EUROPE - The Slovak retail real estate market is pursuing a growth trajectory similar to its significantly larger Czech neighbour, according to Cushman & Wakefield (C&W).
Prague-based head of valuation Richard Hogg said Bratislava was seeing the first moves toward Western-standard shopping centres with projects such as Eurovea.

"Whether it's commercially viable in the long term, Eurovea stands up against Western European project," he said. "Like Prague, the Slovak Republic started with big-box structures, then supermarket ancillary malls, and now it's moving into high-end shopping centres."

Although Bratislava has a population of fewer than 500,000 people, unlike Prague, it has no significant high street to compete with new structures.

Despite a dramatic slowing in development after the recession and largely negative retail sales trends this year, Hogg pointed to the city centre rental levels increasing in the second quarter and new retail supply expected to return in 2012-13.

Currently, moribund consumer confidence is forecast to grow by 3% next year, despite worrying levels of structural unemployment within an overall unemployment rate of 13%.

Michal Mušák, an economist at Slovak bank Slovenská sporiteľňa, pointed more cautiously to "a one-legged recovery so far", with sales and construction still well below the highs of the first half of 2008, but with industry already reaching pre-crisis levels.

The second most developed country in the region - after the Czech Republic - has also been the fastest growing since 2001, with average GDP growth of 4.8% annually against a 1.2% EU average.

But it faces longer-term economic challenges, including a loss of labour arbitrage as wages increase, near-total dependency on automotive and electronics manufacturing sectors and the need for education reform to avert a skills deficit.

"It will have to change in the medium term," said Mušák, though he pointed out that diversification was more difficult for small economies.

Political risk is also "far from negligible", not because of volatility but as a result of coalition stalemates. Although there is public support for broad policy objectives such as fiscal consolidation, strikes are common, and the fragile governing coalition is currently deadlocked over support for euro-zone bailouts.

Despite macro caution, Cushman & Wakefield Slovakia managing director Andrew Thomson pointed out that the market last year saw more new take-up than Prague as global firms moved their headquarters to a multilingual euro-zone market with a 19% flat tax and developed infrastructure.

"I'm surprised there hasn't been more of it," he said.