BR’s Realty event brings together this year industry professionals and consultants alike to find out their take on how the market is evolving and their forecast on the segments promising the highest profits by the end of 2017 and beyond that.

Here are the main statements of the speakers:

Session 2 – Emerging Trends

Ilinca Paun, managing partner, Colliers International: “There are a lot of risks that can harm the economic growth this year.”

Right now, the office projects are redistributed in areas of Bucharest that didn’t have such investments up to now, said Paun.

“I believe the co-working hubs will also be flooded by multinationals,” said Paun

Ovidiu Sandor, CEO, Mulberry Development: “The political events seems to be revolutionary and the concern of the business environment is how sustainable they can be and what can the impact be.”

“The economic backdrop is positive for Romania. The country is well-positioned. The elections in several countries can have an impact on economies linked to Romania,” said Sandor.

“We are entering a new development stage of the market.” “I don’t have we have such refined buyers for mixed-used projects”

ovidiu sandor_ceo_mulberry development“Our project is from the buyer’s perspective a mixed-use. It comprises several smaller components that are distinctly financed,” said Sandor.

I believe that the way in which we work is changing and we have the work based more on project. This trend, is the transformation of a permanent and constant activity to a fluid one from project to project, even in different areas.

Secondly, there is a disappearance of the boundaries between work and private space. Around hubs, there is talent that corporations seek. ISHO project will have a co-work space and a community space where we want people to come with their private projects, said Sandor.

Gabriel Voicu, director New Homes Division, Coldwell Banker: “2016 was the best from the residential perspective and I still advise for precaution.”

“The end-users in residential start to come closer to office buildings or areas with big office projects,” said Voicu.

gabriel voicu coldwell bankers_ilinca paun colliers_ovidiu sandor_mulberry development

Gabriel Voicu, Coldwell Bankers (right), Ilinca Paun Colliers International (left), Ovidiu Sandor, Mulberry Development (center)

“The passing to pay law only had a psychological effect last year. (…) On Prima Casa, there were 3 relocations of funds,” said Voicu.

The demand on residential comprises 90 percent end-users and the rest investors. “The demand is healthy.”

The Prima Casa program is stable with a 5-year funding period. We are talking about a stabilization of the bank finance. We have exceeded 200,000 Prima Casa loans.

The Prima Casa loans represent the engine of the residential growth. Even bank loans represent a good option.

“This year, there are 12,000 units under construction in Bucharest and the surrounding areas that should be finished this year,” said Voicu.

It is the first year in which Cluj-Napoca is more expensive than Bucharest on pricing on residential segment, he explained.

Mindaugas Valuckas – CEO and partner, Hanner: “We are looking for new opportunities and of course there are risks that we see. One of the risks is linked to external forces. (…) There is a growth of supply and demand but it Mindaugas Valuckas Hannermight be mismatched with the product.”

We did our first mixed-use project about 10 years ago and it had 100,000 sqm in Vilnius. The project was financed by banks, said the CEO of Hanner.

Daniel Florescu, country manager, Kinnarps Romania: “Regarding the market in Romania there are two major risks – one related to instability that can impact investment decisions and the second risk is related to the work force considering that in Romania the work force does not migrate.

In Bucharest, it is getting harder to attract employees.Daniel Florescu_Kinnarps Romania

Romania is on the right track, significant steps being taken on the new types of offices. Firstly, we are focusing a lot on the technology changes brought by smartphones and millennials.

We have an aging workforce on average, the costs of raw materials grow. When we became wireless, practically we became workers 24/7. According to our study, two thirds of workers are accessible 24/7, said Florescu.

“Probably a lot of people have seen in Bucharest a series of spaces called hubs where people go to work like in their own office. (…) In Eastern Europe this seems to be a major trend.”

Iuliana Ghimpu – Retail Leasing director, Anchor Group: “From the experience of past years and looking at trends in Europe, it is essential to have a responsible development in all the segments of real estate”

iuliana ghimpu_anchor group“Last year, within the renovation process of Plaza Romania, around 10,000 sqm of space was reconverted from retail to office, which proved to be a good decision,” said Ghimpu.
“Most of the commerce is made in offline today; we have to adapt and we adapted the tenant mix of Plaza Romania and Bucharest Mall,” said Ghimpu. The areas of coffee shops and restaurants are always busy, she added.

 

Alexandros Ignatiadis – Co-founder, Octagon Contracting & Engineering: The demand in the residential segment comes from domestic sources.

On office and retail, the growth engine are foreign investments. The risks come from external sources.

The certification should focus more on the monitorization of the efficiency of buildings on the long term, said the business owner.

Antoniu Panait, managing director, Vastint Romania: “We hope Timpuri Noi to reach 100,000 sqm and we have the second project at Orhideea that is under development and will reach 41,000 sqm. The growth momentum is welcomed and each firm can look at the risks and the investment policy.”

“There are a lot of foreign players bringing investments in Romania.”

Antoniu Panait_Vastint RomaniaTimpuri Noi is a large mixed-project. The main office component will have 100,000 sqm of office and 50,000 sqm of residential, said Panait.

“It took very long but we were able to get one of the best operators, Fratelli, in Timpuri Noi Square, taking more than 80 percent of the retail surface,” said the executive.

“It is important to create these urban areas that cover all the facilities for one week, including shops, restaurants up to universities,” said Panait.

The first contract for energy we signed for Timpuri Noi is based fully on green energy, explained Panait.

Alexandru Niculescu, VP of operations Bulgaria, Hungary & Romania, eMAG: “We want to attract creative workforce at costs that can be supported by the business,” said Niculescu. He added that the company wants to see how the infrastructure projects will be developed in the country.Alexandru Niculescu_Emag

“We see the future in mobile and in apps, a combination of mobility with channels from which clients reach us,” said Niculescu.

We have at this moment 12 showrooms in Romania. The shopping experience can start online and offline, he explained.

Catalin Ioan – Direct Sales manager, Enel: “There are more investors looking at car-sharing with electrical vehicles.”

catalin ioan enel romania“There are more developers and investors in buildings, be it residential or industrial, that buy this green energy. They want to make sure that the energy they buy is generated from renewable sources. I have seen owners of such spaces that think at producing renewable energy, for instance through solar panels. Owners of malls and office buildings are thinking of fitting electrical car charging units,” said Ioan.

“We advise our clients on optimizing the consumption of energy,” he added.

 

Session 1 – Market Report

Monica Vasile, senior broker, Office Agency, Cushman & Wakefield Echinox: “We have reached 60 percent net demand, as there are companies that have either rented more or have expanded their operations. Last year, the non-occupancy rate stood at 11 percent. By contrast, the non-occupancy rate in 2013 stood at 18 percent. In 2017, we believe that the non-occupancy rate will remain stable. We are talking about a mature market, we do not see a dramatic increase.”

Speaking of the importance of good infrastructure when deciding to invest, Monica Vasile said developers have learned to adapt.

“Developers have gotten tired of waiting for the large infrastructure project to be completed, and they developed mixed projects in emerging areas, such as buildings with retail components and diversified facilities. This is what Vastint did at Timpuri Noi, as well as Afi, Accor and others. Therefore, the lack of a poorly developed infrastructure do not weigh as much in the decision making process.”Monica Vasile_Cushman Wakefield Exchinox

 

“Developers are starting to turn towards secondary cities. Right now, we have Iasi, Timisoara, Cluj-Napoca and Brasov. We hear of Galati, Constanta, Targu Mures. Romania’s main competitor is Poland. However, Romania came first as the most attractive destination, according to a study made by Cushman Wakefield Echinox. And staff expenses are still competitive,” she explained.

We have yields at around 7.5 percent for office, said Vasile.

Andreea Paun, member of the Advisory Board, Unirii View said: “Unirii View offers 18,000 sqm. In the past years, the market developed in the north part of the city, such as Charles de Gaulle, Floreasca, Barbu Vacarescu, and Dimitrie Pompeiu. We are noticing an interest in developing office spaces in central areas. The star area, is the western part.Andreea Paun Unirii View

We are seeing an increase in the quality of projects. On office we have a preparation of the product from initial stages, said Paun.

I still believe that Romania is an emerging market, but the scalability is not there yet, she added.

I believe that we might see a new raft of transactions in the western part of Bucharest this year. I think there is a chance to create sustainable products, said Paun.

We started building after we studied the market and the trends and we discovered that there was a need for good quality, Class A buildings. However, it is difficult to attract clients. In general, companies attract each other. And they do think twice when they must go against the tide.

We are in talks with companies to rent 30 – 40 percent of the space we offer. Most companies come from the IT sector, followed by financial institutions, said Paun.

She explained that after the development of the western part of Bucharest, we will see a battle on the central area, around the three main four metro stations, namely Piata Victoriei, Universitate, Piata Romana and Piata Unirii. Somehow, the transport needs will be taken over by the public network.

“There are also signs that there will be a focus on the northern area of the capital. The Baneasa area has a big quality: it is not packed and it has a lower density when it comes to residential areas. It is also located close to Herastrau Park, which is very important among millennials. Also, in the area there are a lot of lands with large surfaces that are available.”

Vlad Vela, general manager, Werk Property Group: “We are developing a 26,000 sqm office building in Timisoara, which will be delivered towards the end of the year. It is difficult to sell everywhere. Our portfolio includes an IT company and I can tell they are demanding. This, together with the fact that we have two strong competitors in Timisoara made us cautious.vlad vela wek property group

We are in talks with companies, but so far the companies we attracted were from abroad. Something that must be taken into account is the fact that in Timisoara the unemployment rate is very small. However, Timisoara is very attractive.”

“We started off with the current building from the need to find space for the IT company we own. Currently, 80 percent of the companies we are in talks with come from the IT sector, probably the most dynamic sector. Right now, the employee chooses the employer, and a decent work place is a very strong argument to stay with a company. Therefore, we are trying to listen, and to offer what they want.”

Vela said that 50 percent of the office project in Timisoara is leased.

Dorel Nita, head of Real Estate Analysis Division, Imobiliare.ro: “Prices on certain categories of buildings have reached EUR 1,300 to EUR 1,400 per square meter.”

“2017 more dynamic for real estate than last year and all the cities will benefit. I see a further expansion of demand. We need buildings. Annually, we should have 70,000-80,000 to meet demand,” said Nita.

“The growth of prices is accelerating in the residential segment,” said Nita.

Cluj-Napoca and Bucharest have average prices per sqm of EUR 1,200. Constanta might reach over EUR 1,000 per sqm this year, he added.

Kiseleff, Herastrau areas in Bucharest have median residential prices of over EUR 2,000, said Nita

Dorel Nita, imobiliare.roIn the last year, there were 30 percent less apartments and houses for sale in Q1 2017 vs Q1 2016. In Bucharest, the offers were 35 percent less, he explained

What worries us is that the number of fresh offers is small and this exerts an additional pressure on prices combined with high demand in these cities, said Nita, referring to the situation in six cities, including Bucharest.

The stock of new buildings in Bucharest-Ilfov area stood at 10,000 last year.

“The delivery of new buildings is an issue. The pressure on demand should stimulate the construction of new houses and apartments,” said Nita.

Bucharest had 98,900 potential home buyers in the first quarter of 2017 and it rose by 13 percent compared to the same period of last year, said Nita.

“There is still an issue in Bucharest with urban planning and authorization of construction works,” said the representative of Imobiliare.ro.

“The stock of old buildings in Bucharest is shrinking, the transactions are closed fast,” said Nita.

Roxana Dudau – associated partner, Head of Real Estate Department, Noerr: If the bill for repeal of changes to legislation on urban planning does not pass, there will be stricter requirements on real estate projects. Investors will have to take into account larger land areas during the urban planning stage for PUZ, which might lead to delays in the approval of projects.

Roxana Dudau, NoerrThe changes were included in ordinance 100 that was approved last year. This ordinance was rejected by Parliament last month, but this move has to be approved by president Klaus Iohannis.

I see an increase of interest of investors in the industrial sector, on manufacturing, mainly from German and Korean companies, from the perspective of the work force and the product that can be developed here, said the associated partner.

Companies will not hurry to choose Romania this year or next year due to Brexit, she added.

I hope that we will have more transactions this year, said Dudau.

Ruxandra Bese – head of development at Immochan Romania: “We are relying on the growth in consumption this year, but we try to remain cautious. We expect retailers to continue their development plans.”

“We are focusing on two lines – one two modernize the existing portfolio, we have 23 commercial galleries where we want to bring modern commerce. Secondly, we are focusing on expansion and we are looking for new projects.

We are heading towards large cities (top 10) where we want to use this successful concept we had in Brasov, Coresi, but we are also eyeing the smaller cities.

ruxandra bese_immochan romaniaWe are seeing a migration and adaptation of large scale shopping malls to retail park or strip mall. We believe that in this complex environment, in which the approach of developers and retailers is towards simplification, we have the end-consumer, where we see more sophisticated expectations of consumers.

Consumers don’t want just sqm, the smallest price, but they seek a new experience,” said Bese.

“The winning formula is of a mixed-project (…) becoming an integrator that meets the demands of the communities where it is located. (…) We are also looking at office and starting from the Tractorul project we remain in the industrial field,” said Bese.

For the modernization of galleries we have EUR 10 million, for five galleries up to now, she said.