At the end of the year, I would like to share with you a brief look at the possible future development of real estate assets in 2022. The main paradigm for next year will be the sustainability of economic growth and its dynamics in the ongoing impact of the COVID-19 pandemic. The general view is that the economy should continue to recover from the effects of the pandemic and therefore the recovery from the effects on the development of commercial real estate will continue. Of course, each real estate segment will be under the specific influence of circumstances that have a significant impact on that segment.

1. The volume of real estate transactions will continue to grow gradually as the economy manages to gain momentum and commercial real estate prices remain in a growth trajectory. Offices and retail properties will grow only slightly. On the other hand, real estate prices will grow faster in the logistics, industrial and housing segments.
2. New segments are emerging in the real estate market. Given the lessons learned from the pandemic, alternative real estate segments such as housing for the elderly, nursing homes, data centers or so-called “Self-storage” (small warehouses for residents). These segments are likely to see capital injections into their further development.
3. The complexity of the construction process, rising material prices but also the availability of land represent a strong supportive level for housing prices on the supply side. On the other hand, the National Bank of Slovakia (NBS) is taking steps to reduce the room for maneuver for banks to provide mortgages. These two opposing forces may cause a slowdown in the growth dynamics of residential real estate prices, respectively. in the second half of the year, the stagnation of prices in some cities and localities.
4. Following the release of pandemic measures, hotels and restaurants will experience a strong rebound and a rapid return to pre-pandemic levels within their economy. The risk will be a shortage of manpower.
5. Increased Inflation and its impact on real estate will persist throughout 2022. The European Central Bank (ECB) will react and its steps will be reflected in the return of inflation to the targeted long-term level (approximately 2% in the long run). ECB rates will remain low and will continue to be a supporting factor for commercial real estate financing.
6. The offices have been, are and will be here, but their perception is gradually changing under the influence of the pandemic. In 2022, we will see an return to offices to an increased extent. Additional forms of flexible work will also be finally domesticated. Owners of office buildings will have to respond to changes in forms of work in the form of improvement and variable change of the interior of buildings (more space for team cooperation, meetings, etc.). When the tenant represented the client at the beginning of the millennium, he is now becoming more of a partner and this approach will also be reflected in the wording of the lease agreements.

Mgr. Vladimír Bolek
Portfolio Manager of the Prvý realitný fond and Member of the Board of Directors of IAD Investments, a.s.