Croatia awakes

  increases in the price of land. The segments that have seen biggest development so far are retail (both in warehousing as well as shopping centres) in Zagreb and other large cities, as well as Class ‘A’ and ‘B’ offices in the capital.

 The growing popularity of Croatia as a holiday destination, the improved infrastructure, and the launch of new cheap flights have increased the demand for both holiday homes and hotel accommodation. The supply of such properties however lags considerably behind demand primarily due to government actions. Among these the most important were the considerable delays in the introduction of master planning in many coastal regions, as well as the decision to forbid construction close to the coastline, which forced some projects in the pipeline to redraft their development plans.

– “These legal definitions however contain some loopholes, leading to investor uncertainty,”– admits Natalia Kaneva, managing partner for Southeast Europe of Colliers International. “In other cases, the prescribed zoning prevents good sites from being economically viable because of the low density of development.”

Globe Trade Centre manages investments in the northern part of Croatia’s coast, on a section of land 130-ha in size. Their special purpose company GTC Croatia holds 75 pct of the venture’s shares in these developments, which include a number of de luxe apartments and villas, as well as a 5-star hotel and an 18-hole golf course. According to Mariusz Kozłowski, director of GTC investor relations: “Purchasing land in this region, which is also very expensive, is no simple matter and that is why we usually look for a partner who is the owner of the land.”

 GTC Croatia is also developing a modern Avenue Mall shopping and entertainment centre in Zagreb with a net area of 26,000 sqm, and which will also contain an office section (an additional 7,000 net sqm). With six months still to go before the scheduled opening, 70 pct of the retail space has already been let. Mariusz Kozłowski, director of GTC investor relations, comments: “Croatia is a prosperous country, the best developed among all post-communist states apart from Slovenia, but is sadly underinvested. And that is why we are thinking about further investments there.”

“Despite the common perception that there are too many retail developments, the growing economic power of the population together with ever closer EU accession, should encourage another wave of retailers currently not interested in entering the country,” says Natalia Kaneva from Colliers International. “This means that the retail market should continue to grow for a few more years, dominated by larger scale developments.”

Focus on the capital

“This has resulted in a downward pressure on office rents,” – believes Natalia Kaneva. “At the end of 2005, Class ‘A’ office space could be rented at EUR 16 to 18 per sqm per month. A mere 9 months later, comparable or better quality office space can be rented for EUR 14 to 17 per sqm per month. Prices will continue to fall during the last quarter of 2006 and at the beginning of 2007 are expected to stabilize at around EUR 10–14. This will fuel absorption as tenants currently occupying converted or lower quality offices start relocating to take advantage of the low rents.”

Home, new home

 Croatia is a country of almost 1,200 islands, of which only 50 are inhabited. Many smaller islands are up for sale. The range of asked prices is huge, mainly depending on the development possibilities. For example, 1 sqm of an island with an inactive tourist infrastructure but with buildings can reach EUR 50, which adds up to a total price of EUR 35 mln for an area of 700,000 sqm. Less well–heeled investors need only EUR 30 to purchase 1 sqm on islands situated 200 metres off the mainland, with pebbled beaches and Mediterranean flora. But the price per sqm for inhospitable islands with rocky coasts situated several kilometres offshore can be as little as a few euros. The islands up for sale are mainly uninhabited, with any purchaser also becoming the owner of a stretch of water surrounding the purchased land.

      z Tomasz Cudowski