Bucharest City Report Q4 2012

Whereas a modest recovery in household consumption appeared to have returned the Romanian economy back to expansion in the second quarter, the economy contracted again in the third quarter of 2012

Economic Climate
Consequently, growth in 2012 has fallen back to only 0.5% with only a moderate increase to 1.2% in 2013 due to recessionary forces in Western Europe and continued constraints in the capital markets. However, more impressive, healthy growth is expected to accelerate to 2.7% in 2014 and even further to 3.5% in 2015.

The National Institute of Statistics published data on developments in consumer prices in December. The overall headline rate of consumer price inflation reached 0.60% month-on-month in December, leading end of 2012 year-on-year inflation to 4.95%. This was under the National Bank of Romania's (NBR's) forecast of 5.1% y-o-y at the year’s end. A high base of comparison in the later months of the year combined with a productive 2013 harvest could bring the inflation rate within the bank's target band of 1.5 - 3.5%, which in turn could lead to some monetary loosening. (IHS Country Report, January 2013)


Political Climate
Romania held parliamentary elections on December 9th. The winning coalition of the Social Liberal Union (USL) – consisting of the centre-left Social Democratic Party, National Liberal Party and the much smaller Conservative Party—has expressed its intention in honouring Romania's commitments with its international creditors and maintaining the country's pro-EU and US.


Investment Climate
The most significant 2012 transaction in the office sector was the acquisition of City Business Centre in Timi?oara by the AIM-listed fund New Europe Property Investors in February 2012. This transaction represented an important milestone for the Romanian market as it was the first truly prime office complex located in a regional city to be traded to an international investment fund. The complex deal structure and its volume - significant for a regional office project in the CEE - were noteworthy.

The political instability brought about by impeachment proceedings in the third quarter of 2012 increased funding costs and stalled investment activity for the entire quarter. Investor sentiment regarding Romania’s macroeconomic fundamentals improved towards the end of 2012, leading to a more active investment market with a few large transactions in advanced stages of due diligence. Investor interest remains, however, concentrated only on the prime end of the spectrum, with minimal interest for the secondary markets or secondary product.

2013 will be the year of proper analysis and selectivity. Romania's demographics and attractiveness as an outsourcing destination remain attractive. The market now features institutional office products delivered by regional developers, a constrained supply pipeline and a return to sustainable rental levels. With limited investor competition, there is now an opportunity to strategically secure proven successful projects—provided that deal structuring and product scrutiny are the key decision-making criteria.

More information about the investment, offices, retail, industrial and hotel markets you can find in the attached .pdf document.