Written by Klemen Fajmut, an experienced real estate expert engaged in real estate consultancy, financial advisory and digital solutions. 

Slovenia's institutional real estate market is maturing but still lacks new, quality real estate products and appropriate legislation which would enable more market diversification and attract more capital flows.

On 8 November, 2021, The Slovenia Times, AHK and Hotel Mons hosted a boutique and exclusive event focusing on the institutional real estate market in Slovenia. Distinguished experts and guests debated the current state of affairs and future potential, and opportunities for the real estate market in Slovenia. The discussion revolved around the interplay of strategic spatial planning, commercial and residential developments, investment funds, alternative real estate investments and the capital flows connected with the institutionalization of the real estate market in Slovenia.

The Slovenian real estate market is missing new and appropriate development projects and market dynamics. Since the crisis of 2008, there has been a development crunch in all real estate segments. Insufficient government activity in spatial planning and infrastructure investments, legislative inadequacies, as well as limited activity by pension funds in real estate investments are additional setbacks, bringing a multi-layered problem. There is reduced market attractiveness, increased investment risk, limited financing institutions and instruments, and ultimately a lack of flexibility for companies to attract talent. Consequently, there is a lack of quality real estate developments and transactional products in the market to attract more institutional investors to allocate more capital flows in the real estate sector and initiate more investment.

Panellists from right to left: Matevž Menčak, Generali Investments; Maja Ostanek Selak, KF Finance; Miran Gajšek, Municipality of Ljubljana; Matej Sodin, Reitenburg; Gregor Rožman, Ržišnik&Perc; Klara Matić, Colliers and moderator Klemen Fajmut, Imagine.

Nevertheless, the market is evolving, construction activity is growing and most of the panellists agreed there can be a positive outlook for market development. According to Colliers research, the yearly transaction volume for Commercial Real Estate (CRE) is reaching EUR 500m which is comparable to other regional markets.

Source: Colliers Croatia

There is still a lot of potential in various segments. There is demand for quality office buildings, warehouses and residential. There is also potential for alternative segments such as senior and student housing, as well as the undeveloped private rental sector (PRS). The latter has seen a development boom in the last couple of years in Central Eastern Europe. Panellists agreed that this trend should spill over to Slovenia in the coming years with continued legislative improvement and more institutional investors coming to the market.  

The Municipality of Ljubljana, amongst others, is also one of the most active agents in the real estate segment, systematically preparing development zones and land plots. There is a substantial volume of land and zones they have prepared and that will be available for potential investors which should fuel the development cycle, such as the residential/commercial development zones in Stanežiče (60ha) and Hrušica-Bizovik (65ha).

All in all, the development is not about the size of the country or the market, it is about the vision and determination. If there is a smart strategy in place and motivated actors anything is possible. There are lots of innovative and decisive actors in Slovenia's real estate market, lots of demand and free capital flows available, and the panellists agreed that the institutional market in Slovenia is developing in the right direction.