Key legal and regulatory changes impacting Slovakia’s commercial real estate market in 2024

In a recent CIJ EUROPE interview, Robert Daniš, Partner at Wilsons Slovakia, outlined significant regulatory changes impacting the Slovak commercial real estate market in 2024. According to Daniš, the introduction of a new construction law is one of the most notable developments this year. “Part of the legislation is already in effect, specifically in zoning, while the sections related to construction are expected to come into force next year—unless parliament decides to delay it further,” Daniš explained.

The primary goal of the new law is to expedite and streamline the building permit process, which has historically been slow and complex. A key change will eliminate the need for zoning permits, a move aimed at making development more flexible. However, Daniš noted that full implementation has been delayed. “We’ll have to wait and see whether the anticipated benefits will be realized once the law is fully operational,” he said, adding that the most significant provisions have yet to take effect.

When asked about tax law changes, Daniš highlighted a rise in VAT for companies involved in real estate. While not a sweeping reform, the increase could have a ripple effect on the sector. “Higher VAT could contribute to increased costs for companies and potentially property buyers, which could potentially affect pricing and demand in the market,” he stated. This shift is expected to influence both inflation and real estate costs moving forward.

Reflecting on the impact of the COVID-19 pandemic on lease agreements, Daniš noted that force majeure clauses became popular during the lockdowns, as many tenants sought rent relief. “Many tenants requested these clauses to safeguard themselves during the pandemic,” he said. However, as the market stabilizes, such requests have become less frequent.

Daniš also pointed out that the office sector has remained in favor of tenants, with current market conditions allowing them to secure better leasing terms to offset the overall inflation driven rise of rent and costs. “It’s more of a tenant’s market in the office sector now,” he remarked, but added that no major structural changes have occurred in lease agreements overall.

Discussing legal risks in property transactions, Daniš emphasized that Slovakia faces many of the same issues as other European markets. In particular, two areas of growing concern are GDPR compliance and ESG (Environmental, Social, and Governance) regulations. “Recently, clients have become more focused on data protection clauses in lease agreements,” Daniš said. Additionally, the rise of ESG standards presents new challenges for developers and landlords who must now ensure their properties meet evolving European regulations and internal ESG compliance rules of corporate tenants. “These are new risks that we didn’t see in the past but are increasingly important in today’s market,” he added.

Turning to industrial and retail properties, Daniš pointed out that location and infrastructure are the primary concerns for industrial real estate. “For industrial properties, it’s typically about access to public roads and utility networks,” he said. Legal risks often revolve around land acquisition, especially when properties are purchased in various stages of development.

For retail properties, lease agreements remain a critical focus. Daniš explained that rental income is the main driver for retail property owners, but added that ESG standards are becoming a major consideration. “ESG compliance could drive up development costs and, in turn, impact rents,” he noted.

Looking ahead, Daniš sees opportunities for growth in Slovakia’s industrial and residential real estate sectors. “There’s still room for expansion, particularly in industrial properties,” he said, citing strong interest from companies. The residential market is also appealing due to a shortage of housing, making it attractive to investors.

However, Daniš acknowledged that the office and retail markets are highly competitive, giving tenants a strong position in lease negotiations. Despite this, he believes the competitiveness in these sectors opens doors for growth in other areas.

In conclusion, Daniš stressed the importance of maintaining momentum in the real estate market. “It’s crucial that there’s consistent activity—new projects, financings, leases, and acquisitions. Without these, the market stagnates, which is bad for everyone,” he warned. Moving forward, attracting new investors will be key to ensuring the continued growth of Slovakia’s real estate sector.

© CIJ EUROPE