MARKET RESEARCH ALBANIA - Colliers International
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H1 2018 | Albania
1
Research & Forecast Report | Colliers International
RESEARCH
MARKET
H1 2018
ALBANIA2
H1 2018 | Albania
Research & Forecast Report | Colliers International
EXECUTIVE SUMMARY
Economy use buildings. The total vacant space resulting in total 4.13%. Such increase
Albania's economy is continuing to in the city center has decreased by has occurred due to the increased
grow from 3.8 % in 2017 to 4.45% in 438 sq.m from H2 2017 reflecting a vacancy of QTU being under
Q1 2018. GDP growth for 2018 is decrease in the vacancy rate from construction preparing for its
projected to be at 4%. The main 9.82% in H2 2017 to 9.28% in H1 extension of 14,000 sq.m. In
contributors to the GDP growth 2018. Such decrease has occurred December 2018 QTU will reopen its
remain the tourism sector, mainly from the relocations of offices. doors to the customers by decreasing
investments and energy sector. Demand for high quality offices has also the vacancy rate of the market.
Construction sector is being increased mostly due to office International brands like New Yorker,
revitalized through the increased relocations and/or extensions done on Desigual et cetera are about to enter
number of approved construction an ad hoc basis. the market by the end of the year
permits. Only in H1 2018 491 and/or Q1 2019 showing the
Part of the demand was generated by
construction permits have been development of the Albanian retail
corporates whose lease lengths came
issued amounting to 493,839 sq.m, market. Other larger retailers continue
to expiry during 2018 and have opted
298 construction permits more than their expansion throughout the
to relocate from residential converted
during the same period in 2017 country, most notably LC Waikiki and
spaces to proper business premises.
amounting to 172,588 sq.m. The Jysk. The most significant changes
The rest of the demand was
unemployment rate, during Q1 2018, are expected in high street supply and
generated by current office stock
reached its lowest level at 12.5%, respective prices. The supply of high
occupiers looking for better locations
while the average real wage street retail is expected to increase
or higher quality office premises.
increased by 2.3% compared to 0.7% due to changes in the legal framework
The prime office market has reached concerning the gambling industry,
in the previous quarter. Foreign
some level of maturity shown in stable which foresees the closure of high
exchange segment was characterized
price levels during the last couple of street gambling units located on some
by appreciation pressures of Albanian
years. Still due to limited high quality of the best locations in the city and
Lek, while average inflation recorded
vacant office space, landlords hold the their relocation to outer city locations.
a rate of 2.2% in Q2 2018, increased
negotiating power particularly for large Such policy change is forecasted to
by 0.3% compared to Q1 2018.
spaces. This pattern is expected to increase the high street vacancy rates
Likewise the previous year, tourism in end as soon as new supply comes to and put downwards pressure on
2018 continues to play a significant market. prices.
role in the services sector showing a
The approved master plan and high-
continuous interest of foreign tourists
rise buildings in Tirana`s city center
on Albania over the last year.
will have a direct effect on the office
Overall, the economy is continuing its market in the medium and long term,
revitalization and development with both, on the supply and price side.
main drivers such as the tourism and
construction sectors.
Retail
During the first half of 2018 the retail
Office market has seen no changes in terms
At the end of H1 2018 total office of retail supply by having a total stock
supply in Tirana has not materialized of 202,800 sq.m. Vacancy rate in H1
any stock changes, thus still 2018 has significantly increased by
amounting to 107,107 sq.m including 1.37% compared to H1 2017,
A, B, B+ class competitive and mixed-3
Research & Forecast Report | Colliers International
H1 2018 | Albania
Albania remains a dynamic real estate market, growing in both
the retail and office sectors. The office stock is foreseen to see
notable changes in the mid term, whereas the retail market will
see growth by existing investors coupled by the entrance of new
brands. Fashion retailers are set to continue their growth within
the country as secondary cities become attractive. Tourism will
see continuous investment by local investors but this time
coupled with experienced international hotel operators who
should bring world class expertise to the Albanian hospitality
market when it comes to international standards for customer
service and quality control. Albania is additionally attracting the
interest of regional investors in the hospitality field who are
looking at it as an interesting, new destination.
Stela Dhami | Managing Partner4
ECONOMY
H1 2018 | Albania
Research & Forecast Report | Colliers International
Economic Overview role in the services sector showing a number of 14 banks. In addition, two
The Albanian economy has continued continuous interest of foreign tourists other banks are in the process of
towards its positive path in the first on Albania over the last year. changing their ownership.
half of 2018. Based on the latest Currently Albania has owned its place
The World Travel & Tourism Council
official statistics by the Bank of on the map as a new and attractive
(WTTC) forecasts that tourism will
Albania, the first quarter of 2017 touristic destination. Tourism is
continue its growth pattern and states
registered a growth rate of 4.45%, a attracting also regional investors who
that the total contribution of travel &
significant growth compared to 2017 are looking at Albania as a new,
tourism to GDP is forecasted to rise by
rate of 3.8%. Such increase was potential travel destination.
4.4% in 2018. In 2018 Albania is
underpinned from the growth of According to INSTAT, the number of expected to attract 4.85 million foreign
energy production, as well as the foreigners that visited Albania in the tourists, while by 2028 the annual
increase of the investments and first six months of 2018 rose by 9.1% number of international arrivals is
private consumptions. year-on-year, in total reaching 1.9 foreseen to reach 6.6 million, by thus
Unemployment rate in Q1 2018 million. Only in June, 496,137 foreign becoming an attractive market in the
reached its lowest level of 12.5%, nationals, up 13.3% year-on-year, region. However, there is further
while the average real wage entered Albania. Out of the total, opportunity for growth in this sector
increased by 2.3% compared to 0.7% 249,438 came to Albania for holiday that would put Albania in a
in the previous quarter. purposes. Most of the entrances are comparable position to other markets
by land (79%), the rest is by air (15 %) in the region (in terms of share of
Low interest rates on both deposits
and the remainder by sea (5%). tourism to GDP).
and loans underpinned the demand
for real estate properties, which still
remains as one of the most profitable Prognosis
investment tools for capital holders.
According to the World Bank report,
Non-performing loans have continued
GDP growth for 2018 is projected at
to decline by reaching 13.27% of the
4%, being supported by energy
total loan stock, by giving the
production and tourism development.
opportunity to lenders to increase their
Both, increased employment and
credit portfolio to the private sector
wage growth, are expected to boost
with a registered average growth of
private consumption. Also, future
5% in Q2 2018.
public investments and improving
Foreign exchange segment was business environment will contribute
characterized by appreciation to the overall economic growth.
pressures of Albanian Lek. It was only
However, Albania’s economic growth
after the intervention of the Bank of
is projected to slow at about 3.5% by
Albania that the domestic foreign
2019 – 2020.
exchange rate recovered. Due to the
LEK appreciation, the EUR has According to the same source,
continued to decline. Albania’s fiscal deficit is forecasted to
remain at 2% of GDP in 2018.
Average inflation registered 2.2% in
Revenues are expected to increase
Q2 2018, it increased by 0.3% points
by 0.3% of GDP in 2018 due to higher
compared to Q1 2018. According to
social security contributions.
Bank of Albania projections, inflation
will meet BOA’s target within 2020. The banking system is consolidating.
The number of banks operating in the
Similar to the previous year, tourism in
market has decreased by two
2018 continues to play a significant
compared to 2017, reaching a total5
Research & Forecast Report | Colliers International
H1 2018 | Albania
Figure 1:
Key Annual Economic Figures
KEY FIGURES
Indicators 2015 2016 2017 2018*
GDP, in % 2.2 3.4 3.8 4
Inflation CPI, in % 1.9 1.3 2 2.3
Unemployment, in % 17.1 16.1 14.1 12.5
Figure 2: 4
3.8 3.7
GDP GROWTH, IN % 3.4
2.5 2.2
1.8
1.4
1
Figure 3:
TOURISM AS A % OF
GDP
11.7
10.4 10.5
Source: IMF, INSTAT, Ministry of Finance, year-end, *projected, World Travel and Tourism Council6
H1 2018 | Albania
Research & Forecast Report | Colliers International
OFFICE MARKET
Supply €19.1/sq.m/month in H2 2017. Eyes of Tirana consist of a 26-storey
Office supply in Tirana has recorded Additionally, H1 2018 observed mixed-use building of 63,500 sq.m to
no changes, remaining in total increased flexibility by landlords in be constructed at the beginning of
107,107 sq.m including A, B and B+ order to attract international tenants. Kavaja Street, one of the main traffic
class competitive and mixed-use The market observed more incentives arteries of Tirana. Such project will
occupied buildings. given including free rent periods increase the office market stock with
during the fit-out work period. 21,000 sq.m office space.
The majority of office supply (77%) is
located in the city center and inner Pipeline Prognosis
city, while the remaining of office stock Projects in the pipeline comprising The completition of the projects in the
(23%) is located in the outskirts of proper office stock consist of pipeline and the other approved
Tirana. The vacancy rate has slightly Downtown 1 Project, MET Tirana projects will significantly impact the
decreased from 9.82% in H2 2017 to Building, Archea (4 ever green) office stock by providing the much-
9.29% in H1 2018, mostly due to small Tower, Arena Kombetare and Eyes of needed additional office supply. The
size office relocations. Such rate has Tirana. latter will have a downward impact on
resulted from the calculation of city the rental prices, which currently are
Downtown 1 Project is a large mixed-
center and inner-city stock rates recorded to be some of the highest in
use, skyscraper located on the Lana
excluding large office projects in the the Western Balkans. We forecast
River on Boulevard Bajram Curri. The
outskirts. even more relocations of
37-storey building has a height of
corporations, particularly of those
Demand 140.6 meters and will provide 17 high
currently located in subprime spaces
The first half of 2018 observed quality office floors with a total office
of lower construction and
increased demand for high quality space of 32,000 sq.m.
management quality.
offices. This demand is mostly a result MET Tirana Building is a new mixed-
of office relocations done on an ad use 12-storey tower located in the
hoc basis. Some of the companies heart of the city. The project will
relocating their offices moved from provide in total 12,000 sq.m of class A
converted residential properties to office space.
office buildings, while others moved
Archea (4 ever green) Tower is an 85
from lower class office buildings to
metres tall tower located in the heart
higher class ones. Such tenants are
of Tirana city. After being inactive in
willing to pay higher rents for better
the market for a period of 6-7 years,
quality office. It is noteworthy to state
during H1 of 2018 the project has
that corporate tenants particularly are
recommenced its construction works.
getting very specific in terms of their
Once completed part of the total built-
demands for quality space due to
up area, approximately 4,500 sq.m,
higher international real estate
will join the office stock, while the
standards and are in favour of
remaining space will join other real
relocating premises in order to find
estate subsegments.
higher quality offices.
Arena Kombetare is the new project
Rents
taking place in the former Qemal Stafa
The average office rent rate in Tirana
stadium, which apart from the stadium
currently stands at €15.4/sq.m/
and sportive area will offer office, retail
month. Average class A office rents
and hospitality facilities. Arena
have seen little change by rising to
Kombetare will provide 10,000 sq.m of
€19.5/sq.m/month in H1 2018 from
office space.7
Research & Forecast Report | Colliers International
H1 2018 | Albania
Figure 4:
Key Figures, H1 2018 - Tirana Office Market
KEY FIGURES
Total Stock 107,107 sq.m
Vacancy 9.29%
Prime Headline Rent € 24.5 sq.m/month
Figure 5:
TIRANA MARKET
OFFICE VACANCY RATE (%) 12%
11% 11%
10% 10% 9%
9% 9%
8% 7%
0%
Figure 6: 15.5 15.5 15.2 15.4
14.0 14.0 14.0
14.0
TIRANA MARKET
OFFICE AVERAGE RENT
(€/sq.m/month)
Source: Colliers International, 2018 research8
RETAIL MARKET
H1 2018 | Albania
Research & Forecast Report | Colliers International
Supply possibility for further expansion to 14,000 sq.m is the additional retail
The retail market has been constant international brands. space.
by providing a total retail stock of International brands like New Yorker, The remaining projects are positioned
202,800 sq.m, the same as the Desigual, MAC, Mango Men and LC in Tirana’s city center. The
previous year. Waikiki Home are about to enter the approximate total retail stock that is
The vacancy rate has significantly market by the end of 2018 / Q1 2019 expected to enter the high streets or
increased from 2.76% in H2 2017 to showing positive development of the city center amounts to 20,200 sq.m.
4.13% in H1 2018. Such increase has Albanian retail market.
occurred due to the increased
vacancy rates in QTU. The first Prognosis
Albanian shopping center is under Rents Following the available information
construction and preparing for an Tirana’s average shopping center and projects in the pipeline section,
increase in supply of 14,000 sq.m. rents currently stand at approximately many of the projects to be constructed
Once the construction is completed, €22.1/sq.m/month, remaining stable in Tirana will contain retail areas
the vacancy of QTU is expected to from €22.0/sq.m/month in H2 2017. which are forecasted to impact
reach 0% decreasing again the Prime headline rents for small size significantly the retail market stock
vacancy rate of the whole market. The retail spaces have slightly decreased once completed. Additionally, the high
demand for the new offered supply to €52/sq.m/month being more streets retail stock supply will also
remains high and new tenants are attractive to international companies increase due to the closure of
joining the Albanian retail market. entering the market. However, for gambling retail units in the city center
large size shops rents vary on their and inner-city areas.
size and position and are negotiated
Demand The total area of construction permits
on a case by case basis.
The first half of 2018 was issued for new commercial buildings
characterized by an increased Prime high street rents have also in H1 2018 have significantly
demand for large size retail spaces encountered a slight decrease in H1 increased by 128% compared to H1
from international brands with 2018 amounting to €45/sq.m/month 2017. The approved building permits
particular emphasis in other large from €48/sq.m/ month. Additionally, for retail areas in the first half of 2018
cities in Albania. Additionally, such the gap between the highest and the amounted 19,522 sq.m, 4,245 sq.m
fashion and apparel international lowest rents continues. This is due to more than in the first half of 2017
brands are being aggressive by buildings` age and conditions in high (15,277 sq.m). Additionally, the total
expanding their presence not only in streets along with the alignments of surface of new buildings permits for
the main shopping malls, but also in retailers` category. the whole 2017 amounted to 70,942
the high streets. Such process takes sq.m.
time to be concluded due to the limited Pipeline Currently the shopping center
availability of large size retail spaces Projects in the pipeline comprising submarket has almost achieved its
in the high streets. However, following proper retail spaces consist of Qendra saturation point. In case all the above
the recent policy changes affecting Tregtare Univers (QTU), Eyes of approved projects will be completed,
the gambling industry, new retail Tirana, Arena Kombetare, MET the retail market stock will face over
supply is expected to come back to Tirana Building, Forever Green Tower supply issues.
the high streets. The policy changes and Downtown 1 Project.
in the gambling industry require the
QTU is the first and one of the most
removal of high street gambling units
successful shopping centers in
and their relocation to more remote
Albania, located in the outskirts of
areas of the city. The newly available
Tirana and being reopened in
retail space will increase the
December 2018 with a new total built-
up area of 47,000 sq.m, out of which9
Research & Forecast Report | Colliers International
H1 2018 | Albania
Figure 7:
Key Figures, H1 2018 - Tirana Market
KEY FIGURES
Total Shopping Center Stock 202,800 sq.m
Vacancy 4.13 %
Prime Headline SC Rent € 52 sq.m/month
Prime High Street Rent € 45 sq.m/month
72 67
Figure 8:
56
TIRANA HIGH STREETS 45 48
45
PRIME RENT (€/sq.m/month) 38 38 40 40
Figure 9:
55
TIRANA SHOPPING CENTERS 50 50 50 52
PRIME RENT (€/sq.m/month) 45
35 33
30 30
Source: Colliers International, 2018 researchFOR MORE INFORMATION
Stela Dhami
Managing Partner | Albania
stela.dhami@colliers.com
Migena Zaçe
Manager | Valuation & Advisory Services
migena.zace@colliers.com
Manjola Çondi
Senior Associate | Valuation & Advisory
manjola.condi@colliers.com
Colliers International | Albania
Dervish Hima Str.
Ambassador 3 building
11th floor, Suite no.88
Tirana | Albania
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