April 2019 – EECFA

Written by Dr. Ales Pustovrh – Bogatin, EECFA Slovenia

The largest Slovenian civil engineering project in recent history – the construction of the second railway connecting Port Koper with the core international railway network in Slovenia – officially started in March 2019. Still, many questions remain to its successful completion.

*Port Koper railway project – Source: http://www.drugitir.si*

The past

Port Koper, which is the only deep-sea port in Slovenia, recorded an impressive growth in the last decade; it transported more than 24 million tons of goods, including almost 1 million containers (TEU) and more than 750.000 cars. Since 2009, it has increased the quantity of its throughput by more than 10 million tons. The throughput continues to grow fast.

However, its growth is encountering limitations from the infrastructure that was designed for much smaller traffic volumes. 59% of the goods has been transported from the port using rail, essentially reaching the capacity of the existing railway connecting the port with the international railway junction at Divaca.

Before recent and ongoing modernization, the existing railway had a capacity of 72 train compositions per day, allowing for the annual transportation of 9.2 million tons of cargo. When the modernization is completed, the capacity of the existing railway will increase to 14 million tons. Yet, with projections of Port Koper reaching 35 million tons of throughput by 2030, this essentially means that all additional cargo will have to be transported on road. This ultimately results in doubling the current road cargo transportation by 2030 and tripling it by 2040.

More about Slovenian civil engineering can be found in the EECFA Slovenia Construction Forecast Report. Sample report on eecfa.com

A simple solution would be to expand railway capacity by constructing the second railway next to the existing one, but unfortunately, this is not possible as the existing railway was constructed in 1967 as an industrial railway owned by the port. Due to its history and very difficult terrain with very steep gradients, it does not fulfil technical EU standards for the core TEN-T railway network. Thus, the construction of the second railway actually requires the construction of the whole new railway with two tracks to enable longer train compositions and faster speed.

Since 1996, and in the period of 10 consecutive Slovenian governments, 17 different technical plans have been prepared for the construction of the new railway.

The present

The final plan obtained a building permit in 2016 and will allow for the construction of 27.1 km of new railway. Together with the existing railway, the capacity of the new railway will be 231 train compositions per day, making the transportation of 43.4 million tons of cargo possible. Its steepest gradient will be 17%, while the existing railway has the steepest gradient of 26%. In order to achieve this key technical characteristic, 37.4 km of tunnels (including service tunnels) and 1.1 km of viaducts will need to be constructed. This plan is still being adjusted to construct a full two-track railway as the existing building permit only allows a single-track railway with service tunnels.

This will further increase the price of the project. Estimated construction value of works Continue reading The past, present and future of Port Koper

Written by Dejan Krajinović, Beobuild Core D.O.O., EECFA Serbia

Office has been struggling to sustain steady growth as its output performance surprisingly meandered in the previous period. Finally, investments are picking up, but will it be enough to improve market conditions?

Office construction

Although Serbia’s office segment has been enjoying positive developments during the ongoing expansion, its performance has been rather bumpy and below market expectations. The initial strong recovery of construction outputs in 2016 had a short breath and corrected back by a double-digit margin in the following year. This was not expected in any way since permit numbers continued surging unabated, while investment-wise all market conditions improved further.

Find out more about office construction in the EECFA Serbia Construction Forecast Report. Sample report

The sudden decrease in 2017 was largely caused by the delay in two major planned projects in Belgrade which had received their permits, but construction start did not follow as planned. With its small base and still recovering outputs, this was enough to produce a significant delay in new deliveries and sway outputs of the entire segment.

Serbia-office — Weak office stock growth during the last decade – Source: Beobuild Core D.O.O.

Unlike other regional centers, the Belgrade market is still underdeveloped and substantially behind in stock size owing to a delayed transition and the lack of institutional funds and developers from the EU that already invested in Central and Eastern Europe. Because the downturn of 2008 and 2009 reduced financing, most office projects have been developed in a pre-leased manner, thus keeping vacancy at a constant low and rents at a stable high. Consequentially, the costs of renting class A office in Belgrade can go 40% higher than its regional peers such as Zagreb or Sofia.

The construction of office buildings has again accelerated in 2018 and 2019, and the project pipeline is slowly entering realization, meaning that new deliveries should start increasing the modern stock by a significant rate in the coming period and vacancy could also temporarily increase. Having in mind the very propulsive take-up figures in the last three years, there is no fear of a prolonged vacancy at the moment. Belgrade is the largest market and there was only 10.000m2 of new stock delivered in 2018, making a tiny contribution to the total of 860.000m2.

On the other hand, several larger projects entered realization in the same period, so another GLA 120.000m2 is under construction in Belgrade and will enter the market in H2 2020. The gap between demand and supply is already very wide and although bigger projects entered construction, it will take time for new offices to become available. Furthermore, most new projects will be leased before or during construction, so, the effect, if any, on the rent costs should be very limited in this cycle. Pressures on the demand side are set to remain strong in mid-term, so more investments will be necessary if Belgrade is to keep its regional competitiveness.

Month: April 2019

The past, present and future of Port Koper

Serbia’s office trailing on beaten path