Boston, MA -- (SBWIRE) -- 01/01/2014 -- Uncertainty surrounding Bosnia & Herzegovina's political and economic backdrop continues to undermine growth in both the country's construction and real estate segments. The leasing market in 2013 remained flat with marginal upside growth, and a re-engergisation of the sector is very much dependent upon broader economic recovery both domestically and regionally. While there are signs of an accelerating economic recovery, we expect growth within the commercial real estate segment to remain muted over 2014 as the result of a number of weak fundamentals including consumer spending and exports.

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With a focus on the three principal cities of Sarajevo, Trebinje and Zenica, the report covers the property fundamentals of the commercial real estate market rental market and examines the office, retail, industrial and construction segments throughout the country, in the context of the struggling domestic and regional economy.

Meanwhile, ongoing political concerns may hamper long-term growth within the real estate sector with the country's integration into the EU still far from assured. The country's politicians are coming under increased criticism from the EU for not showing the will to make badly-need reforms and drive the country's integration into the region. While growing pressure at home and abroad may push the government to approve measures, we expect ethnic concerns to continue to trump EU ambitions among the political leadership

Recent Developments:

- In November 2013 Bosnia Herzegovina's largest international hotels group, the Hotel Ero Mostar, was put up for sale by the government having previously been under the ownership of the Federal pension and disability insurance institute.
- Q314 saw a growing trend in Kuwaiti investment in the Bosnian real estate sector with the country's ambassador to Bosnia and Herzegovina, Nasser Al-Mutairi, stating that Kuwaiti real estate investments that have become an integral part of the Bosnian economy. Al-Mutairi said that Kuwaiti investments will continue to grow due to the strong relationship between the Kuwaiti embassy and Bosnian officials, which provides investors with easy access to buying properties.
- In November 2013, the Daily Avaz reported that foreign nationals were showing increased interest in buying Bosnian real estate assets with particular interest being seen from Russian and Middle Eastern buyers. According to the publication, real estate agents across the country are seeing growing international investment across a wide range of sub-sectors including residential, office and industrial

Key BMI Forecasts

- Overall GDP is set to increase by 2.1% in 2014 following estimated 0.6% growth in 2013.
- Private consumption estimated to have grown by just 0.7% y-o-y in 2013.
- Rental rates to remain flat across all three sub-sectors of office, retail and industrial in 2014.

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