serbia - siepa.gov.rs estate in serbia 4 5 since the onset of economic reforms in 2001, serbia has...

Serbia Investment and Export Promotion Agency3, Vlajkoviceva St. 5th floor, 11000 Belgrade, Serbia

phone: +381 11 3398 550; fax: +381 11 3398 814e-mail: [email protected]

www.siepa.gov.rs; www.doingbusinessinserbia.com

realestateopportunities

serbia

aboutserbiastronginvestmentpoint

competitivetaxsystemfavorabletaxsistem

marketpotentialsuccessstories

aboutsiepa

cont

ent

24678

1619

32

aboutserbiaIt is fair to say that Serbia has seen tremendous changes in the past decade. Since the offset of economic and social reforms over €20 billion of foreign capital has entered the country. Serbia now hosts some of the biggest companies in the world from automotive, food processing, ICT, financial service and many other industries. Today, more than half of all trade is done with EU countries and they are, at the same time, biggest investors. Attracted by favorable tax regime, industrial tradition and skilled work force, a wide range of free trade agreement and many more, companies from all over the world continue to invest in Serbia.

And it doesn’t stop there.

EU accession process is bringing changes to all levels of society, adopting both European laws and values. With EU candidacy status awarded in 2012 comes both certainty and predictability for investors and their projects. With WTO negotiations in final stage, Serbia is becoming a choice of many.

Having all that in mind, we hope this report will help you see market potential in Serbia, its unsaturated market and opportunities for new projects. Although we have seen significant investments in CEE countries, Serbian market remains under supplied compared to neighboring markets. This is true especially for retail sector, with only four modern shopping centers in the entire country. Serbia, with its population of over 7 million is the biggest country in the region and its market is ready to develop further. Positive regulations set forth by the government have already attracted big names from various industries and market is set to boom again in the near future.

Due to its position on the geographic borderline between the East and West, Serbia is often referred to as a gateway of Europe. Two important European corridors, VII – the River Danube and X – the international highway and railroad, intersect on the Serbian territory, providing excellent connections with Western Europe and the Middle East. Serbia

is thus a perfect place for a company to locate its operations if it wants to closely and most efficiently serve its EU, SEE or Middle Eastern customers. Bordering the EU, Serbia still offers a possibility of enjoying all benefits of working outside the EU while being able to provide services and transport goods in projected and flexible time frames.

TIMEZONE

1h

2h

3h

88,361 km2

Temperate continental, with monthly average temperatures ranging between 0.7°C in January and 17.5°C in July

Belgrade: 1.6 million*; Novi Sad: 0.34 million*; Nis: 0.26 million*

€ 28.7** bn

€ 3,967**

Climate

Major Cities

7.120 mn*

*Source: Statistical Office of the Republic of Serbia**Source: Ministry of Finance and Economy

real estate in serbiareal estate in serbia

Geographic position

Corridor 10Corridor 7MotorwayRailroad

AirportRiver port

real estate in serbia

54

Since the onset of economic reforms in 2001, Serbia has grown into one of the premier investment locations in Central and Eastern Europe. In the past ten years alone, the country attracted over €20 billion of inward foreign direct investment. The list of leading foreign investors is topped by world-class companies FIAT, Microsoft, Embassy Group, Siemens, AFI Group, Plaza Centers, NCR, STADA, BOSCH, Michelin, Telenor and more than 500 companies from around the globe.

stronginvestmentpoint


Largest Foreign Investors in Serbia

AB InBev530 million €

Carlsberg160 million €

Gazprom947 million €

Mobilkom Austria570 million €

Intesa San Paolo508 million €

FIAT944 million €

US Steel280 million €

Heineken67 million €

STADA650 million €

Telenor1.602 million €

Eurobank EFG500 million €

Bosch70 million €

Delhaize932 million €

Michelin150 million €

Kronospan150 million €

Cooper Tires50 million €

Benetton43 million €

Source: SIEPA 2012

Foreign Investments in Serbia by Number of Projects

Source: SIEPA Investment Database, 2000-2012

Italy 51Germany 44Austria 43Slovenia 33France 19Grece 16Israel 15United States 15Croatia 8Switzerland 7Others 88

Foreign Investments in Serbia by Value and by Sector

Source: SIEPA Investment Database, 2000-2012

Financial 19.6%Food & Beverage, Agriculture 13.3%Telecommunications 10.7%Retail 9.2%Automotive Industry 8.0%Oil & Gas 7.3%Real Estate 7.2%Tobacoo 4.8%Construction 4.0%Pharmaceutical 3.8%Others 12.3%


76

favorabletaxsistemcompetitivetaxsystemSerbia’s tax system is highly conducive for investment. Apart from featuring one of the lowest corporate profit tax rates in Europe, investments can benefit from various tax incentives which create excellent start up conditions.

Financial IncentivesHighly competitive and diverse investment incentives are designed to reduce the costs of investment projects in Serbia. For standard-scale Greenfield and Brownfield projects, non-refundable state funds are offered in the range between €4,000 and €10,000 per new job created within 3 years. Investments of over €50 million that create the minimum of 300 new jobs within 3 years can be subsidized in the amount of up to 20% of the project’s value.

For a detailed overview of tax incentives and financial suport program please refer to specialized SIEPA brochures at www.siepa.gov.rs.

Free Trade Zones and Inward ProcessingExporters in Serbia do not have to be concerned with import duties and VAT on materials from EU or any other country in the world. In order to stimulate export oriented production, Republic of Serbia provides custom and VAT free import of materials through the Inward Processing procedure. The general permission for Inward Processing is obtained once a year but even further simplification of the procedure can be gained by operating in one of the Free Trade Zones. The Free Trade Zone is considered to be outside the custom system and all goods bound to factories inside them are custom and VAT free.

Property Tax is payable by all legal entities and individuals who own or have rights over real estate located in Serbia. For a taxpayer who keeps books, property tax on the rights to real estate is maximum 0.4% of the property’s book value, while for individuals and entrepreneurs the rates are progressive.

Tax on Transfer of Title over property is payable by all legal entities and individuals who sell rights in relation to real estate. The taxable base is the price stated in the contract or the market value of the property, with the current tax rate set at 2.5%. This tax is not payable on the sale of real estate property rights to physical entities, purchasing the first apartment under the 40 sqm area, as well as up to 15 sqm for each member of their households.

Capital gain is determined as the difference between the sale price and purchase price of the real estate. The applicable rate is 15% for both physical and legal entities, while for capital gains realized by non-resident tax is 20% or in accordance with a Double Taxation Treaties. Capital gains can be offset against capital losses, occurring in the same period. A capital loss can be carried forward for a period of 5 years.

Serbia’s tax regime is highly beneficial for doing business. The Corporate profite tax, which is paid at a uniform rate of 15%, is one of the lowest in Europe, while VAT is among the most competitive in Central and Eastern Europe.

Taxes Related to Real EstateApart from the 8% Value Added Tax for the sale of newly built structures and 20% for other structures, real estate property in Serbia is subject to three basic taxes:

• Property Tax,• Tax on Transfer of Title, and• Capital Gain Tax.

VAT

Serbia 20%Slovakia 20%Bulgaria 20%Czech Republic 21%Poland 23%Romania 24%Croatia 25%Hungary 27%

Corporate Profit Tax

Bulgaria 10%Serbia 15%Romania 16%Hungary 19%Poland 19%Czech Republic 19%Croatia 20%Slovakia 23%

Salary Tax Rate

Serbia 12%Czech Republic 15%Romania 16%Hungary 16%Slovakia 19%Bulgaria 20%Poland 18-32%Croatia 12-40%


98

Real estate market in Serbia is a young emerging market which began to develop some 12 years ago. Over these twelve years, over half a million of m² of modern office, retail and logistic space was added to the market, most of it in the 2004-2008 period. Although we have, during this period, seen a boom in this sector,Serbia remains one of the undersupplied countries in the region in terms of office, retail and industrial space. Over the course of last four years we have seen some projects being delayed mainly due to the financial crisis, but the fact remains that Serbian market is opened and undersupplied.

Serbia has, in 2012 alone, attracted close to 2 billion € of foreign investment, varying from automotive to ICT and construction industry. Most of the secondary cities are still to see modern offices, shopping or leisure time facilities.

OfficeIn recent years we saw a number of international companies entering Serbian market which brought to office development boom. Over 250,000 m2 of class A premises were built following economic development of the country and the increased demand from companies from various industries.

Strong demand reflected in respectable foreign investors entering the market bringing with them international know-how, experience and new and modern facilities. Companies like GTC, CA Immo, BOP Immoand AFI Group are already present on the market.

Class A and B modern offices can only be found in Belgrade and Novi Sad, second largest city in Serbia. If we were to compare Belgrade to capital cities in the region, we would see how big the scarcity of the office stock is. Notably, a city like Kragujevac which is home to the new FIAT factory along with many of its suppliers has no class A office space

All modern office buildings are located in the new part of Belgrade and they host to large number of international companies and banks operating in

Serbia. On the other hand, downtown Belgrade is still underdeveloped in terms of modern office space. Refurbished old buildings in the city center mainly accommodate media and publishing agencies, law firms and financial consultants.

marketpotential

Office

Class A Office Stock (m2) 326.000

Class B Office Stock (m2) 284.000

Prime Office Rent (€/m2/month) 14 - 16

Vacancy Rate as of Q3 2012 (%) 16

Retail

Prime Shopping Center Stock (m2) 98.000

Number of Prime Shopping Centers 4

Average Rents in Prime Shopping Centers (€/m2/month) 27 - 29

Prime High Street Rent (€/m2/month) 65

Prime High Street Rent (€/m2/month) 80

Vacancy Rate in Prime Shopping Centers as of Q3 2012 (%) 0

Industrial

Modern Logistics Stock (m2) 110.000

Prime Logistics Rent (€/m2/month) 4 Source: Jones Lang LaSalle, November 2012

City Population Office Stock

Warsaw 1.7 million 3,745,000 m²

Budapest 1.7 million 3,175,000 m²

Belgrade 1.6 million 610,000 m²

Modern Office Stock in CEE and SEE Countries (000 m2)

WarsawBudapestPragueBucharestBratislavaZagrebBelgrade

500

Source: Jones Lang LaSalle, November 2012

1000 1500 2000 2500 3000 3500


real estate in serbia real estate in serbia

10 11

Market Practice for Office Lease

Serbia’s office market is bound to develop further. Not only it is unsaturated, but with the development of the economy and the EU accession process getting momentum, more prime office locations will emerge. Not only are the foreign companies setting up their local branches, but also domestic companies, especially from IT sector, are seeking new and modern facilities.

A new bridge across Danube River will also change the face of downtown Belgrade, removing heavy traffic from river banks, allowing the city to expand towards rivers Danube and Sava. It expected that by the end of 2014 thousands of square meters of land along riverbanks will be available for investors.

Also, new highways connecting secondary cities with main international corridors will bring to faster development of these sights as well.

In proximity of Belgrade in the municipality of Indijia Embassy Group from India is developing an IT park

on 50 hectares of land. With around 3,000,000 m² of prime commercial, residential and retail space developed around the world, Embassy Group is one of the biggest real estate investor in Serbia. The first phase of Embassy TechZone, Serbia will comprise 25,000 m² of LEED certified built up space expected to be operational by the end of 2013. This business park will have a total Developable Area of 250,000 m².

Office buildings classified as class A typically have glass façades, raised floors, suspended ceilings, modern heating and cooling systems, facilities management, reception and 24 hour security.

The speculative office stock of Class A and Class B buildings remained unchanged in the first 11 months of the year, however in December 2012, the office building Danube Business Centre of 5,300 m² of GLA became operational, increasing the speculative stock. Due to a limited supply of quality premises, prime office rents remained at the same level. Rents in prime office premises in Belgrade range from €14 to €16/m²/month. If we look at the wider area of Belgrade, rents are around €11/m²/month, while in downtown they go up to €16/m²/month. If we look at the Class B office space, it ranges between €9 and €13/m²/month in new Belgrade, while downtown they are between €10 and €12/m²/month. In the other parts of the city office space is in the range between €7 and €11/m²/month.

Prime office yields in Belgrade are between 9-9,5%. Rental levels remained stable during entire 2012 with leasing activity increasing 16% compared to 2011.

Major Office Projects in Pipeline in Belgrade

Office Building Size m2 Delivery Date Status

Old Mill 3,850 2014 Under construction

Verano Block 23 30,000 n/a On hold

Tri ListaDuvana 10,500 n/a Shell and core completed

Atlas Building 3,500 n/a Shell and core completed

West 65 office tower 37,000 n/a Planned

BancaIntesa HQ 32,000 n/a Planned Source: Jones Lang LaSalle, November 2012

Headline Office Rents in Belgrade (€/m²/month)Location Class A Class B

New Belgrade 14 - 16 11 - 13

New Belgrade wider area 10 - 11 9 - 10

Downtown 14 - 16 10 – 12

Wider City Centre / 9 - 11

Periphery / 7 - 8 Source: Jones Lang LaSalle, November 2012

Typical local market practice for office lease includes: • 3 to 5 years lease length • 3 years lease break • Advance payment of monthly rent • Annual indexation in line with European CPI • €3/m2/month service charge • Cash deposit or bank guarantee equal to 3 month rent • Incentives in the form of 3 month rent free period,

fit-out contribution and additional parking space

1312

Only few Shopping Centers

In past few years we saw development of only four major shopping centers in Serbia. Three of them are in Belgrade and one in central Serbia, in town of Kragujevac.

According to JLL Serbia, with shopping center density of 60 m² per 1,000 residents, Belgrade is the lowest supplied city in the region. With only three modern shopping centers in Belgrade, international brands interested in the Serbian market cannot find sufficient prime locations for their market penetration.

Last shopping mall in Belgrade was opened in 2009, while the only one outside Belgrade was opened in 2012. According to CBRE Serbia, during the entire year-2012, the total shopping center stock of in Belgrade remained unchanged, standing at 200,000 sq. m of GLA, which includes all types of retail schemes: western-style shopping centers, neighborhood malls, department stores and secondary SC schemes

Economic recovery and EU accession will push forward new developments, few of them already in the pipeline. As shown in the table, all of them are in Belgrade. Second largest city in Serbia, Novi Sad, is still waiting for a prime shopping mall and world famous brands.

Elsewhere in Serbia, the company Mercator S completed and opened its 20,000 m² of GLA Center in the city of Krusevac (central Serbia), which besides hypermarket hosts the brands such as Intersport, Tom Tailor, Deichmann, Tally Weijl, New Yorker, Orsay, Beba Kids, Lisca, Takko, etc. In June 2012, the construction works on the shopping center Vivo of 10,000 m² in Jagodina commenced.

Existing Prime Shopping Centers in Serbia

Shopping Center Investor Location Size m² GLA Delivery Date

Ušće MPC Properties New Belgrade 46 000 2009

Delta City Delta Real Estate New Belgrade 30 000 2007

Mercator Center Mercator New Belgrade 22 000 2002/2012

Plaza Center Plaza Centers Group Kragujevac 60 000 2012Source: CB Richard Ellis

Major Projects in Pipeline

Shopping Center Investor Location Size m2 GLA

Delta Planet Delta Real Estate Autokomanda 70,000

Višnjička Plaza Plaza Centers Visljica 42,000

Delta Land Delta Real Estate Palilula 40,000

Ada Mall GTC Cukarica 30,000

Rajićeva Shopping Center Ashtrom International City Centre 19,000

Skadarlija Key Stone City Centre 40,000Source: CB Richard Ellis


Retail

At this time, probably the biggest opportunities in Serbia lie in the retail market. Modern shopping malls can only be found in two cities in Serbia while retail parks and outlets are in their infancy. Compared to other neighboring countries, all forms of retail are yet to be developed. Belgrade, as a 1.7 million capital has only around 100.000 m² of total retail area in three modern shopping malls. City of Kragujevac has only one modern shopping mall with 60.000 m² on population of around 200.000 people.


1514

Outlets and Retail ParksIf we look at the secondary cities or suburbs of major cities, retail parks and outlets are what follow’s. Today, there are only three retail parks in the country, one in the second largest city and the other two in other secondary cities.

Israeli company BIG CEE opened the first 10,000 m² of its 40,000 sq m large retail park in Novi Sad industrial zone (including brands such as C&A, Deichmann, Takko fashion, New Yorker and Home centar), while Poseidon Group and Yu Kapital are developing the first retail park in Sabac, Capitol Park, totaling 10,000 m², scheduled for opening in Spring 2013.

First and only outlet was opened in 2012 some 40 km from Belgrade. Black oak investments in collaboration with GVA outlets opened first phase of

what is to be a 60 hectares and 100 million euro project comprising many famous brands, a hotel, large food court and many more.

Fashion industry is one of the fastest growing markets and the Belgrade shoppers are brand aware. The good value for money fashion brands have been among the market’s strongest performers in 2012, offering quality products at more acceptable prices. Existing Retail Parks in Serbia

Investor Size m² GLA Location

Aviv Park 18,000 Pančevo

Delta Park 14,000 Kragujevac

BIG Shopping Center 10,000 Novi SadSource: CB Richard Ellis

Retail Rents in Modern Premises in Belgrade (EUR/m²)

Location <150 m² >150 m²

Prime Shopping Centers 50-70 15-60

KnezMihailova Street Up to 100 40-60

Terazije 45-70 30-40

Secondary high street 30-45 20-30Source: Jones Lang LaSalle, November 2012


The rental levels remained within the same price range during the whole year.

Demand on prime locations for international brands remains high in spite of the crisis. Due to lack of space in secondary cities in Serbia, consumers from all over the country spent substantially in Belgrade. This has influenced the rents to stay stable and with the economic recovery we can expect them to rise, while their occupancy has been stable all along.

It is expected that substantial number of brands still not in the market will enter the market, demanding new and modern locations all over the country.

real estate in serbia real estate in serbia

1716

successstories

The world of business buildings is one which has a very long-term vision of the future. The needs of today are of critical importance, but those of tomorrow are paramount. GTC has seen in Belgrade a vision of a major European center of commerce, business, industry, and transport. Belgrade is in the very heart of the Balkans and at the epicenter of all movement throughout South East Europe. As the importance of Belgrade grows, so too will its requirements for office space and business parks.

What are your current and future projects in the country?GTC HOUSE is the first of GTC International’s investment in Serbia. The building–completed in April 2005–appeared as the long anticipated building, offering Class A office facilities for leasing to the leading international companies in Belgrade. The modern building is fully equipped with all high-tech facilities, sophisticated telecommunications, and elegant double height entrance lobby, leading into a covered central atrium.

Another of our office projects, 19Avenue consists of two 1st class office buildings with a unique design of 20,000 sqm. The 19Avenue is completely equipped

with high-tech telecommunication devices, offering not only exceptional working environment, but also facilities such as a restaurant, bar, storage, and underground garage.

Other GTC International’s projects include GTC Square and Park Apartments. GTC Square is the newest innovative office project located in New Belgrade, with ample parking space, an open interior courtyard overarched by translucent catwalks, and an expansive and majestic atrium. Park Apartments is a top of the range residential building, introducing a new concept of living, with 200 apartments, 2-level underground parking, retail stores, fitness center, 24-hour reception desk, security services, maintenance services on the spot, and a video interphone.

How do you perceive the business climate in Serbia?This is a very exciting time to be doing business in Serbia. In the context of its transition, Serbia has launched itself resolutely onto the path of joining the rest of Europe in terms of its economy and business. Foreign investment continues to come into Serbia from across the spectrum of industry sectors: banking, telecommunications, and, naturally, construction. Investors continue to view Serbia not only as an important investment destination in itself, but as a gateway to the region, as well. We at GTC are committed to open and transparent business practices, and have been very encouraged by the country’s efforts to align itself with the best practices for business development, as witnessed in the EU and neighboring countries. In short, we are very optimistic about the business climate in Serbia and have already experienced many of the benefits of investing here.

GTC

Mr. Robert Snow, Managing Director, GTC Serbia

Why did you decide to start a business in Serbia?There are, of course, many reasons for entering a new market. Serbia presented both a challenge and an opportunity for GTC. Firstly, as it is an emerging market, one of the principle reasons is that we perceived a large gap in the real estate sector and a need for more offices, hotels, shopping malls, and quality mid-to-upper level residential buildings. Choosing to come here also reflected our confidence that Serbia is full of promise-everything exists here in terms of opportunity, resources, and skilled workers for the country to catch up with its more developed neighbors in a short time.


1918

food industry in serbia

SIEPA was established more than a decade ago and entrusted with the mission to support foreign companies seeking to set up or expand their presence in Serbia and Serbian companies doing business abroad. Today, a staff of nearly 50 multilingual employees handles projects from and to all over the world.

We provide professional services to companies interested in setting up business operations in Serbia, focusing on all relevant issues in their decision making process. Our staff is ready to offer information on the general investment environment as well as targeted legal and industry-specific advisory services. Our network of contacts provides links to all levels of government as well as private service providers. By administering the financial incentives program

offered by the government, we have supported opening of more than 40 thousand new jobs since the launch of the program in 2006. At the same time, we have technically and financially supported thousands of Serbian companies in increasing their competiveness at global markets.

SIEPA’s work is widely recognized, with World Bank’s MIGA ranking SIEPA among the top five IPAs of developing and countries in transition topping the list of our international acknowledgements. The list of our clients includes Fiat, Benetton, Panasonic, Bosch and many other global and regional industry leaders.

We invite you to contact our expert staff which is ready to assist you in developing your business in Serbia. Working with us is simple, easy, and still costs nothing.

aboutsiepa www.siepa.gov.rsAviv Arlon

Mr. Nir Saar, CEO, Serbian branch Aviv Arlon

Why did you decide to start a business in Serbia?Aviv Arlon strongly believes in Serbia and foresees bright future for the country on long term.

What are your current and future projects in the country?The company has already developed retail park in Pancevo, Aviv Park Pancevo, with approximately 23,000 m2 NLA. We made strong efforts in planning, developing and operating the retail park which result with success. The plan is to enlarge this project with new facilities in order to create modern thriving city center.

In short time, we are planning to launch our second project in Serbia, Aviv Park Beograd, with similar retail concept. The plot is located in one of the biggest municipalities in Belgrade - Zvezdara. As well, the company has plans to enlarge operation in Serbia developing another projects.

How do you perceive business climate in Serbia?For us as a foreign company that entered Serbian market few years ago it required some time to learn and to adjust to the market. As any other place, it has its advantages and disadvantages. Generally speaking, we feel well in Serbia, we like the place and believe we are getting along with its environment. Definitely, Serbia has a lot of business potential to be used.

20

CB Richard Ellis Serbia

Airport City Belgrade88b Omladinskih Brigada Street

11070 Belgrade, Serbia

www.cbre.rs

Jones Lang LaSalle

Business Center Ušće 6 Mihaila Pupina Boulevard

11070 Belgrade, Serbia

www.joneslanglasalle.rs

Mr. Aleksandar Radulovic

SIEPAFDI advisor

T: +381 11 3398 629

[email protected]

may2013

Serbia Investment and Export Promotion Agency3, Vlajkoviceva St. 5th floor, 11000 Belgrade, Serbia

phone: +381 11 3398 550; fax: +381 11 3398 814e-mail: [email protected]

www.siepa.gov.rs; www.doingbusinessinserbia.com

realestateopportunities

serbia

serbia - siepa.gov.rs estate in serbia 4 5 since the onset of economic reforms in 2001, serbia has...

Documents