REBEC 2023: When Was an Apartment in Belgrade More Expensive Than in Manhattan and Why is the Real Estate Market Here More Resilient to the Crisis Than the Rest of the World?

The coming years will be very challenging for the commercial real estate market, because, after covid, most of the employees have not returned to the offices in the numbers in which they used to, the speakers at the concluding panel of the REBEC 2023, “Where, How and Why Are We Going?”, agreed. Belgrade, they believe, is a specific market, where there is still demand for office space, which is a consequence of the fact that things started from scratch.

– Public transit in New York is used at a 70% rate compared to the pre-covid period, and in San Francisco, the rate is 35%. A direct impact of this is that real estate in city centers remains empty. In New York, there is already an initiative for the real estate which is used as office space to be turned into residential blocks – said Nebojsa Bjelotomic, the director of the Digital Serbia organization.

He added that, in 2022, Belgrade had experienced a large growth when companies from Russia moved to Serbia, which, according to him, masked the trend of companies in Belgrade mostly working by having the employees coming to work half the time, while working from home during the other half.

Also, as he pointed out, the population in the Balkans reduces around 10% each 10 years.

– So, there are fewer people on one hand, and on the other, it is possible for the first time, in the IT sector, for example, for people to work outside the big city centers, from Divcibare, for example, or from Stara Planina. In addition to that, education is increasingly available online. Although these data on the reduced use of public transit from San Francisco seem far away from here, I believe that, in the next five years, we will see office spaces which are not fully occupied here as well – said Bjelotomic.

The real estate market in the USA had been fantastic for decades, all the way until covid, pointed out Vladimir Djukanovic, a private investor and entrepreneur.

– Now the prices and the demand are dropping drastically. The initiative to return to the offices has not taken root the way they wanted. It’s a big question what happens to the office spaces – Djukanovic says.

In Belgrade, he adds, there is still need for construction and the market keeps on growing.

– We should keep in mind that, 15 years ago, Belgrade had no traditional office space, so things started from scratch here. In more developed, more mature markets, things are getting more difficult, and it is a big question how to bring back people to the offices. That is not just the problem of the industry, but also a social phenomenon, because what do you do with all those people who stay at home. When people go to work, they socialize more, they move more, they spend more money – he says.

Djukanovic believes that we are yet to see the numerous consequences of this trend and that the next five years will be challenging.

– Things will be difficult for the commercial real estate market, but on the other hand, people in residential spaces will probably need additional floor area, so that they could also work from there, in addition to organizing their family life – said Djukanovic.

When Belgrade was more expensive than Manhattan

Djukanovic pointed out that people were asking him when the prices in Belgrade would start to drop, but said that he didn’t believe it would happen as long as the demand is higher than the supply and added that the history of the real estate market in Belgrade should be kept in mind, as it had collapsed in the 1990s.

– Some family friends sold an apartment of 120 m2 in Kneza Milosa Street in Belgrade in 1984 and bought an apartment of 140 m2 in Manhattan. So, in the mid-80s, Belgrade was more expensive than Manhattan, and people often don’t understand that. When they complain about the price growth, it is because they don’t know the history of this region and this city well enough – he said.

He points out that, in the 1990s, the real estate market in Serbia collapsed, especially outside Belgrade.

– It is therefore a good strategy to find a location to which people would move, because there’s plenty of space. I am not talking about mountain places, but about villages which are located in the Belgrade area, where real estate is still very cheap, where large houses come with land – he says.

According to him, Belgrade will be a specific market in this crisis.

– The real estate market in Belgrade will be more resilient because the demand is higher than the supply. In the city center, a bigger problem at the moment is how to find adequate office space, and when they find it, people often don’t even ask what the price is – Djukanovic points out.

Can generation Z be brought back to the offices?

Generation Z, according to Vladimir Djukanovic, does not care for office space.

– Generation Z is not ready to compromise in a major way. They are used to gadgets to a much greater extent than we are. For me, working from home would not be a good option, but I understand that this is a generational thing, they see the world in a totally different light. I am worried about the social aspect, because I believe that a job also equips you with some social skills, daily goals. My first goal is: go to work or go to some client. But that’s not the way generation Z thinks – Djukanovic said.

Bjelotomic believes that another problem is the organization of office space.

– Offices used to be individual cubicles where people worked in isolation, and now things are moving toward the other extreme – everything is becoming a place for meetings, open concepts, with narrow hallways between large rooms, where once again, what’s missing is the space for the kind of socializing that people want – chatting with colleagues and having short conversations – Bjelotomic points out.

How will AI influence real estate and jobs?

According to Djukanovic, the concept of whether AI will take over the jobs has changed with time.

– Previously, we had some idea which jobs would be taken over by AI, and now that perception is changing. We should also keep in mind that it will not be the AI that replaces us, but a person who can use AI adequately – this financial analyst believes.

Artificial intelligence, he adds, will also have an impact on the real estate market.

– For example, a good journalist can write 1,000 words a day, with fact checking and the whole process. A journalist who uses ChatGPT and other tools can write 20,000 words. That’s 20 articles. So, if you own a daily newspaper and you need 200 employed journalists, in the future, you will need 20. That will also reflect on the real estate market. Even if you keep your office space, you will not need that much floor area.

He is optimistic when it comes to AI and jobs.

– People always fear losing jobs. There’s a famous story about people breaking textile machines. In practice, however, what happens is that, the more value you add to the economy, which was in fact done by the people who used the machines, the more you earn. The technology develops, but it develops slowly enough for people to be able to master new skills – he says.

Bjelotomic believes that we will certainly need the help of AI in the future.

– Considering that we are an old society, demographically, we will need all the AI help we can get, because our society will not be able to take care of itself. The first industrial revolution made people move from villages to cities, and we can say that the fourth industrial revolution will bring them back to the village, where they will be able to enjoy all the technological privileges – Bjelotomic believes.

According to him, due to the ageing of the society, but also the change of economic flows, another considerable challenge in the coming period will be the labor force.

– Another big problem in the coming period will be where to find the work force. Supply chains have had many difficulties, so now people are making their own supply chains on each continent. Increasingly more companies are moving from Asia to Europe. For example, in Serbia, around 3,000 people from the IT sector work in the automotive industry. If any of those companies wants to grow, it will have to compete to attract workers too – Bjelotomic says.

I. Zikic

Festlent d.o.o. Beograd

REBEC 2023

Digital Serbia

Nebojša Bjelotomić

Vladimir Đukanović

real estate

real estate market in Belgrade

office space

return to offices

work from home

real estate market crisis