CEDES 2005 Highlights

Networking and straight talking at CEDES 2005

The first edition of the CEDES property conference in Bratislava exceeded virtually all expectations, with more than 220 property professionals showing up for a day of discussions about the Slovak real estate market. Four moderated panel discussions were held in the SAS Radisson Carlton in central Bratislava April 14 on topics ranging from housing and retail development to office and industrial.

Most of the participants had gathered the night before at the popular Dubliners Pub in the historic part of the city for the opening party. With the ice having been broken Wednesday night, the conference got underway Thursday morning with a Keynote Address from Roman Kuruc, CEO of SARIO, Slovakia’s foreign investment agency.

The first panel discussion for the day was the Residential Panel, moderated by Laurie Farmer of Spiller Farmer. It’s become clear over the past 12 months that Bratislava’s housing market has been booming, a point that all of the panel members were able to agree on. Bratislava’s market is being driven by the retail networks of the major banks like HVB, Tatra, Slovenska sporitelna and VÚB, but it remains difficult for many foreign developers to secure financing for their projects. The Panel also noted that the appropriate legislation isn’t yet in place that would allow retail mutual funds to invest in the sector, although the returns on such investments are extremely attractive. Other members of the panel were Patel Eyal of SL Properties, Oskar Soták of Slovenska sporitelna and Billy Norton of Norco.

The Office Panel tried to shed some light on the mystery that is the Bratislava market. Moderated by Michael Smithing of Colliers International, panelists were bullish about the potential impact of the so-called Vienna Effect. With the Austrian capital so close and the prospect of convenient road connections becoming imminent, most were confident that Bratislava will see significant demand spilling over the border. What makes developers on the market nervous are the huge swings in vacancy rates caused by large spec buildings that appear in the city on a regular basis. Still, despite these fluctuations, vacancy rates appear to be averaging over the longer-term at an encouraging 10 percent. Investors agreed that the yields being talked about were shockingly low, as prime buildings are going for rates that are nearly the same as those in Prague and Budapest. The panel included Roman Krajčír, VÚB; Rory Mepham, Sachsen Fonds; Skip Schwartz, Heitman, and Paul Philips of Aukett.

The Industrial Panel was chaired by Stewart Thomson of DTZ and he was joined by Filip Schelfhout of J&T Immo Industry Group, Evan Lazar of Salans, Juraj Lettrich from EuroValley, and Todd Bradshaw of PWC. Although Poland is seen as an increasingly competitive player in Central Europe, the panelists agreed that Slovakia is a far more investor friendly country, thanks primarily to its ambitious program of tax reform (and a greater tendency for Poles to go on strike). The worry, as ever, is that so far, the majority of foreign investments have been in the manufacturing sector, so the facilities being built could be moved further east in the future. Logistics development will concentrate in the coming years on the road between Bratislava and Nitra, but panelists were of various opinions on whether southern Poland, Brno or Bratislava would end up being the dominant area. Slovakia, however, is encountering the biggest difficulties in turning away from tactics employed in the former regime, as has been seen in the problems KIA is facing in trying to secure the land it needs. Slovakia, more than its neighbors, remains a country where investors should work with local partners.

The Retail Panel, moderated by Robert McLean of Roberts Publishing Media Group, grappled with the potential of Central Europe’s smallest consumer market. The sector has long been stymied by outmoded (and only recently discarded) import procedures for consumer items like clothing. This has been a major handicap in attracting major brands, the life blood of modern shopping malls. The panel (which featured, Natasa Milic of JLL, Jeremy Cordery of Parker Green, Mike de Mug from Ballymore, Jonathan Wilkinson of Discovery Group and Martin Novak from C&W H&B) was unable to agree on exactly how far behind Slovakia was in terms of retail (up to five years, by one account), but all felt that the opportunities for huge expansion in the country were limited. The biggest issue remains the size of the country’s cities and the tenant base, which is only now showing real signs of growth. Nevertheless, all reported significant interest in retail schemes from institutional investors.