MARKET OVERVIEW
However, the Romanian real estate market has registered signs of recovery in 2013 and this could be a sign that the bottom of the cycle has been overcome. The office segment has been the most active, although the number of transactions and rent levels have tremendously decreased compared to prior years. Unlike 2007-2008, the market remains favorable to the tenants nowadays, which have options to relocate and renegotiate. The segment appears to give the start to the revival of the market and could be followed by other sectors as well, through the delivery of 72,000 sqm GLA Floreasca City Center, Sky Tower and West Gate building 5. Another 63,000 sqm are expected to be delivered until the end of the year, according to market sources. In the first half of 2013, out of the total EUR 79 million transaction volume, 42% related to offices, 40% to shopping centers and 10% to logistics.
FINANICIAL HURDLES CONTINUE
The Romanian real estate market is still characterized by lack of liquidity, as a consequence of restrictive lending conditions by local banks. Location and concept of the project are decisive in assessing the quality and finance access, thus prime projects do not suffer significant funding restrictions. Banks are highly selective about new loans and choose predominantly borrowers with whom they have long-standing relationships.
As commercial banks are more reluctant to exposing themselves to credit risks, nontraditional lenders and insurance companies are emerging in Europe as an alternative to bank lending. As a result, many companies consider converging to real estate investment trusts (REITs). In Romania, NEPI is the first fund listed on Bucharest Stock Exchange’s REIT’s section. The fund has been very active in the last years in Romania and other CEE countries, with total assets of EUR 600 million in Romania and about 50% of their portfolio concentrated in retail property. Another active investor on the Romanian market which has drawn 10% of the direct foreign investments in Romania in the first months of 2013 is Ioannis Papalekas, whose fund’s investment have been focused on distressed properties and arbitrage opportunities.
OFFICES MARKET GOES GREEN
In a tenants’ market, the green costly efficient office buildings are gaining field and this trend will continue along with the increase in energy prices, considering the long-term environment impact as well. The first park offices from the Romanian local market, West Gate and Novo Park, owned by Liviu Tudor and endowed with the BREEAM certification are not an exception to the continuous attention granted to the ecosystems.
LOOKING FORWARD
It is predicted that, while more companies are facing fundamental problems, this will increase opportunities for distressed investors. Real estate transactions are expected to increase in the future as a number of vendors (mainly financial institutions) are now willing to exit from their holdings.
The lack of confidence from banks has left little room for speculative property developments, preventing many new projects to start. Under the current circumstances, it is paramount for developers and lenders to establish common grounds for accepting manageable project risk.
Best properties in very good locations are currently targeted by investors. They are offering higher yields than other CEE countries, which makes Romania very attractive for further investments. The retail segment has registered a decrease in yield down to 8.5% from 8.75% in only half a year due to strong investors’ demand.
In the long run, Romania still provides a promising potential in the real estate sector. The combination of a large population with low urban rates shows a great development potential for all real estate areas.
