The real estate market in Romania registered last year the fastest growth in the last 5-7 years. Developers have intensified their activity in all sectors of real estate, taking advantage of the good market situation and growing demand.
New supply reached 5-year record levels, registering growth of 11% for the residential market, + 39% for shopping centres new supply, while the area of offices completed in Bucharest was 4 times larger than in 2015.
The report provides an overview of the real estate market, including sections on:
Shopping centres
Shopping centre stock increased by 205,900 sq m GLA in 2016 at national level, a 5-year highest volume that corresponds to a 39% annual growth. There were opened 3 new schemes (ParkLake, Veranda, Piatra Neamt Shopping City), 5 extensions and one modernization (Mercur Craiova). New stock was opened mostly as part of the largest cities, with almost half (49%) being delivered in Bucharest (100,000 sq m) and 36%across the regional capitals (73,900 sq m). The rest of the cities have attracted just16%of the openings (32,000 sq m).
Shopping centre stock reached 3,168,850 sq m GLA at year-end in Romania, including 129 schemes (31 in the Capital). Existing stock is concentrated in Bucharest (32%) and regional capitals (27%), markets that are provided with large catchment areas and spendable incomes. The cities with below 100,000 inhabitants account for just 11% of the national stock, being avoided so far by developers due to the low purchasing power and smaller rental levels to be achieved.
Bucharest has exceeded for the first time 1 million sq m of shopping centre space after the opening of two new schemes in 2016, ParkLake Plaza (70,000 sqmGLA) and Veranda (30,000 sqm GLA). The existing density of 532 sq m GLA / 1,000 inhabitants is the 10 highest in Romania.
ParkLake Plaza is the largest scheme opened last year, having 70,000 sq m GLA and 200 shops. The scheme spreads on 3 retail levels (LGF+GF+1), has a large supply of anchors, fashion and leisure, including a 14-screen cinema. ParkLake is developed by Sonae Sierra / Caelum Development and is the 2 dominant scheme opened in eastern Bucharest, after the 2015 delivery of Mega Mall by NEPI.
NEPI was again the most active developer in Romania, with 91,700 sq m GLA delivered in 2016 (45% of total new supply). The company was responsible for 38% (277,800 sq m GLA) of the shopping centre space completed during the last 5 years in Romania, in addition cumulating 41% of the pipeline stock announced for delivery in 2017-2018.
A new stock of 311,215 sq m GLA is announced to open in 2017- 2018 at national level. Only 64,800 sq m GLA were under construction at the end of 2016, with the rest of projects being in various stages of planning and authorization.
Romania continues to be one of the main destinations for international retailers to expand in Europe. Expansion programs are mainly directed towards the shopping centre stock, with the prime schemes from the main cities being the main focus. New entrants in 2016 include fashion brands (Forever 21, Lanidor, Tezenis, COS, Boggi, Lynne and Cerruti 1881), accessories (New Era,OJO), sport (4F), health&beauty (Chanel,Maybelline, ApiVita), coffee shops (Kahve Dunyasi, Caffe Ritazza) and discounters (TATI, TXM).
Highest rents are registered in Bucharest, being placed at 65-70 Euro/sq m/month for 100-200 sq m units. These levels are double than the prime rents of 28-32 Euro/sq m/month found in the largest markets outside the Capital, such as Cluj-Napoca, Timisoara, Constanta and Brasov.
Offices
Office market saw record-high levels of demand in 2016, coupled with an upward evolution in pipeline activity across the main markets. With a generally stable evolution of vacancies, the rental levels have maintained unchanged.
New buildings with a total of 265,000 sq m GLA were completed last year in Bucharest, a 7-year highest level. Northern Bucharest concentrated 65% of new deliveries, followed by the west (21%) and the central area (14%).
Almost half of the newsupply, representing 121,000 sqmGLA,was delivered in Barbu Vacarescu. This area has started to develop at a high pace after 2009 and has transformed last year into the largest office area in Bucharest with 371,500 sqmGLA.
Bucharest’s modern office stock reached 2.44 million sq m GLA at year-end, out of which 75% is A-class stock. The current office density of 1,295 sq m / 1,000 inhabitants remains still far from other Central Europe’s Capitals such as Warsaw, Prague and Budapest (2,000-3,000 sqm/ 1,000 pop.).
Demand jumped to a new record last year, both in Bucharest and outside the Capital, fueled by the economic growth, expansion of IT&C, BPO and shared service centres, coupled with new entries and consolidation deals.
Bucharest’s take-up increased by 56% y/y, to a record-high of 390,000 sqmGLA of major leases. New demand represented 37% of the annual volume, followed by relocations (33%) and
renewals/renegotiations (30%).
There were recorded 33% new leases, 30% renewals/ renegotiations, 26% pre-leases and 11% expansions, at relatively similar distribution as in 2015.
The largest leases signed last year in Bucharestwere Renault-Dacia (47,500 sqmBTS pre-lease) and BCR (17,300 sqmpre-lease at The Bridge). There were recorded 5 leases in between 10,000-15,000 sq m, 12 leases having areas of 5,000-10,000 sqmand 21 leases of 3,000-5,000 sq m.
Industrial
Industrial sector continued on an positive trend, being witnessed further improvements in market fundamentals. There was registered a strong leasing activity and a record volume of new supply delivered at national level, while average rents saw a marginal growth.
Development activity accelerated last year to a record of 400,000 sq mGLA of new speculative space completed at national level. In addition, the owner-occupied stock increased by more than 125,000 sqmof newspace.
Bucharest’s stock increased last year by 190,000 sq m GLA, a volume higher than all completions done during 2009-2015 when development blocked. Major deliveries were also registered in Cluj-Napoca (55,000 sq m), Brasov (30,000 sq m), Braila (27,200 sq m), Timisoara (20,000 sqm)and Ploiesti (20,000 sq m).
Demand counted on 410,000 sqmof major leases at national level. Around 70% of the area was leased for logistics, with the rest having a manufacturing destination and being dominated by demand coming from automotive car-parts suppliers, representing20%of the total volume of major leases.
The Capital concentrated almost 55% of demand, with major deals totaling 220,000 sq m. Take-up doubled in the last two years and increased by 7% in 2016. Bucharest remains specialized on logistics, reachingmore than90%of take-up.
Timisoara is the 2 largest market after Bucharest, with major leases of 450,000 sqmduring the last 7 years, 55% for logistics and 45% for manufacturing (automotive, electronics, equipments). Take-up grewby 35% in 2016, to 75,000 sq m.
Residential
An acceleration in residential activity was registered in 2016, with increases in new supply and sales, while average prices grew by 3- 10% across the main cities. Authorities continued to add a significant influence to the market through the “First House” programand changes in legislation.
Residential development benefitted last year from a good market environment, including growing salaries (+12%), lowinterest rates (ROBOR 3-month < 1%) and increasing demand. Developers showed an active approach in expanding and starting newprojects across the markets that are provided with optimal levels of purchasing power.
New supply has started a growing trend in the late years, increasing by 3% in 2014, 4% in 2015 and accelerating to +11% in 2016. A number of 52,206 residential unitswere delivered at national level throughout 2016 according with the official statistics.
New supply increased in most areas, but especially in north-west (+40.4%), south-east (+19.8%), west (+16.9%) and north-east (+16.5%) of Romania. Decreaseswere registered in Bucharest-Ilfov area (-9.6%) and south-westernRomania (-2.4%).
Urban area accounted for 53% of the newunits delivered last year. Almost the entire newsupplywas private-financed (98%), with the state involvement being represented by only 1,228 units developed with public financing.
Urban area accounted for 53% of the newunits delivered last year. Almost the entire new supply was private-financed (98%), with the state involvement being represented by only 1,228 units developed with public financing.
Bucharest-Ilfov registered 10,022 units completed last year, returning to the volume seen in 2014 after a 9.6% decrease from the 2015 record. The largest activity was found at periphery, with southern (IMGG, Metalurgiei area) and western (Rosu) edges continuing to expand rapidly with low-price blocks of apartments.
Development increased also in the semi-central and northern areas of the city, fueled by good results in sales and demand for medium-class projects provided with good accessibility and amenities.
Important activity was also registered across the top regional capitals in terms of economy and universities. Cluj-Napoca, Timisoara, Iasi, Brasov and Sibiu are witnessing a growing mediumclass population, with boosting IT&C and engineering communities. Residential demand is coming especially from such professionals of 30-45 years old.
Full report: https://www.activpropertyservices.ro/en/market-analysis/36-romania-real-estate-market-report-spring-2017