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Bosnia and Herzegovina Real Estate Report Q1 2013

Bosnia and Herzegovina Real Estate Report Q1 2013

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Meta Description Bosnia and Herzegovina Real Estate Report Q1 2013
Publisher Business Monitor International
Date of Report Sep 1, 2013
Quick Overview
The Bosnia & Herzegovina (BiH) Real Estate report examines the commercial office, retail, industrial
and construction segments throughout the country, in the context of the struggling domestic and regional
economy.
With a focus on the three principal cities of Sarajevo, Trebinje and Zenica, 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 commercial real estate, while minimising investment risk and exploring the impact of
the eurozone crisis on an already struggling market.
Our latest data collection, for the first six months of 2012, has revealed an industry-wide contraction in
rental rates across all geographies surveyed, continuing the downturn of 2011 and undoing much of the
positive growth seen in 2010. The industrial sector has weathered the storm better than its counterparts
due, in part, to the increased lease-length cycle, but in the medium term we expect the retail sector in
particular to outperform.
Key Points:
?? The economic recovery is losing momentum alongside the escalation in the eurozone sovereign
debt crisis. We expect economic activity to pick up in 2013, but warn that further demand
destruction in the single currency area could slam the breaks on Bosnia's fragile recovery. We
have revised down our 2012 and 2013 real GDP growth forecasts to 0.1% and 1.1% from 1.9
%and 2.3% respectively.
?? A central government may have finally been agreed, but political instability remains a lingering
concern. The highly fractious state of Bosnian politics mean that future reform moment will
likely be anaemic, preventing the country from realising its full growth potential.
?? The IMF has agreed to a new 24-month loan for Bosnia, which will provide a welcome boost to
investor sentiment and fiscal stability. However, we warn that risks of reform fatigue, missed
fiscal targets and coalition instability remain, which would once again result in outstanding loan
tranches being frozen.
?? The construction and infrastructure sector in Bosnia and Herzegovina (BiH) rests on shaky
ground as the eurozone crisis continues to deplete enthusiasm from investors. The coalition
government adds further risk with unstable alliances and the risk of a much more pronounced
downturn in economic activity. Construction industry value is forecast to stand at US$0.7bn in
2012, with average year-on-year (y-o-y) growth of 2.2% expecting to see the industry value rise
marginally by 2016, to US$0.8bn.
Table of Contents
Executive Summary ......................................................................................................................................... 5
SWOT Analysis ................................................................................................................................................. 7
Bosnia & Herzegovina Real Estate/Construction SWOT ....................................................................................................................................... 7
Bosnia & Herzegovina Political SWOT ................................................................................................................................................................. 8
Bosnia & Herzegovina Economic SWOT ............................................................................................................................................................... 9
Bosnia & Herzegovina Business Environment SWOT .......................................................................................................................................... 10
Real Estate Market Overview ........................................................................................................................ 11
Real Estate Market Analysis - Office ........................................................................................................... 14
Supply And Demand............................................................................................................................................................................................. 14
Rents And Yields .................................................................................................................................................................................................. 14
Table : Historic Rents - 2011-2012 (EUR per m2/month) .................................................................................................................................... 14
Table: Net Yield, 2011-2012 (%) ......................................................................................................................................................................... 15
Table: Terms Of Rental Contract/Lease - H112 .................................................................................................................................................. 15
Industry Forecast Scenario ....................................................................................................................................................................................... 15
Table: Forecast Rents (EUR per m2/month)......................................................................................................................................................... 15
Table: Forecast Net Yield, 2010-2017 (%) .......................................................................................................................................................... 16
Real Estate Market Analysis - Retail ............................................................................................................ 17
Supply And Demand............................................................................................................................................................................................. 17
Rents And Yields .................................................................................................................................................................................................. 18
Table: Historic Rents - 2011-2012 (EUR per m2/month) .................................................................................................................................... 18
Table: Net Yield, 2011-2012 (%) ......................................................................................................................................................................... 18
Table: Terms Of Rental Contract/Lease - H112 .................................................................................................................................................. 18
Industry Forecast Scenario ....................................................................................................................................................................................... 19
Table: Forecast Rents (EUR per m2/month)......................................................................................................................................................... 19
Table: Forecast Net Yield, 2010-2017 (%) .......................................................................................................................................................... 19
Real Estate Market Analysis - Industrial ..................................................................................................... 20
Rents And Yields .................................................................................................................................................................................................. 20
Table: Historic Rents - 2011-2012 (EUR per m2/month) ..................................................................................................................................... 20
Table: Net Yield, 2011-2012 (%) ......................................................................................................................................................................... 20
Table: Terms Of Rental Contract/Lease-H112 .................................................................................................................................................... 21
Industry Forecast Scenario ....................................................................................................................................................................................... 21
Table: Forecast Rents (EUR per m2/month)......................................................................................................................................................... 21
Table: Forecast Net Yield, 2010-2017 (%) .......................................................................................................................................................... 21
Forecast Scenarios ........................................................................................................................................ 22
Infrastructure Report ................................................................................................................................................................................................ 22
Table: Bosnia Construction And Infrastructure Industry Data, 2008-2016 ......................................................................................................... 22
Table: Bosnia Construction And Infrastructure Long-Term Forecasts, 2013-2021 ............................................................................................. 22
Construction And Infrastructure Forecast Scenario ............................................................................................................................................ 23
Macroeconomic Outlook ........................................................................................................................................................................................... 25
Real Estate Risk/Reward Ratings ................................................................................................................. 28
Real Estate/Construction Risk/Reward Ratings ........................................................................................................................................................ 28
Table: Real Estate Risk/Reward Ratings .............................................................................................................................................................. 28
Business Environment Outlook ................................................................................................................................................................................. 28
Table: BMI Business And Operation Risk Ratings ............................................................................................................................................... 29
Institutions ........................................................................................................................................................................................................... 30
Table: BMI Legal Framework Rating .................................................................................................................................................................. 30
Infrastructure ....................................................................................................................................................................................................... 32
Table: Labour Force Quality ............................................................................................................................................................................... 34
Market Orientation .............................................................................................................................................................................................. 35
Table: Emerging Europe - Annual FDI Inflows ................................................................................................................................................... 36
Table: Trade And Investment Ratings .................................................................................................................................................................. 37
Table: Top Export Destinations ........................................................................................................................................................................... 39
Operational Risk .................................................................................................................................................................................................. 39
Competitive Landscape ................................................................................................................................. 40
Company Profiles ........................................................................................................................................... 42
BBI Real Estate .................................................................................................................................................................................................... 42
Delta Real Estate Group ...................................................................................................................................................................................... 43
GP Put d.d. Sarajevo ........................................................................................................................................................................................... 44
STRABAG SE ....................................................................................................................................................................................................... 45
Vranica d.d. Sarajevo .......................................................................................................................................................................................... 47
Demographic Data .......................................................................................................................................... 48
Table: Bosnia & Herzegovina's Population By Age Group, 1990-2020 ('000) .................................................................................................... 49
Table: Bosnia & Herzegovina's Population By Age Group, 1990-2020 (% of total) ........................................................................................... 50
Table: Bosnia & Herzegovina's Key Population Ratios, 1990-2020 .................................................................................................................... 51
Table: Bosnia & Herzegovina's Rural And Urban Population, 1990-2020 ......................................................................................................... 51
BMI Methodology ........................................................................................................................................... 52
How We Generate Our Industry Forecasts ............................................................................................................................................................... 52
Construction Industry ............................................................................................................................................................................................... 53
Bank Lending ............................................................................................................................................................................................................ 54
Real Estate/Construction Business Environment Rating ........................................................................................................................................... 54
Table: Weighting Of Indicators ........................................................................................................................................................................... 55
Sources ..................................................................................................................................................................................................................... 58




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