Serbia, Croatia, Bulgaria, Slovenia and the wider South Eastern European (SEE) region is an increasingly attractive investment destination for both international and local developers and investors in the view of analysts. Assets potentially provide a yield premium on the established CEE and Western European markets, albeit with a lower supply and availability of assets.
“Our expectations remain consistent with those of the past five to six years. We anticipate maintaining solid liquidity across the Southeast European markets, projecting approximately €1 billion in transactions across all markets. We expect this continuity to persist moving forward. In the past year, we successfully closed transactions totalling just under €1 billion, approximately €900 million. Looking ahead, we anticipate reaching around €1 billion in transaction volume for 2025,” comments Uroš Grujić, head of investment properties SEE at CBRE, from a positive perspective.
Whilst the SEE market has never really interested institutional money from the US, Western Europe and Asia, there has always been a steady flow of interest from neighbouring Central European markets such as Hungary, Austria, and the Czech Republic according to iO Partners.
“I foresee domestic and CEE investors becoming the predominant participants in our region moving forward. This trend is evident in markets such as the Czech Republic, Slovakia, and Hungary, where local investors are increasingly directing their attention toward opportunities in Croatia, Slovenia, and Serbia,” says Uroš Grujić about the origin of investors in SEE.
Concerning yields – “Historically a lack of transactions has always made yield predictions especially difficult in Serbia, with seller expectations often being far removed from where international buyers price the risk in the market. To generate interest in the market from abroad the gap in yield levels between neighbouring EU countries such as Croatia and Hungary need to be sufficiently wide, and therefore prime yields in Belgrade for both office, retail and industrial sectors are all in the range of 8.25-8.5 percent,” argues Kevin Peirson, managing director iO Partners.
Yield expectations vary significantly depending on the asset class and the specific country in question according to CBRE. “Currently, we observe yields ranging from 7 percent for the most aggressive investments, such as retail parks and prime office spaces, to as high as 9 percent or even 9.5 percent, depending on factors like the age of the building and whether it is located in a secondary or overpopulated city. While we remain optimistic about the potential to achieve yields below 7 percent in the future – particularly for custom-tailored logistics properties in markets like Slovenia – at present, the most competitive yields we are witnessing stand at around 7 percent, with upper limits extending to 9-9.5 percent.”
CBRE does not anticipate any of the markets experiencing significant oversupply or a surge in new projects, which is a favourable condition for the stability of the region. “Moving forward, the primary focus for investors should remain on sectors such as offices, retail parks, and industrial properties, and it appears that investors are increasingly aware of these dynamics, says Uroš Grujić,
Belgrade has a low stock of office space by Central European capital standards combined with a low overall vacancy rate of 6 percent, although the effective vacancy rate in the CBD is effectively under 5 percent according to iO Partners. “The gap between high-quality property supply and rising demand is growing due to limited market expansion and more companies entering the market,” comments Bajana Krsmanovic, office agency consultant at iO Partners Serbia.
As much as 75 percent of the stock is in the CBD and around 50 percent of the total stock is held by AFI Europe and the Serbian developers, MPC Properties, Marea Properties and Delta Holdings. A further 200,000 sqm of office space is planned in Belgrade according to iO Partners. This is in addition to the 113,000 sqm under construction. Concerning sustainability issues, 57 percent of the ongoing projects will be BREEAM or LEED-certified.
In Zagreb, the prolific SEE developer, GTC has completed the sale of the 10,500 sqm Matrix C at the BREEAM Excellent Matrix Office Park for a reported €27 million. GTC is an established developer in both Zagreb and Serbia. The company sold Matrix A and B to a local investor and work is set to start on the 10,500 sqm Matrix D with a scheduled completion of 2026.
Office yields currently stand at 7.75 percent according to CBRE. Office stock in Zagreb stands at circa 1.2 million sqm with a vacancy rate of under 4 percent, indicating high demand in the market. The VMD Tower is set to deliver 21,000 sqm and the Avenue office building 30,000 sqm in 2027.
“The main obstacles to further market activity include the limited availability of high-quality investment-grade assets, particularly in prime locations, and potential delays in new construction. The forecasted supply may not significantly alleviate the supply-demand imbalance in the short term. Rising rents and high competition for available properties further constrain market activity,” comments Kevin Peirson on the availability of products.
SEE is now regarded as an attractive logistics and light industrial destination as demand for logistics and light industrial space is evident. The leading regional industrial developers CTP and VGP are now active in the Serbia market. The total stock of modern Class A industrial space in Serbia has surpassed 1.1 million sqm according to 1O partners. This divides 72 percent in the Belgrade area and 20 percent in the Vojvodina region. A further 125,00 sqm is under construction with a 6 percent overall vacancy, and stock is expected to grow. A growing number of projects are BREEAM-certified.
Zagreb industrial yields stand at around 8 percent according to CBRE. The consultancy has traced 470,000 sqm of speculative stock in Zagreb with 137,000 sqm under construction. The Zagreb area is the prime industrial hub and Rijeka and Osijek are also the focus of international investors and developers.
“This region has established itself as a proven and liquid destination, characterized by high-quality investment products. It is poised to attract significant regional capital, particularly from CEE and neighbouring countries. This influx of investment underscores the confidence investors have in the region’s potential for growth and stability,” says Uroš Grujić.
“Southeast Europe (SEE) is an increasingly attractive investment destination due to its strategic location, economic growth, and demand in sectors like real estate and technology. The region offers access to key markets, a young and skilled workforce, and favourable government policies for foreign investment. Serbia for example, stands out with its strong IT industry with over 80 percent of its 5,000 active IT companies focused on software development,” concludes Kevin Peirson.
