Southeast Europe’s real estate market is dynamic and evolving, quickly adapting to emerging trends, including a notable shift in focus toward logistics away from office space, according to conference speakers regional real estate conference in Skopje, the capital of North Macedonia, on May 10.
The conference brought together over 30 speakers from across the country and region for discussions and knowledge sharing on various aspects of the real estate sector. Skopje-based Fortonmka, as the exclusive affiliate partner of global real estate services company Cushman & Wakefield in North Macedonia, co-organized the event.
Sergey Koynov from Bulgaria, managing partner of property management company Intelliway Services, discussed changing trends in the sector. “First there was a wave of shopping centers, then a wave of offices, followed by large and small hotels, and now it is very modern to invest in logistics and renewable energy,” Koynov said during of a round table.
Koynov cited the CEO of global investment management firm Blackstone who said that while in 2007 60% of its portfolio was office space, this percentage has now been reduced to just 2%. At the same time, the company’s logistics portfolio grew from zero to 40%.
“The market is changing, evolving and we have to be smart and very quick to decide what to do next,” Koynov said.
How COVID-19 hit the office market
Participants agreed that working from home and a hybrid work model, a trend brought about by the COVID-19 pandemic, has significantly transformed trends in the office market.
“The office segment has seen significant development over the past 15 years, but the definition and way of working in this segment has changed with the COVID-19 pandemic, which has affected the entire world and led to a reassessment work strategies”, Katarina, CEO of Fortonmka. » said Nikolov.
Mia Zecevic, owner and CEO of Serbian real estate, asset and real estate management company Novaston, acknowledged that the current situation is strongly affected by the pandemic and the war in Ukraine, with many fluctuations and the need to adapt .
Zecevic cited the case of Novaston’s main client, French energy management and automation company Schneider Electric, which started operations in Serbia three years ago with 20,000 GLA (gross rental area), only to see significant reductions due to the pandemic.
Looking to the future, Zecevic said the time may come when most office workers return to physical offices, especially in industries that rely heavily on human connections and where the presence of managers is essential. However, in IT and some service sectors that don’t rely so much on direct interaction, a hybrid work model may persist as a viable option, she added.
“I think the outcome and resolution of this situation will become evident over the next two years. At that time we will know if a significant amount of available square meters will be successfully occupied,” Zecevic said.
According to Zecevic, market dynamics, whether in Serbia or elsewhere in the region, are strongly influenced by blue-chip tenants.
In North Macedonia, said Nikolov from Fortonmka, supply and demand are neck and neck. Good demand in the country is 20,000 m², which matches the supply, she said.
The size of the market matters, she added: “If a company in Belgrade asks for 5,000 m², here in Skopje the interest is 700 m².”
However, there are always exceptions, including software and technology services company Endava.
“In the case of Endava, it is a very successful story and we have not seen any reduction in scale. On the contrary, it is one of the largest occupiers of commercial spaces in Skopje, with exceptional interiors and one of the most notable projects of the last year,” she said.
According to Ilija Gospodinov, chairman of the board of directors of the Skopje-based IT Chamber of Commerce MASIT, the problem is not the availability of space and demand, but the future of work and how companies can remain prosperous and sustainable in the long term. in completely different ways of engaging with their employees.
“My first idea is that any company, whatever its sector of activity, and any company that wants to last, bases its activities on values and culture,” he said.
However, he added that establishing and maintaining values can be particularly difficult when operating under a work-from-home or hybrid model.
Gospodinov said that the IT sector in North Macedonia effectively navigated the difficult period of COVID-19 and subsequent difficulties faced by the technology sector by successfully implementing alternative work models.
Moving from “hybrid” to “mixed”
As industry players have demonstrated their ability to adapt to a hybrid work environment, Gospodinov said they recognize the need to move forward. A hybrid system is an artificial mixture, he said, and the challenge is how to go from “hybrid” to “mixed.”
“The way we interact with our employees should become a ‘mixed’ method, in which working from home, working in the office or wherever is comfortable, should become one organic system,” Gospodinov said.
The challenge businesses face, he says, is reaching a point in the next few years where they can confidently say their current approach is working exceptionally well for them.
Highlighting the need for change, he said: “Two or three years ago we missed two points when we were working from home. We lacked community and engagement.
He added that it is imperative that businesses prioritize aligning what they provide with the needs of their employees, as these are the most valuable assets.
Class A office space in North Macedonia
Despite changing trends, according to Fortonmka data, demand for Class A office space in North Macedonia is expected to remain strong following historically low vacancy rates and total demand for Class A occupancy. The vacancy rate increased only slightly in 2022 by 3% per year. The average prime rent was €13.5 per m² and the average transaction size was 450 m².
Ongoing projects for the first half of 2023 include 6,733 m² of new offices which are expected to be delivered by the Cevahir Business Center in Skopje, and an additional 3,100 m² in the city center which will be delivered by the Skopje Business Center. In the second half of 2023, 3,600 m² will be delivered by La Piz Business Center and 3,600 m² by 3 Corner BC in the city center.
Hospitality and ESG in Albania
Stela Dhami, managing partner of Colliers International in Tirana, said the company has a strong presence in the Albanian hospitality sector, which is strongly encouraged by the government and offers good investment incentives.
Dhami acknowledged the impressive efforts of local investors in Albania, but expressed the need to attract more foreign investors, especially in the hospitality sector.
Other sectors have seen considerable growth in foreign investment. Now, “we want to see more investment in the hotel industry from foreign investors,” she said.
“Of course, the merger of local and international is happening in Albania and is going very well because local investors bring their valuable local expertise, while foreign investors bring their international experience,” she said .
She highlighted that environmental, social and governance (ESG) considerations in the real estate sector are also a very important topic in Albania.
ESG standards were the topic of one of the conference’s six panel discussions, along with the latest trends in the office and residential markets, investment opportunities, financing strategies, and more.
Colliers and German investors are working to develop Albania’s first business park, she said, calling it an important new project in the country.