Serbia’s retail – primed for take off

Serbia’s retail segment is enjoying a robust growth in the number of permitted buildings due to the permit reform introduced in 2015. With the first phase of the reform having commenced in 2015, and the second phase having been set out in 2016, the application procedure for permits has been made fully electronic in order to have full transparency. Consequently, not only did Serbia gain a better position in The World Bank’s 2016 Doing Business list, but is now seeing a new investment cycle of the construction of high-volume international-type shopping malls. The start of such several big-league projects should sustain this growth cycle and give a boost to construction volumes in the years to come.

Written by Dejan Krajinović, Beobuild Core D.O.O, EECFA Serbia

Delta Planet, Ada Mall (top row), IPM center, BIG Fashion (middle row), BW Gallery (bottom) – Source: beobuild.rs

In an effort to improve investment climate, permit procedures in Serbia were marked as a one of the main regulatory obstacles to development, with a long line of inefficient procedures and corrupt instances suffocating the economy. Before the reform was introduced, in some cases, it took almost a year to acquire a building permit, even if all legal conditions were met. During 2015, the government presented a multi-phase reform, which would include a total overhaul of the procedures, resulting in far cheaper and much faster permit procedures. Its implementation started in late 2015 and so far, it has been a resounding success, with building permit applications now being processed in just a few days. Furthermore, the second phase of the reform implementation started in January 2016, with building permit applications now a fully electronic system in Serbia. With electronic and centralized applications, the reform aims to lower the number of instances and the possibility of corruption and hush money in the process. This significant regulatory reform helped Serbia swiftly boost its ranks in the World Bank’s ‘Doing Business’ list, and from 91st in 2015 it reached 47th position in 2016, making it one of the most improving economies of the world in 2016.

With some anticipation of investors, new permit procedures resulted in a strong spike of permit numbers across the board. Practically all construction segments have seen their share of growth, but with almost two years into implementation of the new permit laws, some construction sectors are leading the way. It seems that the retail segment forwards as main beneficiary in building construction, with a very potent investment cycle carrying almost 1 million permitted square meters in just over two years. Coming from a very low post-crisis level, this several-fold increase of permitted retail buildings created a real sector’s boom. The reasons behind such a strong reaction of investors lay in a very opportunistic market, open for development of big city malls and retail parks. It is worth Continue reading Serbia’s retail – primed for take off

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Housing market in Russia: Demand potential shaping future market dynamics

While in the EECFA Forecast Report Russia we estimate/forecast residential output, this article is looking at another angle of predicting housing market developments: demand potential in the Russian housing market (the number of households able to buy housing) as the main indicator of further market dynamics. Positive macroeconomic indicators in Russia currently are suggesting growth in real incomes and an increase in the population’s solvency, which in the near-term future is set to raise the number of households able to buy housing. This growth in demand potential will have a positive impact on residential output, yet, this is not something that will happen overnight: the Russian housing market is predicted to continue to slump for the time being. Nevertheless, the predicted growth in demand potential will play a major role in halting this drop, leading to an expansion in the housing market in 2019.

Written by Andrey Vakulenko – MACON Realty Group, EECFA Russia

‘North Valley’ Residential Complex in St. Petersburg – Source: http://www.severdol.ru

Having the largest share in total construction both in value and volume terms, the housing market is the engine of the whole Russian construction market. Any change – decline or growth – in the housing subsector may have a decisive effect on the Russian construction industry as a whole; as it was the case, in particular, during the crisis of the Russian economy in 2015-2016. In this period, the housing sector enjoyed an unprecedented level of state support (more details in the current/previous EECFA reports), which prevented the entire construction industry from collapsing.

The state of the housing market primarily depends on the ability of the population to purchase housing. Other market factors, such as the volume of supply in the market, the level of competition or the cost of housing are secondary. It is the ability of citizens to buy housing that ultimately determines the total volume of effective demand, which in turn regulates development activity and price trends in the local housing market. At the same time, the indicators of the population’s need for housing are also secondary in terms of the dynamics of the market situation; they are of an abstract nature and cannot be used to predict the situation in the market. The need for housing is a conditional market potential, which, without the ability to buy housing is never realized. The ability of the population to purchase housing is the real market potential, which – in most cases – is realized in transactions. The level of housing provision (need) affects only the nature of demand: investment purchase, purchase of a first home, improvement of housing conditions, among others. Continue reading Housing market in Russia: Demand potential shaping future market dynamics

Game of Towers – Sofia’s New Dynamics in Office Construction

Demand for offices in Sofia is boosting a huge activity in office building and mixed-use projects, and growing land prices trigger the construction of higher and higher such buildings and office towers. The game of towers has generated a public debate on whether to designate zones where these buildings are to be concentrated.

Written by Yasen Georgiev and Dragomir Belchev, EPI – EECFA Bulgaria

BLU Offices, City Tower, Millenium Center (upper row), Capital Fort (lower row). Sources: http://www.novinite.bg, http://www.blu-offices.com, http://www.capitalfort.com, http://www.icon-bulgaria.com

In 2016 the Bulgarian economy registered a growth of 3.4%, driven mainly by increasing household consumption and export volumes. Forecast for 2017 and 2018 suggests that the country’s GDP will register a further expansion between 3% and 3.5%, reflecting the positive signs from the labor market and their implications on individual demand.

These trends support EECFA’s latest summer forecast for an increase in the overall construction market by more than 5% in 2017 and over 3% in 2018. Building construction is set to grow even at a higher pace, thus reaching an annual increase of around 8% for 2017-2019. Beside the accelerated growth of residential construction, it is the non-residential sub-sector that shows increased dynamics after a year of negative growth.

According to the EECFA 2017 Bulgaria summer report, office construction is expected to rise and reach an average growth of 4.7% over the 2017-2019 period. This forecast is supported not only by the announcement of a number of projects due to start in 2017-2018, but also by the increase in permitted floor spaces of office and administrative buildings in 2016 on an annual basis, as well as by the scale of started projects in Q12017 compared to Q12016.

In this regard, Sofia remains the most economically active city in the country. Despite the emerging demand for contemporary office space in secondary cities, in terms of floor space, 77% of all permitted office and administrative buildings in 2016 are located in the capital city, similarly to the share of started office and administrative buildings in Sofia, in a nationwide comparison accounting for 74%.

What stands behind is demand coming from outsourcing and IT companies that either seek to expand or to offer more appealing office facilities to their employees Continue reading Game of Towers – Sofia’s New Dynamics in Office Construction

GDP revision in Turkey: implications on construction market size

TUIK (Turkish Statistical Institute) had been working on harmonizing its GDP calculation method with the most recent international standards from 2013 on. The first revised figures were published at the end of 2016. After the revision, the construction market size was measured twice as large for 2015 as it was considered earlier.

This presentation is about the revised construction size and EECFA’s opinion: Turkey’s GDP and Construction Investment

Prepared by Janos Gaspar (EECFA Research)

 

 

EECFA 2017 Summer Construction Forecast and Revision

We have released our summer construction forecast on 16 June 2017 on Bulgaria, Croatia, Romania, Russia, Serbia, Slovenia, Turkey and Ukraine. This post intends to summarize the most important projections for these construction markets for the years 2017-2019. These are our main findings; for a deeper understanding, please consult our reports. You can contact us on eecfa.com.

Outlook for the EECFA regions

The highly optimistic outlook for South East Europe is maintained by EECFA. Leaving behind the transitory 2016, when the absorption of funds available in the new EU programming period (2014-2020) was still at a low level, the upcoming years are characterized by a bigger expansion of the construction market than that of GDP. Building construction is predicted to well outperform the total market, with a yearly average rate of 9% over the horizon. The small growth in the region’s total civil engineering market is attributed to the negative expectations in Romania.

Sideway moves, no further market expansion on the horizon are what we consider the most probable scenario for the 3 East European markets together. Turkey and Russia, being far the two biggest markets we cover in EECFA, is expected to show some similarities. In both countries our forecasts are moderately optimistic in the civil engineering market. While in the building construction market the outlook is clearly negative for Russia and neutral for Turkey. In Ukraine, the recovery experienced in 2016 is predicted to be sustained until 2019. Both building construction and civil engineering could expand further with a relatively good pace. Continue reading EECFA 2017 Summer Construction Forecast and Revision

Agrokor aggravation: Do the Agrokor Group’s tribulations threaten the Croatian construction sector?

Earlier this year, Croatia’s construction industry at last seemed on track for recovery after many dismal years of negative growth. 2015 saw a number of construction sectors moving into positive figures for the first time since 2009, but the recovery really took hold last year with all construction sectors likely to show positive growth once complete data for the year are available. Now, though, the Agrokor crisis has thrown this rosy picture into doubt.

Written by Michael Glazer, SEE Regional Advisors and Tatjana Halapija, Nada Projekt – EECFA Croatia

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Illustration of Agrokor HQ (Croatia) photo by Zeljko Hladika, source: http://www.24sata.hr

First, some background. The Agrokor Group is by far ex-Yugoslavia’s largest business conglomerate, with EUR6.4 billion in sales in 2015. Indeed, it is one of Central Europe’s largest companies (11th, according to Deloitte’s Central Europe’s Top 500 2016) and its second largest retailer (behind Poland’s Jeronimo Martins Polska, also according to Deloitte). Among other things, Agrokor owns the biggest retail grocery chains in Croatia, Slovenia, Serbia and Bosnia-Herzegovina (BiH), several large Croatian agricultural producers, important Croatian resort projects, significant travel agencies and major distribution companies for the wholesale and HoReCa sectors in Croatia and BiH.

Agrokor is now in serious trouble. It is having difficulty finding liquidity, a government administrator has been appointed for it by the Croatian government, the Slovenian and Serbian governments are considering similar measures and it is making only limited payments to its suppliers, on its taxes and to its lenders.

In theory, the consequences of an Agrokor Group collapse could be grave for all of the economies in which the Group operates, particularly Croatia, Continue reading Agrokor aggravation: Do the Agrokor Group’s tribulations threaten the Croatian construction sector?

Small is beautiful – and has the potential to grow!

The Slovenian economy has strongly rebounded after the recession. This is finally improving the construction industry – and might even result in the implementation of some large construction projects

Written by Ales Pustovrh, Bogatin, EECFA Slovenia

Dragon Bridge, Ljubljana -source: http://www.visitljubljana.com

GDP is forecasted to grow by 3.6 % in 2017 – its fastest growth in the last decade. However, Slovenia’s GDP has been growing steadily for three years without lifting the construction industry. This time, it might also lead to an increase in construction output in Slovenia.

Construction output has been steadily decreasing since its peak of EUR 4.6bln in 2008 to EUR 2.3bln in 2016. However, it is almost certain that construction bottomed out in 2016 and has already begun to rise. The vibrant economic growth has increased demand for residential housing, especially since the credit flows started to go up last year following several years of a severe credit crunch. At Bogatin, EECFA Slovenia, we are forecasting the increase of residential construction by 30% until 2018, but the latest growth in credit to households hints that growth might even be faster!

Continue reading Small is beautiful – and has the potential to grow!

Beyond market feeling: 3 indicators we created for understanding better what is happening on the construction market

This post of mine appeared first on the EUROCONSTRUCT blog in mid-February and introduced one of our researches in Hungary. This research is about creating such aggregates from the data of individual construction projects which carry new, up-to-date information on the current performance of construction market segments. Since then, however, we have published our first findings for the EECFA member Romania as well. Most of the original text stands for Romania too, but there are some differences so these are included in brackets.

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Thanks to The National Bank of England for the fan chart and Cosgrove Hall Films for Jamie and the Magic Torch

The regular fan-chart of The Bank of England’s GDP forecast is perfectly honest about the challenge we all face while putting together historical construction data and forecast. Uncertainty is there, not only on the right, but on the left of the dotted line as well, thanks to revisions. This post is focusing on how uncertainty surrounding the present and some months ahead in the future could be eased with aggregated construction project data. These are Hungarian and Romanian examples.

Continue reading Beyond market feeling: 3 indicators we created for understanding better what is happening on the construction market

EECFA 2016 Winter Forecast

EECFA has released its winter construction forecast reports on 2 December 2016. In this post you will find the concise summary on our expectations for the 8 construction markets we are dealing with: Bulgaria, Croatia, Romania, Russia, Serbia, Slovenia, Turkey and Ukraine. You can also find us and our reports on eecfa.com.

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Regional outlook

South-East Europe is very optimistic. After the transitory 2016, when shrinkage in the civil engineering market in the EU countries of the region dragged down the region’s total performance, high growth is expected to characterize the total construction market in the upcoming years. Each EECFA country of the region predicts an expansion beyond 5% for 2017 and a further increase for 2018. Building construction, coming back from low levels, is predicted to expand faster than civil engineering in 2017.

Eastern Europe is at a standstill as a whole. In Russia, we expect a prolonged decline. The total construction market is not predicted to expand before 2018, and we believe that the growth of civil engineering sub-market can only alleviate the loss awaited in building construction in 2017. In Turkey, our stories for the upcoming years is rather similar to that of Russia, slight optimism in civil engineering, slight pessimism in building construction leads to a total market which is not predicted to grow until 2018. In Ukraine, all-round recovery is forecasted. From the very low levels, we expect relatively high growth rates for 2017 and 2018.

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Continue reading EECFA 2016 Winter Forecast