Slovakia has undergone a slow process of recovery and the countrys heavy dependence on external factors for its economic growth presents a key downside risk to forecasts. Indeed, a significant slowdown in external demand, in particular from Germany, would impact heavily on Slovakias export-led economic recovery. Given the deteriorating global economic outlook over the second half of 2011, this is clearly a risk to watch going in to 2012. However, having said this, Slovakias economic recovery at this point remains on track and both household consumption and gross fixed capital formation are rising, albeit gradually. Private enterprises in Slovakia are increasing their capital expenditure. As a result, we maintain a positive outlook for the recovery of the property sector and latest in-country interviews support this view.

Rents for commercial real estate in Slovakia generally rose in H111. Businesses pushed Slovakias commercial property sector into a recovery in 2010 and this continued in 2011, as vacancy rates fell and supply of office and industrial space stood still or fell, according to a report by property services group CB Richard Ellis. Leasing demand for office space in Bratislava was solid in Q211. As a result, vacancy levels fell to 9.1%.

Some of the key opportunities currently in the real estate market are:

- Demand for retail space in good locations is strong. King Sturge reports that around 16,000sq m of new retail space is likely to become available in 2011.

- The vacancy rate for industrial property is extremely low – under 4%, according to CB Richard Ellis in June 2011 – providing a massive opportunity for the right kinds of new development. The agent pointed out that no new projects were delivered in early 2011.

- Local sources in the country expect Bratislavas commercial real estate rents – which are expected to have moved in 2011 – to rise by anywhere up to 10% in 2012.

Some key risks to the current real estate market are:

- A slowdown in Slovakias exports will impact economic growth and may halt the recovery in property across all sectors in Slovakia.

- The European debt crisis may result in a second financial crisis in Europe with less available capital and financing for the property market.