2010 Global Market Report - NAI Commercial Real Estate

Sofia, BulgariaPrague, Czech RepublicContactNAI ProCon+359 2 943 43 75Country DataArea (KM 2 )GDP Growth (%)GDP 2009 (US$ B)GDP/Capita (US$)Inflation Rate (%)UnemploymentRate (%)1334.3-6.50%$44.78$5,916.220.61%8.23%The downturn was first felt in October 2008. Deterioratingdomestic demand has led to a contraction of Bulgaria’seconomy by 5.8-7.1% in Q2 2009. The country's economydeteriorated significantly throughout 2009. Investment volumeis off 60% compared to 2008. Most commercial developmentplans have either been stopped or are on hold.The market was characterized by weakened domesticdemand in comparison to the previous year. Rising exportswill help offset that weakened demand, but expectations arefor continued negative GDP. Mostly because the adjustmentprocess is still going on and because the currency is fixed,most of this adjustment takes place at a slower pace. Recentdata indicates that inflation is heading to a negative territorywhich, in turn, is also hurting the GDP growth. Bulgariareported a monthly deflation of non-EU harmonizedconsumer prices for July, for a third month in a row. We areseeing a further deterioration in domestic demand, which isthe key factor for the deepening erosion of GDP. At the sametime, net exports should be contributing positively but thatwill not be enough to offset the slump of the domesticdemand component.Plans to start development of nine industrial parks are onhold. Most of the transactions are done by local players. Theonly property transactions that are continuing are the seasonaland holiday properties along the Black Sea coast, buteven those are moving along at a much slower pace. Bankshave gradually started to open up for credit but at muchhigher interest rates than a year ago.The office market has remained the most developedcommercial property sector in Bulgaria, primarily concentratedin Sofia. Vacancy rates are in the range of 13.5% withvacancy rates of 19.6% in the suburban areas. Four newshopping malls opened and reached 220,000 SM. The firstCarrefour hypermarket opened n Burgas.ContactNAI MIPA+420 224 818 677Country Data*Area (KM 2 )GDP Growth (%)GDP 2009 (US$ B)GDP/Capita (US$)Inflation Rate (%)UnemploymentRate (%)1334.3-4.32%$189.67$18,193.651.04%7.93%With a global economic downturn and GDP in negativeterritory, the Czech Republic has witnessed a slowdown indevelopment and investment throughout all of 2009. Newoffice, retail and industrial development has significantlydiminished due to a lack of financing and reduced tenantdemand. This also applies to shopping centre development,which has almost come to a halt.Prague has 2.6 million SM of modern office space composedof 50% inner city, 30% outer city and 20% city centre with70% new buildings and 30% refurbished. Vacancy is around13%. Prague will see about 130,000 SM of new space in2009, a year over year drop of 60%. Pankrac Budejovicka’soffice hub continued to be the preferred location. Significantprojects include Prague Marina, Factory Futurama andPrague 8. Only 85,000 SM of modern office space will comeon the Prague market in 2010. This will ease thedemand/supply situation and help to maintain rents.The Czech Republic has 240 SM of shopping centre spaceper 1,000 inhabitants. Of this, 1.9 million is in shoppingcentres and 600,000 SM in retail parks. Openingsinclude Forum Liberec (20,000 SM), Liberec Plaza (19,500SM), Skodovka Klatovy (16,000 SM), Forum Usti nad labem(26,400 SM), Olympia Brno (25,000 SM), Area Bory PhaseII (15,000 SM), Atrium Hradec Kralove (7,300 SM) and retailPark Kladno (6,000 SM). There are currently two outletcenters. There is a total inventory of 3,277,000 SM of industrialspace in the region; 1,600,000 SM in Prague and1,680,000 SM in the rest of the Czech Republic. Vacancy isat 20%. Rent remains low at €3-€4.5/SM/month.The commercial real estate investment market is experiencinga surprisingly low level of activity and of the foursignificant office investments transacted in 2009, two wereagreements made from previous years. The most significanttransactions have been the purchase of JungmannovaPlaza Gemini and Prague 4 by Deka. Yields were 7% and7.5%, respectively.Financing of new developments remains key. Rates aredown but pre-leasing requirements are up. Since demandfor space is dramatically reduced, this has led to manydevelopment sites being put on hold.Interest Rate(%)1.00%Interest Rate(%)1.25%Population (Millions)7.569Population (Millions) 10.425Sofia At A GlanceConversion: 0.6681 € = 1 US$ RENT/M 2 /MO US$ RENT/SF/YRLow High Low High VacancyCITY CENTER OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAIL€€€€€€€€€25.0010.005.0015.008.005.003.002.004.00€€€€€€€€€35.0016.0010.0025.0012.007.005.004.006.00$$$$$$$$$41.7216.698.3425.0313.358.345.013.346.67$$$$$$$$$58.4026.7016.6941.7220.0211.688.346.6710.01N/AN/AN/AN/AN/AN/AN/AN/AN/ACity Center (High Street Shop) € 50.00 € 100.00 $ 83.43 $ 166.87 N/ANeighborhood Service CentersCommunity Power Center(Big Box)Regional Shopping Centers/MallSolus Food Stores€€€€20.006.0015.006.00€€€€40.008.0025.008.00$$$$33.3710.0125.0310.01$$$$66.7513.3541.7213.35N/AN/AN/AN/ADEVELOPMENT LAND Low/M 2 High/M 2 Low/SF High/SFOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidentialN/A N/A N/A N/AN/A N/A N/A N/AN/A N/A N/A N/AN/A N/A N/A N/AN/A N/A N/A N/AN/A N/A N/A N/APrague At A GlanceConversion: .793 EUR = 1 US$ RENT/M 2 /MO US$ RENT/SF/YRLow High Low High VacancyCITY CENTER OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIAL€€€€€€220.00140.00130.00160.00140.00100.00€€€€€€240.00180.00160.00180.00160.00130.00$ 29.62$ 18.85$ 17.50$ 21.54$ 18.85$ 13.46$$$$$$32.3124.2421.5424.2421.5417.5013.0%13.5%14.0%13.0%11.0%10.0%Bulk WarehouseManufacturingHigh Tech/R&DRETAIL€€€66.0055.0040.00€€€72.0060.0050.00$$$8.897.415.39$$$9.698.086.733.0%3.0%3.0%City Center€ 1,320.00 € 1,800.00 $ 177.73 $ 242.35 2.0%Neighborhood Service CentersCommunity Power Center (Big Box)Regional Shopping Centers/MallsSolus Food Stores€€€€420.00100.00480.00120.00€€€€480.00140.00660.00140.00$ 56.55$ 13.46$ 64.63$ 16.16$$$$64.6318.8588.8618.855.0%3.0%5.0%N/ADEVELOPMENT LAND Low/M 2 High/M 2 Low/SF High/SFOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidential€ 300.00 € 1,000.00 $ 40.39 $ 134.64€ 116.00 € 166.00 $ 15.62 $ 22.35€ 30.00 € 60.00 $ 4.04 $ 8.08€ 16.00 € 33.00 $ 2.15 $ 4.44€ 40.00 € 70.00 $ 5.39 $ 9.42€ 30.00 € 90.00 $ 4.04 $ 12.122010 Global Market Report ■ www.naiglobal.com 44