Croatia?s commercial property sector has stabilized, but the lookout remains extremely flat at this stage, and as such lags most property sectors in Eastern EU, which have started to show indicators of recovery. The commercial property sector has not been able to rebound as the economic recovery in Croatia is still very muted and essentially export-driven.
The industrial sector, which seriously is affecting requirement for economic sector space, remains puny. Indeed, the economic production index in Croatia fell by 4.1% y-o-y in February, marking the third consecutive month of decline. Given that Croatia?s economic recovery is only in its nascent stages, it is unsurprising that industry still has to pick up. We are forecasting the Croatian economy will come forth from 2 years of recession in 2011, but the outlook is for puny real GDP expansion of 1.9%.
The recovery will be largely export-driven, benefiting from a positive eurozone expansion story, as consumer demand remains restricted by high unemployment of 19.6% in February and puny credit expansion. One positive aspect for the expansion outlook for Croatia is tourism. Croatia is heavily dependent on tourism for economic expansion and it?s so inspiring to see that tourist arrivals have already bounced back strongly. The rebound in service exports will, in turn, reduce unemployment, which we see moderating in 2011 as seasonal employment picks up. We forecast 2.0% expansion in private consumption in 2011, following a 0.9% drop in 2010.
Logically, demand for office space and retail space is barely growing. Industrial space demand has also barely ticked up. We saw falls of 20-30% in rental prices for office space between the 1st half of 2009 and the second 1/2 2010. Retail rents fell by 30-40%. Business properties bucked the trend, with rents recovering 20-30% in the same period. But industrial property rents have now stalled. We see rents and yields remaining basically flat thru 2011 and 2012. Broadly, we think that rates are rather exposed in the Zagreb area, will remain unchanged on low activity in the Zadar area, but have upside potential in the area around Split where some new commercial properties are going to be developed by foreign backers. Therefore you still can buy some Croatia real estate if you curious about life in Croatia.
It is hard to imagine any pronounced recovery within the prediction period. The economic recovery will be slow and export-oriented. Unemployment remains stubbornly high. With its economy on a slow expansion trajectory there is no reason to expect a big recovery for Croatia?s commercial property sector at this stage.
Some of the key opportunities now in the estate market are :
- The economic environment improves more than predicted, assisted by export expansion, tourism expansion and a turnaround in purchaser demand. Unemployment would need to start to fall.
- Extension of credit availability to both developers and home house purchasers, adding more space and more demand. This could indeed be boosted if Croatia?s advent talks are positive.
- Strength in the office sector means vacancy rates have dropped but that projects coming online in 2011 will ensure that demand can be met. Some key risks to the current housing market are :
- If Croatia doesn?t complete EU advent this can indeed prove a negative for investor sentiment and in investment in Croatia, which would have a negative knock-on effect on the commercial property sector.
- Should continuing far-ranging political protests return to violence, as was seen in February, this would most probably weigh heavily on Croatia?s appeal as a tourism hotspot, as reported tagza.com.
Related Posts:
dkny maurice sendak earthquake dillards ice road truckers trace adkins cbs sports
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.