Given how severely the crisis was all over central Europe, are you satisfied or surprised by the current level of investment in Slovakia? Has long-term damage been done particularly for Bratislava?
We saw strong first-half of the year last year because some transactions were still concluding. But then the second half of the year was very quiet. Even though we expected €1 billion to be traded last year, in the end it was just north of €500 million. A lot of investors didn’t finalize their transactions because of the pandemic. They started to be more cautious.
This year we’re seeing the opposite. We see that the investors are more relaxed. They see that the office market in Bratislava is still okay, and that the logistics market is booming so much there’s basically a lack of product. Everything that comes through the market is being traded. Then there’s the €450 million Aupark transaction, which for a market like Slovakia’s was huge. It’s the largest transaction that ever happened in Slovakia. And there were a lot of transactions happening in the second half of the year. At the beginning of 2021, we expected that there could be around €700 million for the year. But there are still transactions going on now so it might be €800 million or a bit more.
We’re not out of the pandemic yet, but it seems countries are coming to an understanding of how to manage the situation. Do you have the sense from investors that is part of why they are now regaining confidence?
It’s not completely clear yet, especially in the office market. We see a lot of owner/occupiers turning to lease agreements and selling their older properties, taking a new lease, or shrinking their space. We also saw this happen with banks moving from two buildings into just one. They’re trying to be more efficient. We don’t know how efficient the office market is going to be after the pandemic. But we see that companies might be taking a little bit less space, though on the other hand they will want more quality space.
So, they will invest more into the office premises. But there’s a widening gap, with prices for high-quality product going up (meaning yields are going down). We now have the first building or two in Bratislava where the asking prices for Bratislava are below 5%. These are really prime office buildings. On the other hand, the prices for office older properties are decreasing. Investors have a lot of confidence in high-quality, CBD product. We see that there’s a lot of liquidity. We see a lot of domestic investors, there’s demand from Austrians and now, Hungarian investors are starting to look at Bratislava and Slovakia. So, it’s too early to know how the market will end up but I’m optimistic.
You mentioned the uncertainty of companies on how much office space they need, and what quality. Do you think that the development pipeline is going to be slightly delayed? Could it shrink compared to pre-Covid expectations?
I think that developers will wait for some pre-leases before they start building rather than building a lot speculatively as they did during the busiest times. But there are still big transactions happening. We did the largest office transaction this year that we’ve ever done: it was 30,000 sqm to an IT company. We also saw a pharmaceutical company move its R&D center to Bratislava. So, it’s not only the shared service centers. But I think the developers will be a little bit more cautious.
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