in 2012, Serbian economy recorded a modest GDP growth of
0.2% in 2Q 2013, mostly affected by growth in information and
communication sector (9.6%), electricity, gas and steam supply
(3.2%), and mining and quarrying (2.8%). The most significant
decline was recorded in the construction sector (-42.5%) as the most
severely affected by the global crisis.
According to the preliminary data, GDP growth was strengthened in
3Q 2013 to 3.2%.
Industrial production recorded strong growth by 13.4% in September
2013 compared to September 2012, with growth in electricity, gas,
steam and air conditioning supply sector by 19.8%, followed by
manufacturing (12.2%) and mining (10.4%). During the period
January – September 2013 it recorded an increase of 6.4% comparing
to the same period last year.
In the 1H 2013, construction sector in Serbia was faced with
continuous slump that started as a consequence of the global
financial crisis in 2008. The value of construction works in the period
January - June 2013 decreased by 34.9% compared to the same period
2012, also followed by the decrease in total number of issued
building permits by 4.4%.
Serbia’s FDI inflow reached its lowest level in relation to all the years
of crisis. According to the National Bank of Serbia, net FDI inflow in
the first three quarters of 2013 amounted to EUR 584 million, while
expected inflow of EUR 800 million is 20% less than the year before.
In March 2013, Serbia started negotiations with the companies from
UAE. The Al Dahra Company signed a preparatory agreement with
the Serbian government that implies investing USD 400 million in
Serbian agriculture sector. The Serbian government signed a strategic
partnership agreement with the Etihad Company in August 2013, by
which former air-transportation company “Jat Airways” will be
restructured into a new company entitled “Air Serbia”.
Total exports of goods in the period of January - August 2013
amounted to USD 9.237 billion, as a 28.1% increase comparing to the
same period last year.
In 2012, Serbia recorded the highest level of annual inflation rate of
12.2%, while 1Q and 2Q 2013 reflected a gradual decrease in
inflationary pressure. However, consumer prices in September 2013,
compared to September 2012, increased by 4.9%, while compared
with the previous month an increase of prices was noted in
communication sector (0.7%), housing, water, electricity, gas and
other fuels (0.5%), transport (0.4%), restaurants and hotels (0.3%),
and food and non-alcoholic beverages (0.2%). The highest price
decrease was noted in the group recreation and culture (-5.4%).
Economy
Outlook
3Q
2013

Serbian unemployment rate recorded a modest decrease from 1Q’s
25% to 2Q’s 24.1% in 2013. However, according to the latest
predictions, 2013 will end with the highest rate of 26.5%. The
announced reforms in 2014 will increase this rate, placing this issue
as a top priority of any economic strategy.
The average net salary in September 2013 was RSD 42,866, which
represents an increase of 1.5% in real terms, and an increase of 6.5%
in nominal terms when compared to September 2012.
According to the IMF (International Monetary Fund) forecast,
estimated GDP growth in 2013 has been revised to 2%. Due to a
number of structural problems waiting to be solved, it is difficult to
expect positive changes in the real estate and construction sector in
2014.
Forecast
It is expected that GDP growth during the 2013 will keep the positive
rate. However, the latest predictions for the year-end results are
below those initially forecasted, with a modest GDP growth of 1.8%
y-o-y. This gradual recovery of Serbian economy mostly depends on
external exports that recorded a strong increase of 26.4% in 1H 2013
compared to the same period last year, mostly due to higher exports
of FIAT cars and good agricultural season.
Inflation continues to represent one of the biggest challenges with an
estimated double digit rate of 10% y-o-y in 2013. The main goal of the
National Bank of Serbia is to succeed in bringing the rate to the level
of 4.1% by 2015.
The announced austerity measures will also contribute to the
economy slowdown, since it will influence the further decline in
domestic demand and a possible increase in the unemployment rate.
In 2013, the European Commission recommended that Serbia should
be granted a date for the start of negotiation for accession to the EU,
which should improve business climate in the country, attract new
investments and enable access to the EU funds. However, the exact
date will be provided at the beginning of 2014, as it was previously
conditioned by progress in the Belgrade – Pristine negotiations.
A new privatization and restructuring cycle of the remaining large
state owned companies is expected in the following period, as well as
a new credit arrangement with the IMF.
Table 1
Macroeconomic indicators
2008 2009 2010 2011 2012 1Q 2013 2Q 2013 2013f* 2014f*
GDP (EUR bn) 32.6 28.9 28.0 31.4 29.9 7.4 8.1 32.3 33.5
GDP per capita (EUR) 4,456 3,945 3,981 4,288 4,800 n.a. n.a. 4,537 4,708
GDP (constant prices y-o-y, %) 3.8 -3.5 1.0 1.6 -1.7 2.1 0.2 1.8 2.1
CPI (average y-o-y, %) 8.6 6.6 10.3 7.0 12.2 11.2 9.8 10.0 7.0
Central Bank reference rate 17.8 9.5 11.5 10.5 10.3 11.7 n.a 10 9.5
Monthly wage, nominal (EUR) 402.4 337.9 330.1 372.5 364.5 370.8 394.8 n.a. n.a.
Unemployment rate, in % 13.6 16.1 19.2 23.0 23.9 25.0 24.1 26.5 25.7
Budget balance / GDP (%) -1.7 -3.4 -3.7 -4.2 -5.7 -6.0 -5.2 -5.8 -4.5
Public debt (in % of GDP) 29.2 34.7 44.5 48.2 59.3 62.5 60.6 65.8 65.9
Current account balance (EUR mil) -7,054 -1,910 -1,887 -2,870 -3,155 -622 -268 -2,754 -2,527
Current account balance (% of GDP) -21.6 -6.6 -6.7 -9.1 -10.5 -8.4 -3,3 -8.5 -7.5
Net FDI (EUR mil) 1,824 1,373 860 1,827 1,006 155.3 n.a. 800 800
FDI (% of GDP) 5.5 4.8 3.1 5.6 3.4 4.4 n.a. 2.5 2.4
Gross foreign debt (EUR mil) 21,088 22,487 23,786 24,125 25,721 26,722 26,072 27,814 28,219
Exchange rate to EUR (avg) 81.4 94.0 103.0 102.0 113.1 111.7 112.2 116.0 120.0
Credit rating (Fitch)
BB-
/negative
BB-
/negative
BB-
/stable
BB-
/stable
BB-
/negative
BB-
/negative
BB-
/negative
BB-
/negative
n.a.
Source: National Bank of Serbia
Ministry of Finance and Economy
* Unicredit Bank; Hypo-Alpe-Adria Group

2006 2007 2008 2009 2010 2011 2012 3Q 2013
Chart 2
Belgrade office delivery, semiannual
Following the economic downturn in 2012, Belgrade
office market witnessed an improvement of occupier
demand in 2013. The continued lack of new
speculative office developments contributes to
stabilization of the market rent levels, bringing
vacancy to its lowest level since 2009.
The total volume of demand increased in the first 9
months of 2013, but lease renewals had a
considerable share in total leasing activity. With a
few deliveries announced for 2013/2014 and taking
into account the current market absorption, we can
expect a relatively stable decrease in vacancy in the
coming quarters.
Supply
The Belgrade office market starts to witness an increase in supply
with 25,000 sq m of gross leasable area (GLA) being introduced to the
market over the last 12 months. This marginal addition to supply is a
step forward after a long period of almost zero delivery, recorded
during 21 consecutive months. However, 79% of the newly
constructed office space is owner occupied, indicating very slow
recovery of confidence among investors. Two largest deliveries in 2H
2012 were the headquarter building of Raiffeisen Bank (18,400 sq m
of GLA) and Danube Business Center (5,300 sq m of GLA) located in
New Belgrade.
A few larger office deliveries scheduled for the second half of 2010
have been postponed and none of these projects have been activated
yet. The postponed projects such as “Tri Lista Duvana” (8,500 sq m),
“B-23” (35,000 sq m) and “Atlas office building” (3,600 sq m) will
bring the additional 47,000 sq m of GLA of speculative space.
However, it is still uncertain when these buildings will be introduced
to the market.
A couple of small-scale projects that will bring new 15,000 sq m of
GLA, are currently under construction and their completion is
expected during 2013/2014 period.
Despite strong pipeline, supply has responded with net additions to
stock falling well below pre-recession averages, while development
completions are expected to be low over the next 12 months. With
limited new supply and moderate demand we will see slow but
steady absorption of the vacant space in the coming period.
Chart 1
Belgrade office stock
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
Sq m of GLA
Source: LeRoy Research
Total Class A Class B
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
1H
2008
2H
2008
1H
2009
2H
2009
1H
2010
2H
2010
1H
2011
2H
2011
1H
2012
2H
2012
1H
2013
Sq m of GLA
Total Class A Class B
Office
Market & Trends
3Q
2013

2005 2006 2007 2008 2009 2010 2011 2012 Q3
Demand
Belgrade office market witnessed improvement of occupier demand
in 2013, after last year’s contraction caused by a new wave of
recession. Serbia’s economy recorded a growth in the first three
quarters of 2013, but growing uncertainty about short term economic
outlook prevented sustained upturn in demand, further delaying any
substantial market recovery. The IMF (International Monetary Fund)
has downgraded Serbia’s mid-term growth forecast which is a
warning sign of potential economic turbulence in the country. The
fundamentals in the occupier market are weak, particularly because
of the high unemployment rate and growing state debt.
The market activity in previous years was mainly supported by small
to medium size transactions but unlike 2012, when recorded take-up
decreased cca 15%, in 2013 we noticed a slight increase in
expansionary led requirements. Relocation requirements and lease
renegotiations are still the most active segment of demand,
comprising almost 40% of total leasing activity in 2013, due to the
fact that five-year lease agreements, concluded during the expansion
period (2008), expire this year. New leases in three quarters of 2013
comprise app. 30,000 sq m which is an increase of 31% compared
with the same period last year.
Since the most of contemporary office space is located in New
Belgrade area, the highest number of office leases relate to New
Belgrade office space, while only 25% of lease transactions are in the
downtown area. Occupier activity was predominantly focused on
grade A space. The structure of demand is similar and among most
active occupiers in 2013 are IT companies, banking/insurance sector,
professional services firms, etc.
The recovery in demand will be slow, and rising economy
uncertainty does not contribute to strengthening business
environment. At the local level, expectations for annual take-up in
2013 showing better prospects compared with last year and demand
slowly shifting toward new leases, causing positive upturn in
absorption of available space.
Vacancy
After a peak, vacancy of speculative stock has started to drop in 2011,
but remain in double digits due to still a large amount of surplus
space that needs to be absorbed. In 2013 office vacancy rate
decreased below 20%, first time since 2009.
Low level of net absorption is mainly a result of number of
relocations taking place despite growing element of take-up
generated by new tenants. The majority of vacant space remains
within new developments and the increased vacancy is recorded also
within lower quality class B and C buildings and secondary
locations.
Despite new deliveries in 2012, better absorption of the available
office space in 2013 influenced the further decline in vacancy rates to
average 18% in Q3 2013 (16% class A and 22% class B).
With a few deliveries announced for 2013/2014 and taking into
account current market absorption, we can expect relatively stable
decrease in vacancy in the coming quarters.
Chart 3
Office vacancy rates
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2013
Class A Class B average
Rents
Moderate supply of new office space has kept prime rents stable
since 2011. The prime class A rents are stabilized to EUR 14 - 15.5 per
sq m/month, while the prime class B rents are EUR 11 - 12 per sq
m/month. The rental levels in CBD area for the class A space is EUR
13 - 14 per sq m/month on average, while for the class B premises it is
EUR 10.5 - 11 per sq m/month. The rents in the Wide Center area for
the class A ranges from EUR 12 - 13 per sq/month, and for the class B
from EUR 8 - 10 per sq m/month. Tenant incentives remain a feature
of the market and can include fit-out contributions and rent free
periods, particularly for existing class B buildings while landlords in
prime locations can afford to be less flexible.
Office yields seem to have bottomed out in 2010, and we noticed
stabilization since 2011 onwards. With few speculative developments
that will not significantly affect the existing stock, average rents are
not expected to decline further, especially in the prime office
segment.

Chart 4
Average rent levels
19.0
17.0
15.0
13.0
11.0
9.0
7.0
5.0
1H
2008
2H
2008
1H
2009
2H
2009
1H
2010
2H
2010
1H
2011
2H
2011
1H
2012
2H
2012
1H
2013
EUR/sq m/month
Class A Class B
Chart 5
Office yields
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 3Q
2013
Class A Class B
Pipeline
After a period of stagnation, a few small-scale projects should be
delivered during 2013/2014 that will bring new 15,000 sq m of GLA.
Large-scale developments (the office projects “Tri lista duvana”,
“Atlas building” and “B-23”) are still on hold and their completion
will bring new 47,000 sq m of speculative space to the market.
In terms of speculative developments, the project “Swiss build”
(1,220 sq m of GLA) in Kralja Aleksandra Boulevard should be
delivered by the end of 2013. By the end of 2014, the Austrian
developer Soravia Group announced completion of construction of
mixed-use complex “Old Mill” that will comprise 4* hotel and office
building (3,200 sq m). The construction company Deneza announced
delivery of a new office building in Tosin bunar Street (4,000 sq m)
by the end of 2014.
The announced construction of Banca Intesa headquarter building
(24,000 sq m) at the corner of Mihajla Pupina Boulevard and
Tresnjinog cveta Street in New Belgrade (block 11a) is currently on
hold.
Forecast
New speculative developments are rare and it will remain so until a
sustained upturn in demand. Economic recovery has lost its
momentum, compounded by very low level of foreign direct
investments (FDI) and expected growth of unemployment in the
coming year, which will possibly prevent a required level of
expansionary demand.
The lack of new supply and modest short-term pipeline, together
with slow demand recovery, influence the pace of office market
activity through slow but steady absorption of available space.
Headline rents are expected to remain stable in 2013. With the
expected level of new completions, vacancy rate will decrease further
in next 12 months, setting the scene for slight rental growth of class A
office space. The overall impression is that Belgrade office market
shows a good outlook in the medium run.

Chart 6
Structure of retail sales in Serbia, 2Q 2013
43.2%
4.5%
Development of new shopping centers and other
retail schemes has been reactivated in 2012, bringing
a change after a long period dominated by expansion
of supermarket chains. Occupier activity increased
with the entrance of a few new brands that began an
active market expansion.
High-street vacancy moved upward in 2013, since
shopping centers are the focus of many international
retailers. Development activity is driven by strong
occupancy levels of modern retail concepts, while
sustained reductions in consumer spending and
unstable GDP growth continues to slow
implementation of announced projects.
During the last 12 months, retail market was mostly characterized by
increased occupier activities at the prime shopping mall locations,
reconstruction and reorganization of the existing retail concepts and
its tenant mix, new shopping mall developments, as well as entrance
of new brands to the Serbian market.
Shopping malls and modern retail parks represent the most
prosperous retail concepts, with stable demand and rather low
vacancy rate, while high streets units are facing an increase in the
vacancy, more frequent tenant changes and sharp rent decrease.
In April 2013, online payment system PayPal established its
operations in Serbia, which will provide new shopping experience as
well as certain changes in shopping perception in the period to come.
As the growth of on-line sales increases rapidly internationally, it is
also expected that Serbian retailers will soon adjust the access to the
on-line purchase system.
Overall retail trade turnover in the period January – September 2013,
compared to the same period 2012, increased by 0.1% in current
prices and decreased by 7.3% in constant prices. The average Serbian
household consumption decreased and recorded a negative rate of –
1.2% compared to the same quarter last year, with no major
deviation in the level of participation of goods and services.
0.7% 2.4% 4.6%
4.7%
4.0%
4.7%
15.0%
7.4%
4.4%
4.4%
Source: Statistical Office of the Republic of Serbia
Food and non-alcoholic beverages
Alcohol beverages and tobacco
Clothing & footwear
Residence, water, electricity, gas and fuel
Furniture & household equipment
Health care
Transport
Communication
Recreation and culture
Education
Hotels & Restaurants
Other
Household purchasing power is expected to remain fragile, as salary
cuts in the public sector and other structural reforms have been
announced and should be implemented by the government during
2014, which will further weaken the demand.
Supply
Expansion of supermarket chains was a dominant segment of the
new supply throughout the periods of 2010-2011. After three years of
delay, 2012 witnessed more vibrant activity in retail sector and the
emergence of new retail deliveries throughout Serbia, such as retail
parks and new shopping centers. The overall new supply in Serbia
during 2012 was 76,000 sq m of GLA, which is a significant increase
compared to 23,000 sq m delivered in 2011. During the first three
quarters of 2013, shopping centers stock in Serbia increased by new
43,000 sq m of GLA with opening of the new shopping center
“Stadion” in Vozdovac, re-opening of the shopping center “Merkur”
in Karaburma and opening of a new stage of retail park “Aviv” in
Pancevo.
Food retailers have changed their development strategy, putting
more focus on smaller, neighborhood shops while larger
supermarkets are usually opened within shopping centers and retail
parks. New supermarket growth slowed down in 2012 and the trend
continued during the first 3 quarters of 2013, recording an increase of
app. 22,000 sq m.
Retail
Market & Trends
3Q
2013

Chart 7
Shopping center stock in Belgrade
240,000
210,000
180,000
150,000
120,000
90,000
60,000
30,000
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
Sq m of GLA
Chart 8
Big-box stock in Serbia & Belgrade
600,000
500,000
400,000
300,000
200,000
100,000
0
*without Belgrade
2006 2007 2008 2009 2010 2011 2012 3Q
2013
Sq m of GBA
Serbia* Belgrade
Croatian chain “IDEA” announced a takeover of 53% shares of
Slovenian retailer “Mercator” in the following period, which would
make it the regional leader.
The Belgian retailer “Delhaize” continued the renovation process of
its units across Serbia after the takeover of “Delta Maxi” chain in
2011, which resulted in certain stagnation in the expansion. The
Group’s main activities in 1H 2013 were focused on the
reorganization of its operations in the region by selling their retail
chain in Albania and Montenegro as well as on introduction of a new
retail concept called “Shop&Go” that will replace “Mini Maxi” shops
in Serbia.
The German discount retailer “Lidl” continued its activities
regarding land purchase for its future network development in
Serbia. They secured locations in Valjevo, Subotica, Novi Sad,
Zrenjanin, Nis and Smederevo for their supermarkets (average size
of 800 – 1,300 sq m), while they confirmed the acquisition of land plot
in Belgrade in August 2013.
In Belgrade, only the best locations and retail formats with strong
tenant mix maintained rental rates and operational performance.
Also, a group of international retailers strategically increase their
market presence through active expansion within new retail
schemes, probably anticipating growth rates above average to follow
the pace of the market recovery.
In the 1H 2013, Serbia witnessed the entrance of the long announced
and anticipated international renowned Swedish brand “H&M”,
which opened its first store within “Delta City” shopping center in
August and the second in “Stadion” shopping center in September.
Another well-known clothing brand “Desigual” opened its first store
in Belgrade’s “Usce” shopping center in May, while the famous
watch brand “Rolex” opened its representative store in Belgrade’s
downtown in August.
Belgrade
The shopping center supply pipeline shrank rapidly during last 4
years, as many schemes were delayed or cancelled altogether.
However, the best quality retail concepts, such as prime Belgrade
shopping centers, continue to display strong performance, while the
secondary shopping centers remain less popular and still struggling
to attract demand. Despite the challenging business environment and
low consumer confidence, only 136 sq m of modern retail space per
1,000 inhabitants in Belgrade is the key motivation factor for
potential investors and the Belgrade retail market is showing signs of
recovery as projects put on the sidelines during the recession attract
renewed interest from developers.
Belgrade saw delivery of two shopping centers during the 1H 2013
that boosted stock for additional 39,000 sq m of GLA, and introduced
to the market the first new community shopping center after 2009.
The shopping center “Stadion” was opened in Vozdovac
municipality in April and covers an area of 28,000 sq m of GLA.
Anchor tenants are “Roda” supermarket and fashion retailers
“H&M”, “C&A” and “New Yorker”, while other retailers are
“Deichman”, “Koton”, “Tally Weijl”, “Takko Fashion”, “Planeta
sport”, “Lilly drogerie”, “Julia & More”, etc. This shopping center
diversified itself by positioning a football field on its roof, hosting
Football Club Vozdovac. The investor of this project is the Austrian
company Daun & Cie.
The Slovenian DIY retailer “Merkur” redeveloped its previous retail
space in Karaburma district into a neighborhood shopping center
with an area of 11,000 sq m of GLA in March 2013. The shopping
center hosted brands such as “Takko Fashion”, “JYSK”, “C&A”,
“Deichmann”, “Roda” supermarket etc., while reorganizing and
reducing space of its DIY store on the ground floor.
The Danish “everything for the home” retail concept “JYSK”
continued to strengthen its market presence by opening four new
stores in Belgrade. It opened the store in Kaludjerica’s neighborhood
shopping center “Point” in March, followed by opening the stores

Table 2
New retail deliveries in 2013
Project Location Type
Size (Sqm
of GLA)
Delivery
date
Roda Smederevo Supermarket 2,500 Jan-13
Univerexport Novi Sad Supermarket 4,000 Mar-13
Stadion Vozdovac Shopping center 28,000 Mar-13
Merkur Zvezdara Shopping center 11,000 Mar-13
JYSK Kaludjerica Everything for the home 800-1200 Mar-13
JYSK Novi Sad Everything for the home 800-1200 May-13
JYSK Zemun Everything for the home 800-1200 Jun-13
JYSK Vozdovac Everything for the home 800-1200 Jun-13
JYSK Miljakovac Everything for the home 800-1200 Sep-13
Roda Vozdovac Supermarket 4,000 Apr-13
DIS Nis Shopping center 5,500 Apr-13
AVIV retail park* Pancevo Retail park 3,800 Jun-13
DIS Pozarevac Supermarket 4,000 Aug-13
Univerexport Novi Sad Supermarket 1,500 Sep-13
Idea Vracar Supermarket 900 Sep-13
JYSK Leskovac Everything for the home 800-1200 Sep-13
BIG CEE Novi Sad Shopping center 34,000 End of 2013
DIS Kraljevo Supermarket 4,000 End of 2013
DIS Vrsac Supermarket 4,000 End of 2013
within “Stadion” shopping center and “BN BOS” outlet center in
June. Their latest opening was a store within the department store
“RK Beograd” in Miljakovac municipality in September.
Supermarket chains continue with expansion, now focusing on small
neighbor stores. In this segment, the Croatian retailer “Agrokor”
dominated, with the opening of “IDEA” supermarkets. They
enriched the Serbian capital city by eight smaller markets with areas
between 60 – 300 sq m, with the latest opened supermarket of 900 sq
m in Juzni Bulevar Street in September.
The Slovenian retailer “Mercator” also keeps pace with expansion
through opening the new hypermarket “Roda” (4,000 sq m) within
the “Stadion Shopping Center” in Belgrade.
Serbia
Expansion of new retail schemes in Serbia dominated through 2012,
after a long period of standstill, bringing new 76,000 sq m of retail
space. Developers agree that Serbia’s retail market has not reached
its potential, but unsecured market fundamentals prevent better
development dynamics.
Among the largest new projects delivered during 2012 are the retail
park “Fashion Outlet Park” (15,000 sq m of GLA) in Indjija and the
“BIG CEE” (10,000 sq m of GLA) retail park in Novi Sad, as well as
the shopping center “Plaza” (22,000 sq m of GLA) in Kragujevac and
the shopping center “Roda” (15,000 sq m of GLA) in Krusevac. The
third phase of the retail park “Aviv” (8,000 sq m of GLA) in Pancevo
was delivered in May 2012.
Another phase of the retail park “Aviv” in Pancevo was delivered in
June 2013, bringing new 4,000 sq m of GLA.
In Q4 2013, the second stage of the retail scheme ”BIG” is expected to
be opened in Novi Sad. The second stage will contain a shopping
center (34,000 sq m of GLA) that will be a part of a complex
consisting of a retail park and a shopping center, totaling 44,000 sq m
of GLA.
Food chains have changed their expansion strategy, putting more
focus on development of small neighborhood stores, as a response to
the constant decrease in the purchasing power of the population.
Only few larger supermarkets were delivered during 2013.
The Serbian retailer “DIS” continued with their strong expansion
during 2013 by opening a hypermarket (4,000 sq m) in Pozarevac,
also taking over the space of the French DIY retailer “Mr. Bricolage”
(5,500 sq m) in Nis and reopening it as a hypermarket (4,000 sq m)
including few smaller tenants such as: DIY store “Woby Haus”, a
bank, a pharmacy, etc. New hypermarkets in Kraljevo (4,000 sq m)
and Vrsac (4,000 sq m) should be opened in October.
The Croatian “IDEA” supermarket chain opened four supermarkets
in Novi Sad and one in Cacak, Trstenik and Krusevac. In August,
they opened their first store in Sid with an area of 800 sq m.
The Slovenian retailer “Mercator” opened the “Roda” supermarket
in Pozarevac (2,500 sq m) in January, while the local chain
“Univerexport” continued with expansion in Novi Sad and re-opened
a renovated and expanded supermarket in March (4,000 sq
m) and a new supermarket (1,500 sq m) in the sport center “Spens” in
September.
*stage
Demand
International retailers that entered the market in the period after 2011
and their expansion strategy create a demand for quality retail space
within modern shopping centers and retail parks. Retailer interest
appears to have re-emerged in the last 12 months, especially amongst
mid-range and value retailer brands, which can be confirmed by the
entrance of the renowned Swedish brand “H&M”, which opened its
first store (2,500 sq m) within “Delta City” shopping center in August
2013, and the second store in the “Stadion” shopping center in
September, announcing further market expansion.
Annual footfall remains strong in the prime shopping centers in
Belgrade which is the basis of a stable demand, despite frequent
changes of tenants. Secondary shopping centers do not match similar
performance, which can be explained by lower quality tenant mix
and absence of ‘high profile’ retailers.

Development of new retail schemes, such as retail parks, appeared as
a winning strategy for many retailers looking for expansion, due to
more efficient cost structure including lower rents and operating
costs. The best locations and shopping centers will continue to
benefit from domestic and cross border retailers keen to capitalize on
the counter-cyclical opportunity to expand into high quality space at
a lower cost.
Spending patterns of the population are still negative, which
prevents stabilization of this market segment. In this environment,
retailers will remain cautious, with further rationalization of
underperforming stores especially in high street locations. The
demand for high street locations is slowed down influencing the
increase of vacant units that had been unoccupied for more than 4
months. Secondary locations have seen the highest vacancy so far
and absorption of these units will require time and improvement of
the economy conditions. The structure of tenants is changing at these
locations as well, with a considerable increase in the number of
newly opened coffee bars and fast food restaurants in the prime
zone.
The demand in the retail warehousing segment is also reduced
compared to 2010 – 2011 period, characterized by aggressive
expansion of food chains. Today, these activities are mainly slowed
and the market is expecting the opening of supermarkets of the
German discount retailer “Lidl”. The French chain “Carrefour” has
announced its market entry, as well as the Swedish “Ikea”.
Despite challenging business environment in Serbia, we can expect
moderate demand and strengthening of market position of
international tenants through their strategic expansion in the local
market, primarily within new retail schemes. In 2014, the Serbian
economy will be confronted by similar themes and challenges as in
2013; the consumption will be a volatile category again, and the
retailing environment is set to remain difficult over the next two
years.
Vacancy
The average high street vacancy rate of app. 10-12% in the capital
(prime and secondary locations), reached its highest level since the
beginning of the recession. One of the reasons for the increased
vacancy rates lies in the process of restitution, which is nearing
completion in the case of a part of the disputed properties. On the
other side, changes in the consumption habits and customer
preferences, together with rather high rents and inadequate space
structure of downtown shops, focus a number of brands toward
modern shopping centers and retail parks.
The announced closure of the “GAP” store along with a number of
short term lettings coming to an end, will further affect slower
absorption of vacant units. The trend of rising vacancy on secondary
locations continued and these locations will continue to suffer
demand shortage in the following period, as well.
Prime shopping centers in Belgrade keep the vacancy rate at very
low to zero level, while secondary and neighborhood shopping
centers achieved the highest average vacancy of app. 12%. The
shopping centers “Usce” and “Delta City”, which succeeded in
keeping its vacancy rate close to zero over time, continued with the
trend of changing tenants, regardless of rents decrease and more
flexible landlord’s approach.
Average vacancy rates in modern retail schemes are still low despite
the challenges that the market is facing, primarily due to delays in
the development. Every new retail project will increase city-wide
vacancies over the next 12 months.
Rents
Difficult retail climate is still putting pressure on rents, but the prime
shopping centers appeared to be most resilient, recording only slight
decrease. Average high street rents decreased by 9% in the last 12
months, but when we consider the upper rent levels, the market
indicates even higher rent decrease.
Shopping centers rents maintained mostly the similar levels from
EUR 30 to EUR 60 per sq m, while rents in retail parks range between
EUR 6 – 15 per sq m depending on retail category. Downtown prime
street rents (Terazije, Kralja Milana and Knez Mihajlova Street) have
dropped to average EUR 35 to EUR 80 per sq m, depending mainly
on the size and position of the unit (smaller units maintain higher
range of average rents). Secondary locations rents move between
EUR 15 to EUR 35 per sq m on average.
Chart 9
Prime & Secondary rents in Belgrade
150
100
50
70.0
42.5
35.0
25.0
0
Knez Mihajlova
St.
Terazije & Kralja
Milana St.
Kralja Aleksandra
Blvd.
Secondary streets
EUR/sq m/month
min max average

Project Investor Location Type
Size (sq m
of GLA)
Delivery
date
UNDER CONSTRUCTION
Big Center Big CEE Serbia Novi Sad
Shopping
center
24,000 4Q 2013
Economy Ltd / Industrial
Building Corporation Ltd
Zemun Retail Park 15,000* 2H 2014
YU Kapital / Poseidon
Sabac Retail Park 9,850 1Q 2014
ANNOUNCED
Belgrade /
Palilula
Shopping
Center
48,000 N/A
Belgrade /
Vozdovac
Shopping
Center
75,000 N/A
Vivo retail park Vivo shopping park Jagodina Retail park 10,000 N/A
Belgarde / New
Belgrade
Shopping
Center
40,000 N/A
Rajiceva Avital / Ashrom Group
Belgarde / Old
Town
Shopping
Center
15,000 N/A
Ada Mall GTC Belgrade
Shopping
Center
30,000 N/A
Downward pressure on high street lease rates will remain until
consumer spending picks up, while the lack of competition in the
prime retail segment in next 12 months will be a guarantee of
maintaining similar rental performances. Increase in spending power
is not foreseen in 2014 and the rental growth is unlikely.
Chart 10
Indicative retail yields, 3Q 2013
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
8.00%
9.00%
9.75%
High street Shopping center Retail warehouse
Pipeline & Announced
Retail market in 2013 will achieve similar performances, with total
delivery of 77,000 sq m of GLA of new retail space during 2013 and
25,000 sq m of GLA currently under construction.
Belgrade is facing the growing interest of investors in different retail
schemes, but the majority of previously announced large scale
projects are postponed, since the projects are frequently delayed by
the search for financing and tenants, as well as all types of appeals.
The final phase of the “BIG CEE” retail scheme in Novi Sad,
consisting of a shopping center, is scheduled for delivery in
November 2013. The development will comprise 24,000 sq m of GLA
and the entire complex will contain 34,000 sq m of new retail space.
Being recognized as the most feasible retail concept at the moment, a
few retail park projects are under construction across Serbia and
Belgrade’s surroundings. The Israeli investors “Jerusalem Economy
Ltd” and “Industrial Building Corporation Ltd” commenced the
construction of the “IBC Power Center” retail park with 15,000 sq m
of GLA in Zemun municipality, with the announced completion date
during the 2H of 2014.
The retail park “Capitol Park” is currently under development on the
outskirts of the city of Sabac as a joint investment of the Slovenian
“YU Kapital Holding” Company and the English “Poseidon” Group.
Upon completion which is expected in 1Q 2014, the park will
comprise 9,850 sq m of GLA.
Table 3
IBC Power Center
Capitol Park
Visnjicka Plaza Plaza Centers
Delta Planet Delta Real Estate
Blok 41a Napred
Forecast
EBRD / Jerusalem
Group
In correlation with wider economy, the retailing environment is set
to remain difficult over the next two years, while the number of
projects currently under construction indicates a slowdown in
delivery in the next 12 months. Relatively undeveloped market in
terms of new supply and lack of competition are the main reasons for
the increased investor’s interest and the entry of new brands on the
market. However, there are several barriers to the development and
completion of new supply, such as limited scope of retailers
currently present in the market and their expansion potential, as well
as limited sources of capital available for such developments.
After targeting the capital city, retail operators are gradually
changing their focus to other major Serbian cities. Retail parks will be
a dominant concept in these cities in the following years, enabling
lower rents and additional costs for occupiers.
Despite the increased activity and development of modern retail
schemes, the retail market in Serbia is still volatile and the future
market prospects will be dependent upon the project type, area and
location. Prime projects are expected to continue to successfully cope
with changes, both in terms of occupancy and rents, while new
developments in emerging locations may struggle with increased
vacancy.
Being faced with a decreased tenant demand, high street locations
will continue to struggle with rising vacancies.
The market will continue to suffer the lack of confidence among
retailers, influencing further suppression of their expansion in the
short term.

Industrial and logistics real estate segment remains
weak. Positive results translated into industrial
production growth in 2013, did not suppress the
speed up of yield expansion, thus making property
values attractive relative to replacement costs.
During the first nine months of 2013, the
industrial/logistics market in Serbia has seen a
somewhat improved pace of new developments, but
build-to-suit deals mainly constitute the dominant
part of new supply, while the offer of brownfield
properties is expanding.
The industrial production in Serbia marked a positive development
during the first three quarters of 2013. The industrial production
recorded the 13.4% increase in September 2013 compared to the same
period last year. Compared to the period January-September
2012/2013, the industrial production increased by 6.4%.
Significant infrastructural projects, initiated by the government in the
recent period, are aimed at achieving competitive advantage of
Serbia’s industrial/logistic position in the region. Completion of
Corridor 10 and other initiated projects will enable new positioning
of the country on the European logistic map.
In order to create an attractive investment environment that will
enable better inflow of foreign investments, Serbian government
along with local authorities has introduced the concept of industrial
and free business zones, providing investors set of incentives such as:
exemption from taxes and infrastructure development fees,
employment subsidies ranging from EUR 4,700 to EUR 10,000 per
new working place and even free allocation of construction land. All
these incentives are set to attract investors and boost the economy
growth.
Belgrade’s wider area close to the “Nikola Tesla” Airport and areas
along the E-70 and E-75 highways that include settlements such as
Stara and Nova Pazova, Indjija, Krnjesevci, Pecinci, Dobanovci,
Simanovci and Ugrinovci, remain the most attractive in terms of new
developments, holding the majority of newly developed stock.
As for the inner Belgrade area, at the end of 2012 Belgrade’s local
authorities introduced new business zones planned to be
redeveloped in the next five years at the land total area of 5,691 Ha
geographically divided into the North, West, East and South zone.
After establishing free industrial zones at the outskirts of other major
cities in Serbia, such as Subotica, Novi Sad, Sabac, Zrenjanin,
Kragujevac, Krusevac and Nis, new developments gradually started
to emerge in these regions as well.
Supply
The previous year (2012) witnessed a revival of investment activities
within the sector, with an increase of the number of issued
construction permits by 25%. Two of the market’s underlying
drivers, consumer spending and industrial production, are still
vulnerable, which continues to hamper the construction of
speculative projects.
In the period January - June 2013, the number of issued construction
permits for new industrial and logistics buildings in Serbia recorded
a significant downfall by 15% in comparison to the same period last
year.
Belgrade area also witnessed a 33% decrease in the number of issued
construction permits during the first half of 2013, implying a
slowdown in the future developments. Only four permits were
issued in regard to new logistic projects, with no permits issued for
new industrial developments.
During 2012, total area of 327,000 sq m of new industrial and logistic
space was delivered to the Serbian market, which is a 33% increase
compared to the previous year, boosting the overall new stock (since
2000s) to app. 3,000,000 sq m.
The availability of prime distribution & industrial facilities
decreased, as the existing supply and the amount of new, speculative
developments continue to fall. In the next period supply will remain
tight and focused on pre-lets and build-to-suit transactions.
Industrial
Market & Trends
3Q
2013

Chart 11
New industrial and logistics developments in Serbia
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2008 2009 2010 2011 2012
New development, in sq m
Total Industrial Logistics
Chart 12
Industrial and logistics construction permits issued in Serbia
350
300
250
200
150
100
50
0
2008 2009 2010 2011 2012 1H 2013
Number of permits
30
25
20
15
10
5
0
2008 2009 2010 2011 2012 1H 2013
Number of permits
After construction of logistic space area of 3,690 sq m by Austrian
investor “Lagermax AED” in Simanovci at the end of 2012, Serbian
industrial/logistics market continued with a rather high level of new
deliveries during the 1H 2013.
The majority of new construction activities during the 1H 2013 were
focused on development of industrial facilities. During that period,
the Danish industrial pumps manufacturer “Grundfos” opened a
EUR 50 mil. worth factory in May, with an area of 25,000 sq m in
Indjija. The city of Jagodina saw the opening of a factory of 8,000 sq
m by the Italian company “Andrea Confezioni” in March.
The German company “Henkel” opened its new facility in Krusevac
with area of 7,000 sq m in June, while another German car supplies
company “ConTech Fluid” opened its facilities of 6,000 sq m in
Subotica, also in June.
The Slovenian manufacturer of refrigerators “Gorenje” opened its
EUR 21 mil. worth factory in Valjevo with an area of 20,000 sq m in
July, while the latest announced delivery will be opening of a factory
with an area of 4,300 sq m by the Canadian car seat manufacturer
“Magna Seating” in Odzaci in October.
Three logistics projects were completed during the 3Q 2013. The
German retailer “Metro Cash & Carry” opened its logistic center of
2,500 sq m in Subotica in August. In September, a large logistics
center with an area of 17,000 sq m in Krnjesevci was opened by the
Serbian company “Milsped”, while a logistics center of 4,200 sq m
was opened in Novi Sad by the Serbian national post carrier “Poste
Srbije”, also during September.
Demand
A set of incentives supported by the government, aimed to attract
investors within industrial / logistics segment, contributed to a
slightly improved investment activity within the sector. Small and
medium sized production companies have begun expanding their
activities, resulting in an increased pace of construction of new
manufacturing and warehouse facilities throughout Serbia in the last
18 months.
The demand is mostly focused on a modern industrial / logistic
space, with a flexible layout, developed infrastructure and good road
connection. The offer of this type of modern facilities is very scarce,
whether for sale or for rent, which is one of the main reasons for the
construction.
Despite the large offer of brownfield properties throughout Serbia,
the demand for these facilities is limited since many of them do not
meet required standards, which is the main reason of their limited
marketability.
The demand is mainly generated by the companies from automotive
industry, distribution, pharmacy and FMCG, with requirements for
space ranging from 1,000 – 4,000 sq m.
Chart 13
Industrial and logistics construction permits issued in Belgrade

The highest demand, apart from the Belgrade’s wider area along the
E-70 and E-75 highways, is also notable in the Vojvodina region, as
well as within the industrial districts of major central and southern
Serbian cities, such as Nis, Jagodina and Kragujevac.
GDP, private consumption and trade are the leading macroeconomic
drivers of industrial demand, and while we expect these indicators to
remain volatile in the short term, the medium and longer – term
forecasts bode well for the sector.
Rents & Yields
Rental levels for industrial and logistics space mainly remain stable
during 2013 and are still well below the market’s previous peak
(2008). The highest downward correction of app. 10% was recorded
for warehouses in Zemun and New Belgrade area, during the last 12
months.
The outlook is relatively a stable rent performance in Belgrade in
near term, with some notable differentiation across regional markets.
Rents seem to get to the bottom, since in many cases are well below
replacement cost rents.
Chart 14
Modern warehouse rents in Belgrade & wider area
3.5
5.00
4.00
3.00
2.00
1.00
2.9
2.5 2.5
2.9 2.9
3.1
0.00
Zemun Dobanovci Simanovci St. Pazova Krnjaca Lestane Downtown
EUR/sq m/month
min max average
The rental levels for newly constructed and contemporary equipped
warehouses mostly depend on their location and road connectivity.
The highest rents are recorded in New Belgrade and Zemun area
ranging from EUR 3.0 to EUR 4.0 per sq m per month. Belgrade
wider area along E-75 and E-70 highways, within settlements of
Simanovci, Dobanovci, Pecinci, Stara and Nova Pazova, has
witnessed asking rents between EUR 2.0 and EUR 3.25 per sq m per
month, while warehouses in Krnjaca area recorded rents from EUR
2.5 to EUR 3.25 per sq m per month.
Poorly maintained and equipped older warehouse facilities in
Belgrade, in dependence on their location, generally ranges in rental
values from EUR 1.5 to EUR 2.25 per sq m per month. The
warehouse space within older industrial complexes in Belgrade’s
downtown area kept the highest rents, on average between EUR 2.5
and EUR 3.5 per sq m per month.
Prime yields have stabilized between 10-11%, which is the highest
recorded level, indicating more potential for inward yield
movement, once market starts to improve again. Yields for non
prime assets are between 12 – 13%. The subdued economic outlook
combined with an increasing offer of distressed properties will
continue to put upward pressure on non prime yields, therefore 2014
is set to be another challenging year for the sector.
Pipeline & Forecast
At the beginning of 2012, Belgrade saw the completion of the new
“Ada” Bridge over the Sava River, as a part of the larger
infrastructural project regarding the development of Belgrade’s new
inner main ring-road.
Along with other large infrastructure projects, currently under
construction across the country, Serbia will undoubtedly improve its
potentials on the European logistics market.
Gradual improving macroeconomic conditions in the country
compared to 2012’s recession year, with growing industrial
production and encouraging export activities of mostly automotive
and agricultural goods, will also support the occupier demand in the
medium term.
During the next year, several undergoing projects are due to
completion, contributing to the overall supply of mostly new
industrial space. The largest logistics facility planned to be delivered
at the market in 2014 represents the EUR 50 mil. worth distribution
center with an area of 70,000 sq m, being under construction by the
Belgian “Delhaize” Company, in Stara Pazova.
The international renewed jewel and accessories manufacturer, the
Austrian company “Swarovski”, is expected to complete the
construction of its facilities of 15,000 sq m in 2Q 2014 in Subotica.
The German company “Robert Bosch” Company is expected to
complete the first phase of its manufactory facilities with an area of
22,000 sq m in Pecinci during the 1Q 2014. Total investment value is
projected at EUR 70 mil., upon the completion of the entire project in
2016.
Another German company “Leoni Wiring Systems Southeast” is
expected to finish the construction of its facilities of 25,000 sq m in
Doljevac, during the 1H 2014, investing EUR 21 mil. in the project.

PIPELINE
ANNOUNCED
The largest undergoing industrial project represents an expansion of
facilities of the French tire manufacturer “Michelin”, which is
developing new facilities with an area of 71,000 sq m in Pirot. Total
investment value is projected at EUR 45 mil., upon completion in 4Q
2014.
Several other projects, again mostly related to industrial facilities,
announced the start of construction in the future period. The German
“Robert Bosch” announced completion of the factory in Pecinci, as
the second phase of construction is planned to end by 2016,
delivering 18,000 sq m of space to the market.
The Austrian air-condition manufacturer “Vossloh Kiepe” is
planning to develop its factory area of 25,000 sq m in Novi Sad, while
the Indonesian food manufacturer “Indofood” acquired 5 ha of land
in Indjija as it plans to invest EUR 10 mil. in developing its facilities
area of 25,000 sq m.
The southern parts of Serbia also witnessed announcements of
several new projects. The Hong Kong based company “Johnson
Eletric” plans to invest EUR 15 mil. in developing their facilities of
10,000 sq m in Nis by 1H 2014, while the Italian shoes manufacturer
“Goex” announced the investment of EUR 15.8 mil. in development
of a new factory with an area of 20,000 sq m in Vranje.
New investments in the manufacturing sector will keep the similar
path of new developments, but are still insufficient to draw
noticeable employment growth. Build-to-suit developments will
continue to constitute the highest percentage of new supply in
Serbia, keeping the demand for non prime assets and brownfield
properties low.
With gradual economic recovery in the period to come, along with a
moderate supply of new industrial/logistic space and increasing
demand, a further rent adjustments are expected for the prime
locations and modern space.
Table 4
Investor
Country of
origin
Location Size (sq m)
Investment
value, in
EUR
Delivery
date
Swarovski Austria Subotica 15,000 21 mil. 2Q 2014
Robert Bosch Germany Pecinci 22,000 (I Phase) 70 mil.* 1Q 2014
Delhaize Belgium Stara Pazova 70,000 50 mil. 2014
Michelin France Pirot 71,000** 45 mil. 4Q 2014
Leoni Wiring
Systems Southeast
Germany Doljevac 25,000 21 mil. 1H 2014
Investor
Country of
origin
Location Size (sq m)
Investment
vlaue, in
EUR
Delivery
date
Robert Bosch Germany Pecinci 18,000 (II Phase) 70 mil.* 2016
EyeMaxx Austria Nis 136,000 61 mil. n.a.
EyeMaxx Austria Novi Banovci 240,000 n.a. n.a.
Vossloh Kiepe Austria Novi Sad 25,000 n.a. n.a.
Indofood Indonesia Indjija 25,000 10 mil. n.a.
Johnson Electric Hong Kong Nis 10,000 15 mil. 1H 2014
Geox Italy Vranje 20,000 15.8 mil. n.a.
* Total investment until 2016
** First phase
PIPELINE
ANNOUNCED

Sustainability & “Green” building market trends
As an integral part of the internationally adopted concept of
sustainable development, so called green buildings, represents a
widely recognized initiative regarding implementation of innovative
design and (re)construction policies and standards, which supports
all three complementary aspects of sustainability – people, planet
and profit.
Regardless of indubitable social, environmental and economical
benefits of green buildings, supported by the latest best practice
evidences worldwide, Serbia seriously lacks in new green
(re)developments, showing extremely immature awareness towards
this issue with inadequate actions from behalf of all involved parties
on the market.
Stagnation regarding green building’s development at the Serbian
real estate market has also been affected by avoiding the interrelated
responsibility among occupiers, constructors, developers, and
investors for making initial steps towards acting supportively on this
issue. It could be noted that the Serbian market stands at its earliest
phases regarding green developments.
Governmental actions, mainly characterized in terms of obligated
construction standards for newly developed buildings, still lacks in
supportive incentives towards intensification of green development
in forms of subventions and/or tax reductions/exemptions.
The latest governmental directive adopted in the late 2012, known as
an “energy passport” initiative, implies obligated minimum “C”
categorization in terms of building’s energy consumption and is
applicable to all (re)construction projects, as well as real estate
sale/acquisition processes in the future. In practice it means that the
maximum building’s energy consumption must not exceed 65kw/h
per sq m per year.
Serbia’s Green Building Council also started with its operations in
2010, as a part of a broader international incentive aiming to improve
local regulations towards the issues of sustainability, as well as to
increase the awareness and a dialog among market’s players.
However, governmental and NGO’s initiatives recently introduced
have still to translate into new green developments in the period to
come.
Recent period was also active in educating the market regarding
building’s certification procedures and its benefits mainly in regard
to BREEAM and LEED certification and rating systems. However,
there is few officially certified building on the Serbian real estate
market at the moment. The “Bluecenter” office building area of
50,000 sq m of GBA, developed at New Belgrade’s CBD by the Greek
investment fund Bluehouse Capital in 2010, received its BREEAM
certification in 2013. This is the largest office development in Serbia
built in accordance with the standards listed.
There are a few more projects announced to become officially
certified in the period to come. The U.S. Embassy’s building, area of
14,000 sq m constructed in mid 2013, awaits for its certification. The
Indian company “Embassy Group” started the construction of the
office park with total area of 25,000 sq m in Indjija, with its first phase
completed during 1H 2013 area of 10,000 sq m of office space. After
the completion of the entire project, it is expected to be officially
LEED certified, as it is being built in accordance with the LEED
Golden Certification standards.

16,417
18,162
19,049 19,815 19,103 18,648 18,449
2005 2006 2007 2008 2009 2010 2011 2012
907
450
210 63 183 164
The residential market recorded slow but still unstable
increase in demand during the first 9 months, after a
steep decline recorded in 2012. Mortgage sales
dynamics in Serbia increased by 6.1% in the first 9
months of 2013 compared with the same period last
year, which is still a decline of 22% compared to 2011.
Construction of the government financed large scale
residential complex (4,616 apartments) “Stepa
Stepanovic” in Vozdovac boosted new delivery in
Belgrade market in 2012. Housing supply increased by
30% in 2012 or 7.5% if this project is excluded.
The slowdown of construction activity in Serbia
continues in 2013 and according to the issued building
permits, the number of dwellings decreased by 29% in
1H 2013.
Supply
Residential development completions in Belgrade increased for 30%
to 7,844 apartments in 2012, which is close to the pre-crisis average.
The main driver of new supply was completion of few stages of the
large scale project “Stepa Stepanovic” in Vozdovac municipality.
Demand contraction in 2012 reduced investor confidence leading to a
visible slowdown in construction activity during 2012 as well as
2013. According to the issued building permits, the number of
dwellings decreased by 8.7% in 2012 and by 29.2% in 1H 2013,
compared with the same period 2012.
As in the past few years, the largest development activity in 2012
within the immediate metropolitan area was recorded in Vozdovac
and Zvezdara municipalities, despite a significant decrease in
construction dynamics in municipality Zvezdara in 2012
(26% decrease). The most significant construction slowdown in 2012
was noted in the peripheral municipalities Rakovica (62% decrease),
Palilula (56% decrease) and Cukarica (48% decrease), while a
significant increase was recorded in New Belgrade, Zemun and Stari
Grad.
Chart 15
Number of constructed apartments in Belgrade & Serbia
20,000
16,000
12,000
8,000
4,000
0
15,223
7,292 7,379 7,601 7,306
5,759 5,048
6,018
7,844
Number of apartments
Serbia Belgrade
Chart 16
Number of constructed apartments in Belgrade municipalities
2,400
2,000
1,600
1,200
800
400
0
381
2,165
438
24
1,033
827
1,609
194
2,352
234
795
78
534
62 71
1,088
2011 2012
Residential
Market & Trends
3Q
2013

Chart 20
Number of sold* apartments in central Belgrade municipalities
5,000
4,000
3,000
2,000
1,000
0
1,075
346
2008 2009 2010 2011 2012 2013
Source: National Mortgage Insurance Corporation
Chart 17
Structure of new apartments in Serbia, I-IX 2013
24%
33%
23%
20%
Studio & 1 bdr
2 bdr
3 bdr
4 bdr & larger
Statistics in the first 6 months of 2013 confirm decline in number of
issued building permits for residential buildings in Serbia by 9.8%
compared with the same period last year. Decline in number of
issued building permits for residential buildings within central
Belgrade municipalities is even higher than the national average and
amounts to 21%, which indicates a visible reduction in construction
activity in the capital.
Chart 18
Residential construction permits issued in Serbia & Belgrade
4,000
2,000
0
2006 2007 2008 2009 2010 2011 2012 I-VI
2013
2,129
3,113
3,281
2,901
2,184 2,165 2,261
944
566 649 741 620
471 507 528
202
Number of permits
Serbia Belgrade
Chart 19
Residential construction permits issued in Belgrade municipalities
90 84
60
30
0
67
18
27
23
14
4
11 7 9
68
57
23
42
21
13
3 5 3
10
24 21
5
19
9
4 1 2 0 3
2011 2012 I-VI 2013
Based on the number of issued permits in 2012 and 1H 2013, we can
conclude that the highest pace of construction in the following
period will be in the municipalities Zvezdara, Vozdovac and Zemun.
Downward corrections of market prices are also evident in the first
half of 2013, following 2012 trends. Many new projects are currently
under construction thereby threatening to increase the offer of new
apartments in the already oversupplied market. However, it remains
to be seen whether the commenced projects will be completed in the
announced deadlines, especially multi-phase residential
developments. The expected supply in Belgrade is estimated at app.
5,500 - 6,000 units in 2013.
Demand
Housing market continues to struggle, following the economic
turbulences and unemployment growth, which is reflected in steep
decline in number of housing loans approved by the banks in Serbia
during 2012. Subsidies for home buyers were approved by the
Government in 2013 (RSD 1.7 billion). According to this regulation,
the citizen participation is 10%. Given the relatively small growth in
number of subsidized loans, we do not believe that will have a
notable impact on the overall market demand.
In the first 9 months of 2013, the number of approved loans increased
by 6.1% (throughout Serbia) compared with the same period last
year and totaled 5,075 loans (according to the National Mortgage
Insurance Corporation), which is still 22% less than in the same
period 2011. According to the same Authority, the number of loan
purchases in the first three quarters of 2013 in Belgrade was 2,351
apartments (excluding peripheral municipalities: Barajevo, Grocka,
Lazarevac, Mladenovac, Obrenovac, Sopot, Surcin), which is 11%
increase compared with the same period 2012, but 4.7% decrease
compared with the same period 2011.
* Number of apartments sold on credit
833 657 526 644
1,237
374
803
771 708
906
1,370
418
779 1,040
877
801
974
724
869 889
749
Q1 Q2 Q3 Q4

Chart 22
Average asking prices in Belgrade municipalities
1,513
1,319 1,286 1,287
Chart 21
Number of sold* apartments in Belgrade & Serbia
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2007 2008 2009 2010 2011 2012 1Q-3Q
Source: National Mortgage Insurance Corporation
* Number of apartments sold on credit
2013
14,224
15,650
6,549
9,559
8,084
6,437
4,792 5,277 4,957
2,155
3,750 3,695 3,096
2,513
Serbia Belgrade
The most active segment of the market consists of low to mid class
residential projects located mainly on the outskirts of residential
neighborhoods, while the demand for larger and more luxurious
units is almost negligible. The similar situation can be also reflected
on rental market. Due to overall macroeconomic developments in the
country, prices can still continue to decline.
The demand for affordable housing will continue to be active,
especially for government financed program of residential
construction. This segment of the market is heavily sentiment driven,
and demand will depend greatly on the government initiatives and
buyers’ confidence. Residential demand in Belgrade in 2013 will be at
something higher level than in the previous year.
Pricing
Price decline continued during the entire 2012 as well as during the
first three quarters of 2013. Average price correction in the first 9
months of 2013 was 3.5%, compared with Q4 2012. The highest
downward asking price correction was observed in the case of high-priced
apartments in central locations, and amounts to 8%. Achieved
prices of apartments in these locations are close to the lower level of
rank, which can be seen in Chart 22. In the mid-market segment the
highest recorded decrease was in New Belgrade.
Asking prices for mid quality projects depend mainly on
municipality and micro location and vary between EUR 1,300 – 1,700
per sq m. High quality development prices are between EUR 2,000 –
2,400 per sq m on average, while the highest price range goes up to
EUR 3,000 per sq m.
It should be noted that these price levels rely on the existing offer.
Most of developers/sellers still prefer to keep higher asking prices,
but are more flexible when negotiating with clients. Therefore, the
effective price for a closed transaction can be up to 10% lower.
Achieved prices are official statistics from the National Mortgage
Insurance Corporation.
The housing crash initially resulted in a huge expansion of offers to
rent. However, rents are stabilizing in Belgrade, and modestly rising
in some areas, as a result of a better quality offer. Slight rent decrease
of 3 - 4% was recorded in the wider city area (Zvezdara, Vozdovac,
Cukarica and New Belgrade).
1,716
2,500
2,000
1,500
1,000
1,666
* National Mortgage Insurance Corporation data
1,096 1,127 1,159
500
EUR/sq m
min max average*
Chart 23
Average asking rents in Belgrade municipalities
8.0
12.0
10.0
8.0
6.0
4.0
7.5
8.0
6.3
5.5 5.4
5.0 4.8
2.0
EUR/sq m
min max average
Developed & Under Construction
Several larger projects currently under construction are expected to
be delivered during 2013-2014 period. Most of the developments are
designed for mid-market buyers.
During the first half of 2013 the second stage of the project “Golf 8”
in Banovo Brdo was completed bringing 35 new apartments.
Third stage of the residential complex “Maxima center” with 84
apartments was completed in New Belgrade block 11.

Project Location
No of
units
Deadline Investor
Maxima Center- III stage New Belgrade 84 Dec-13
Imperial gradnja/
Capotto Build
West 65* New Belgrade 514
Completed 1st
phase;
2014/2015
PSP Farman
Golf 8** Banovo Brdo 153
Completed 2nd
phase; 2014
Peteg
Stepa Stepanović Vozdovac 4,578 2013 Gradj.direkcija Srbije
Dr. Ivan Ribar New Belgrade 707 2013/2014 Gradj.direkcija Srbije
Alpha City Zvezdara 299 Completed
International alpha
construction
Block 34 New Belgrade 107 Completed Napred
Dusana Vukasovica Street Novi Beograd 126 Completed Neimar V
Marmil Land Vracar 159 Dec-13 Marmil inzenjering
Harmony Apartments Vracar 80 2014 Pluto Capital
Block 9a - Dzona Kenedija St. New Belgrade 108 2014 Obelisk Gradnja
Paunova Street Banjica 107 2014 CPI Group
Dunavske terase Palilula 270 Dec-13 Aramont
Atrium 63 New Belgrade 91 Dec-14 Basal
Gardenia Apartments Zvezdara 263 Announced Aviv Arlon
Ruzveltova Street Zvezdara 50 Announced Edil Italiana
Block 67a New Belgrade 840 Announced Deka inzenjering
*First stage (152 apartments) is delivered in 1H 2013
** Second stage (35 apartments) is delivered in Q1 2013
The residential complex “Stepa Stepanovic” in Vozdovac is
scheduled for completion by the end of 2013, with approximately
4,300 units completed until August 2013.
The residential complex with 707 apartments, “Dr.Ivan Ribar” in
New Belgrade is scheduled for completion in 2013/2014. The first two
buildings (out of 6) were delivered in September 2013. The investor
of this project is Gradjevinska direkcija Srbije.
The project “Alpha city” in Zivka Davidovica Street Zvezdara was
completed in September 2013. The complex contains 299 apartments.
After a period of slowdown, new residential projects commenced in
New Belgrade during 2011/2012.
The biggest project currently under construction is the “West 65”
complex in block 65. During the first half of 2013 the first stage of the
residential complex “West 65” in New Belgrade was completed
bringing 150 new apartments and 19 retail units. The second stage is
to be launched soon.
The company Napred completed a building with 107 apartments in
block 34.
The project in Dusana Vukasovica Street in block 61, consisting of
126 apartments is also scheduled for completion in 2013. The investor
of this project is company Neimar V.
The project in Dzona Kenedija Street (corner with Mihajla Pupina
Blvd) in block 9a, consisting of 108 apartments and 12 retail units is
scheduled for completion in 2014. The investor of this project is the
company Obelisk Gradnja.
The construction of a new mixed-use complex in block 63 in New
Belgrade has started. The first phase will contain 4 residential
buildings with 91 apartments. The second stage will deliver a new
office building. Deadline for the first stage is December 2014.
Construction of the residential project “Marmil land”, with 159
residential units, in Maksima Gorkog Street is close to end and the
expected date of completion is December 2013.
Another larger project in Vracar municipality (corner of Maksima
Gorkog Street and Juzni Boulevard) is the “Harmony apartments”
complex, currently under construction, that will contain 80
apartments and the project should be developed by 2014. The
investor of this project is the company Pluto Capital.
Delivery of the project in Banjica with 107 apartments is announced
for 2014. The investor of this project is the company CPI Group.
The project “Dunavske terase” in Palilula municipality is close to
completion. The complex will consist of 270 apartments, 162 business
apartments, 93 retail units and 54 studios. The investor of this project
is the company Aramont and the delivery date is December 2013.
Table 5
Forecast
Performance of the housing market in the first three quarters of 2013
seems to be better than in 2012, despite weak economic fundamentals
and expectations regarding medium term recovery. Weak to negative
growth for the economy as a whole has been reflected in weak to
negative growth in disposable incomes, which resulted in a further
fall in apartment prices. If weak income growth were to persist,
positive changes in this market segment cannot be expected.
Downward trend in prices is likely to be prolonged in the next two
quarters, since sellers will probably outnumber buyers for some time
to come.

KOPAONIK MOUNTAIN
Investment opportunity

EXCLUSIVE LOCATION FOR MIXED-USE DEVELOPMENT
(HOTEL, CONDO-HOTEL & RETAIL) -
Kopaonik Ski Resort, Serbia
Proposed Development
Apartments / Condominiums : cca 201 units
Hotel 4*: cca 36 rooms + 3 penthouses
Retail units: cca 1,387 sq m (divisible units)
Location
Kopaonik Mountain is situated in the central part of Serbia and is approximately 260 km away from the capital
city of Belgrade. It is also 177 km away from Nis, the administrative center of the Serbia’s south-east region. The
highest section of Kopaonik is its northern part, known as Ravni Kopaonik. Around spacious plateau Ravni
Kopaonik (altitude of about 1.700 m) rises Suvo Rudiste area with Serbia’s highest peak called Pancicev Vrh at
2,017 m above the sea level.
The subject site is located in the south-western part of Suvo Rudiste area, which is the central tourist area of
Kopaonik within the National park, approximately 550 m away from the central zone, known as “Konaci”.
The property is located along the right side of the local road that connects center of Kopaonik with “Pancicev
Vrh” peak, at an altitude of 1,740 m. Therefore location enjoys excellent car accessibility as well as exceptional
posi?on and visibility from the main road (R-218) which is only 50 - 70 m away from the subject property.
Total Land Area 6,257 sq m
Zoning I zone, Hotel & Apartments
Building Height Ug + Gf +4 + Attic (building height: 21 m)
Gross Building Area
Above ground: 14,000 sq m
Underground garage: 3,495 sq m (122 parking spaces)
TOTAL 17,495 sq m GBA
Net Aboveground Building Area 10,473 sq m
Property description
The subject property is positioned between ski slopes “Malo Jezero” and “Suncana dolina” and is only 200 m
away from the ski-lifts, allowing ski in and ski out access to the site, which will significantly increase fluctuation
of visitors and skiers, contributing undoubtedly to the overall attractiveness of this location.
Micro location of the property is a position with one of the best views in Kopaonik, where the south-western
side of the plot.
Along the north border of the subject land plot is the area where construction of the new ski-lift was planned,
while along the south border is planned construction of new road that will connect location directly with the
neighbouring complexes and the main road.
Available documentation
Valid Location Permit and ownership documentation are available on request.The subject property is privately
owned (Freehold, 1/1).
Price Available on request

Belgrade Real Estate Market Outlook 2013

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