Photo: Nevena MikićStatistics and analyses show that in recent years, Serbia has been one of the most attractive investment destinations in Europe, with a record number of foreign direct investments year after year. To what extent do the laws keep pace with the current state and further development of the business environment, what are the main advantages of the market that make foreign companies choose to do business in Serbia, and why will investing in real estate and construction projects be particularly appealing to both domestic and foreign investors in the coming period – we asked Miloš Petaković, a senior associate in the Belgrade-based Gecić Law office, officially the best law firm in Southeast Europe, which provides its clients with a wide range of legal services and enables them global coverage in more than 110 countries.
Gecić Law was declared the best law firm in Southeast Europe in 2021, as chosen by "The Lawyer" magazine, and last year you made it to the finals in four categories, which no law firm in the region has achieved so far. How prestigious and important are these awards as a recommendation for clients who want to do business in Serbia and the region?
What truly drives us is getting the job done most efficiently and effectively while adding meaningful value to our clients' businesses by employing innovative solutions and building client relationships. However, we are always proud to see the fruits of the firm's tremendous expansion over the past several years recognized this year in first-time nominations for our corporate and litigation teams. This recognition is incredibly satisfying as it comes from other lawyers – our European colleagues. To stand together with outstanding firms such as Skadden, Arps, Slate, Meagher & Flom, and Bird & Bird demonstrates that the Gecić Law team can be proud of its achievements. Ultimately, the client-attorney relationship is based on trust, and awards are an excellent reflection. However, to maintain trusting client relationships, we must consistently deliver strong results, which is our primary focus.
Miloš Petaković, Senior Associate at the Gecić Law office / Photo: Nevena Mikić
According to your experience, what is the general legal climate for doing business in Serbia? And what makes us stand out as a favorable investment destination?
Serbia's legislative base is solid and manages to keep pace with the current state and further development of the business environment. There is an ongoing trend of digitalization in most aspects of doing business. This process is beneficial as it raises the efficiency and objectivity of the administration system in general. Foreign investors no longer see Serbia as a curiosity but as a booming market with strong potential in the long term. Serbia's foreign direct investment profile testifies to this point: Serbia has consistently attracted record FDIs since 2018 and is ranked as one of the top investment hubs in Europe. In parallel, according to the Business-Friendly Cities Perception Index, Belgrade has scored number one as the city with the most significant economic potential for a second consecutive year.
These rankings are not surprising since Serbia has a lot to offer investors worldwide, such as high-quality labor, competitive operating costs, custom-free access to up to 1.3Bn consumers, and financial benefits and incentives. Serbia currently has 43 Bilateral Investment Treaties ("BITs") in place with most countries across the region, the European Union, as well as with significant trade partners, including the United Kingdom, Canada, the United States, Russia, and China, which offers additional confidence in investments in the country.
What do you see as new trends in the world of real estate, and in what direction will the market change in the future?
A trend that will continue to be in focus involves the implementation of ESG standards and energy sustainability. With ESG now playing a much more prominent role in how companies operate, investors are embedding ESG considerations into every stage of the property lifecycle, from due diligence to acquisitions and leasing to asset management. They aim to meet the demanding task of decreasing the industry's current 40% share of total global emissions. Investors take this obligation seriously, which is why there is a rise in LEED and BREEAM certifications. Construction is one of the critical sectors for the development of the economy. By its very nature, the industry links directly with the local environment, from which it draws labor, raw materials, materials, products, and financing. Green construction recognizes the importance of these factors. It promotes the application of local resources to strengthen the domestic economy, employ and train the workforce, and create healthy competition in the domestic economy and for its professionals.
On the other hand, the overall energy crisis and sustainability goals will introduce more and more examples of application and development in renewable energy sources, including wind and solar, combining energy and construction projects. While energy-saving and net-zero are the new normal for new buildings, it will be interesting to see how the industry and government will deal with the energy efficiency of old buildings.
You are about to complete a guide to investing in real estate in Serbia, with all the legal and commercial aspects of such an investment. How can investors get this guide, and what will it include?
The idea behind the real estate guide was to create a manual for both local and foreign businesses and new and experienced real estate investors. We aim to provide readers with a holistic approach that will include the necessary legal and commercial details on a long road from the decision-making process to investment, all aspects of construction, licensing, and contracts, to the utilization of constructed office space via sales and asset management. That is why we partnered with Novaston, one of the leading real estate firms in the region that specializes in asset and property management, to combine both the legal and commercial aspects of construction project management in Serbia. The guide itself will be promoted via a joint event for Novaston and Gecić Law and all information about the guide will be available to the public on our website. We hope this will be a steppingstone for other exciting projects in the field.
According to the data you have collected for this guide, what can we conclude? Is Serbia still the real estate hot spot of Europe and the Balkans, and why?
Serbia has seen healthy economic growth in the past two years, primarily due to its macroeconomic and financial stability. The economic policy measures implemented during the pandemic reduced the effects on GDP in 2020. Demand in the real estate market remains strong, with prices in Serbia increasing by 23% in the last year, and they continue to grow despite inflationary pressures and rising interest rates. This trend is evident across geographies and real estate classes. In fact, since 2015, there has been a consistent growth of new residential units, with 28,874 apartments completed in 2021. In the office space sector, Belgrade surpassed 1.1 million square meters of gross leasable area on offer by mid-2022, while the retail supply grew to 575,000 sq m of gross leasable space. Overall, the average price of new construction projects in Serbia in the first half of 2022 presented an increase of 11.7% relative to the first half of 2021. The highest prices of new construction dwellings were recorded in Belgrade's municipalities, where average prices in urban areas increased by 14.8% relative to the same period last year. Although under the threat of slowing down under the inflation hike burden and expected decrease in loan activity, there are no indicators that this trend will change in the short term.
More importantly, the guide will show that developing a construction project in Serbia is both commercially rational and safe under the legislative framework that continues to improve, benefiting the effectiveness of the administrative proceedings required in project development.
By: Jovana Nikolić
Photo: Nevena Mikić
