Photo: Colliers Crna Gora (Na slici: Milovan Novaković)The Montenegrin real estate market is small, but as a young destination, it offers fantastic opportunities for fresh investments that will continue in the coming period in the commercial real estate sector, with a special emphasis on the development of retail park projects, industrial real estate, and elite tourism. We talked about the Montenegrin real estate market and its investment potential, trends in the real estate industry in the entire Adriatic region, and the successes of the multi-awarded consulting company he runs with Milovan Novaković, the head of the Colliers Montenegro office, which has been successfully operating on the Montenegrin market for two decades and is one of the founders of the Green Building Council of Montenegro.
How do you assess the current state of the real estate market in the entire region, and how specific is the Montenegrin market in relation to regional trends?
When it comes to the region, it can be stated that the commercial real estate market is quite balanced, so no significant changes are expected in that segment. It is expected that investors who have recognized the potential of the Southeast European market will continue to invest mainly in the commercial real estate industry, which has proven to be the most resilient, with a focus on retail parks and industrial real estate. As for the residential real estate market in this part of Europe, we expect that in 2024, prices will begin to show negative trends in most markets.
Gross foreign direct investments in Montenegro last year amounted to 1.15 billion euros and are 24.07% higher than in 2021, according to preliminary data from the Central Bank of Montenegro. 448.02 million euros were invested in real estate, which represents a growth of as much as 60.99%. After the recent entry of large investors into the commercial real estate sector, such as the company BIG CEE, which in the previous year and a half invested around 200 million euros, mainly in existing buildings, and taking into account their plans for new investments, primarily in the sector of retail parks, we believe that the market will continue to develop in a positive direction and that the maturity of this market can be expected in the next two years. Colliers Montenegro was privileged to act as exclusive agent and coordinate the entire process for their recent acquisition of Capital Plaza. It is also the largest acquisition in this segment of real estate in Montenegro. It is a building with a total construction area of about 85,000 m2, with two business-office towers, the CUE hotel, a residential-commercial complex with 70 luxury apartments, a shopping area on two levels, as well as four levels of garages with about 725 parking spaces. We believe that our future cooperation will be successful to our mutual satisfaction. Cities that are expected to be interesting for new retail projects are Nikšić, Budva, and Bar. In the following short-term period, we do not expect significant new investments in classic shopping centers, except in the case of upgrading existing ones.
The acquisition of Capital Plaza in Podgorica by BIG CEE is the largest acquisition in the commercial real estate sector in Montenegro / Photo: Colliers Montenegro
In previous years, Colliers Montenegro has been awarded several times by eminent institutions, such as the International Property Awards, and declared the best real estate consulting company in Montenegro. What sets you apart from the competition, and how integrated is the Colliers brand at the level of the Adriatic region?
I would also like to mention that Colliers Montenegro was declared the best consulting company in Europe for 2015/2016 and thus became the first company from this part of Europe to receive this award. Our global presence and intensive cooperation within the extensive Colliers network, the strengthening of cooperation in the Adriatic region, the strength of the brand, the diversification of services, and the professional expertise of our employees, accompanied by a high degree of ethics in business, have contributed the most to our success in such a small market that does not forgive serious mistakes. As a result of all the above, during the period of expansion in the real estate market, we were present and cooperated with almost all large investors, banks and other financial institutions, and state authorities, and during the period of stagnation, our services were mainly used by clients who were looking for the best new scenarios for their projects in accordance with the new market circumstances, as well as the banks for whom we provided diversified services, evaluation of their portfolios, and optimization of lease costs. It is very important to mention that we always listened to the signals we received from the market itself, learned from the acquired experiences, aligned our business policy with current expectations, and were prepared for upcoming, sometimes not so predictable, challenges. An honest and professional attitude towards our clients, a cautious approach when entering new business, where in many situations we had to say NO to potential clients, as well as the rational management of the company, certainly contributed to our survival in such a small and limited market. After almost two decades of successful operations, the clients with whom we cooperate and the results achieved speak best about us.
Montenegro is one of the most attractive destinations in the region for investing in real estate, especially for foreigners who buy houses and apartments by the sea. How do you see the further development of this trend?
Montenegro is already recognized as an attractive destination for foreign buyers, especially when we talk about the "second home" market segment. It is important that investors continue with quality promotion of their products, that they adapt to the profiles of customers who gravitate towards Montenegro, and that they constantly work on the so-called "fine tuning", that is, that they harmonize their products and planned budgets with real market circumstances. For young destinations like Montenegro, the expertise and attractiveness of the product being marketed are much more important than the financial strength of the investor. Projects such as Porto Montenegro, Luštica Bay, Portonovi, and some smaller ones similar to them are the best examples of this. The investors in these projects not only recognized the potential of the destination, but through their quality promotion, they positioned Montenegro on the map of the most luxurious destinations in Europe and beyond. They are also one of our best ambassadors in the world, and that is why our country should implement a culture of promoting and affirming them in order to continue attracting investors of this level.
What is the situation in the residential real estate market when it comes to domestic buyers, and how are the local residents dealing with significantly higher rental prices?
As for domiciled buyers, Podgorica is already a traditional market that absorbs the most residential transactions in Montenegro, and this trend will continue in 2022. Our predictions are that there will be no significant price corrections in 2023, but taking into account the strength of the real sector, the growth of interest rates, the still high rate of inflation, and the fact that prices are reaching their real maximum, we predict a gradual decline in prices in this segment of real estate for next year.e believe that the smaller developers, who may become insolvent, will be the first to start reducing prices and bringing them into line with real demand. If this is the case, even larger investors will begin to adapt and harmonize with the current and expected market circumstances.
As for renting apartments, Montenegro has become a temporary home for more than 50,000 people from Ukraine and Russia, which has had a positive effect on consumption in the country, but rental prices have jumped between 20% and 60%, depending on the product and location. This increase in rental prices had a negative impact on the local population, whose spending power was significantly reduced. A very small percentage of foreign tenants change to buyer status, which additionally negatively affects the entire market, so a downward price correction is expected in the future in classic multi-family buildings on the coast.
The development of luxury projects with premium amenities and the arrival of renowned hotel brands clearly show that Montenegro has turned to investments in elite tourism. What can we expect further in this sector?
Based on our information, planned investments in already market-positioned projects, such as Porto Montenegro and Luštica Bay, will continue according to the planned dynamics. The continuation of the development of such projects in Kotor is expected. In those projects, which offer their customers a "lifestyle" and a complete service, we do not expect significant price corrections. Large international hotel brands continue to recognize Montenegro as an attractive destination and the importance of projects implemented in our country, so that trend will continue. It is very important to emphasize the potential of the north of our country, which, with its further development, will be a serious creator of demand and significantly influence the development and sustainability of the most important economic branch of Montenegro. What is important to mention is that capital infrastructure projects must be continued, with a focus on road and air infrastructure, in order for Montenegro to further improve its accessibility. Also, it is necessary to promote sustainable construction in practice, aligned with the most recognized world standards.
You are a big supporter of the idea that Montenegro should use its chance as a digital nomads destination; moreover, you started the whole story two years ago. How far has the development of this program come?
Digital nomads are individuals whose work allows them to perform their work activities from any point in the world that is covered by the Internet. Last year, the Parliament of Montenegro adopted the Draft Law on Amendments to the Law on Foreigners, which aims to regulate foreigners who conduct business electronically for foreign companies not registered in Montenegro or are entrepreneurs (so-called digital nomads). The adopted amendments to the law allow the digital nomad to enter Montenegro on the basis of a long-term visa (visa D), after which he/she can apply for a temporary residence permit for up to two years, with the possibility of an extension for another two years. Montenegro is a very suitable destination for digital nomads and has all the necessary infrastructure, but what is most important for our society is the "brain gain" effect, which can be the greatest capital for the entire region because practical and modern knowledge is what everyone lacks. Research predicts that by 2035, one billion people will work "remotely". A special benefit would be the improvement of tourism and the extension of the season to the whole year. Digital nomads would no longer come to Montenegro just for a few weeks but for a few months, a whole year, or longer. Research conducted by the company Jobbatical, owned by Karoli Hindriks, the initiator of the visa program for digital nomads in Estonia, showed in a sample of 1,200 digital nomads that 87% of them believe that a simpler visa process is the main factor in choosing the destination they want to visit and work in. Therefore, nine out of ten digital nomads will choose their next destination depending on the level of regulation of the visa legislation. The legal prerequisites have been created, but now it is all up to all relevant governmental and non-governmental institutions to use the best world practices in order to make Montenegro a paradise for this fast-growing industry.
The global real estate market has gone through many crises and challenges in recent years. Do you foresee the situation calming down and recovering in the future?
After the great misfortunes first caused by the COVID-19 virus pandemic and not long after by the war in Ukraine, which is still ongoing and which further exhausted the European economies, it was to be expected that the real estate markets in many countries would also feel the negative impact of all these circumstances. It is certain that economic recovery cannot be expected until geopolitical events in the world stabilize, which will indirectly or directly affect the real estate market. High inflation rates, which are slowly stabilizing, constant growth of interest rates, and the accumulation of deposits in banks are clear signals that the markets are entering a recessionary phase. The trend of investing in commercial real estate in Europe records a decline of about 30% in 2022 compared to the average of the previous five years. Conditions on all markets are reflected in the relationship between supply and demand. From a global point of view, regardless of the newly created situation, in certain markets there was an accumulation of supply that exceeded demand, while in other markets the opposite process is taking place. That imbalance was and will be the main reason for falling or rising prices. It is expected that the appetites of global investors in the future will be focused on the so-called "distressed" opportunities as well as on the safest developing markets, which will provide them with faster returns on invested money.
By: Gordana Knežević Monašević
Photo: Colliers Montenegro
