Research
Department
May
2014
Commercial
M a r ke t R e p o r t
R
O
M
A
N
I
A
• The main macroeconomic indicators are on an ascending trend, with the GDP
growth of +3.5% in 2013, the highest since the start of financial crisis. The
consumption is also increasing showing the first signs of transferring the
newly formed stability towards the population.
• Supply has been very low during the current term with the exception of the
UKRAINE
ROMANIA
SERBIA
BULGARIA
delivery of one of the largest-scale office buildings to the market. Demand is
on a slightly increasing trend resulting in a decreasing vacancy rate.
• A significant characteristic of commercial market is the continuous rapid
expansion of the food operators in Bucharest and in the countryside
capitalizing on the newly increased consumption trend. In the area of
shopping malls a handful of projects have lately entered the construction
phase.
• With few new tenants targeting light industrial and logistics spaces, built-toGREECE
The present advertising brochure
«Romanian Real Estate Market» has been issued by
Eurobank Property Services S.A.
Editor in charge:
STEFANOS DOULAS
Research Group:
DRAGOS DIACONU MRICS
Date
May 1, 2014
suit is still the norm. However, the new economic improvements are expected
to improve the long-term conditions of the investment environment in the
logistics market.
Disclaimer
This report has been issued for advertising purposes by Eurobank Property Services S.A., a member of the
Eurobank Group, and may not be reproduced in any manner or provided to any other person. Each person that
receives a copy by acceptance thereof represents and agrees that it will not distribute or provide it to any other person.
This report is not an offer to buy or sell or a solicitation of an offer to buy or sell the real estate mentioned herein.
Eurobank Property Services S.A. and others associated with it may have positions in, and may effect transactions in
the real estate mentioned herein, and may also provide or seek to provide services (investment banking, brokerage or
other) for those companies. The investments discussed in this report may be unsuitable for investors, depending on
the specific investment objectives and financial situation. The information contained herein has been obtained from
sources believed to be reliable but it has not been verified by Eurobank Property Services S.A. The opinions
expressed herein may not necessarily coincide with those of any member of the Eurobank Group. No representation
or warranty (express or implied) is made as to the accuracy, completeness, correctness, timeliness or fairness of the
information or opinions herein, all of which are subject to change without notice. No responsibility or liability,
whatsoever and howsoever arising is accepted in relation to the contents hereof by Eurobank Property Services S.A.
or any of its directors, officers or employees. This is an advertising report and is distributed free of charge.
Economy
T
he second half of 2013 consolidated the macrostabilization of the economy and confirmed the good
evolution of the main economic indicators. In particular,
the GDP growth recorded for the entire year was above the
most optimistic expectations reaching 3.5%, the second
growth in European Union for the year.
The contributing factors of the GDP growth are considered to
be the high performance of the agricultural sector as well as the
export activities, and in particular the automotive industry.
However, this trend, which has started from the previous year,
is not expected to apply in long-term conditions for both
sectors.
Great progress was noted towards the limitation of the budget
deficit, which was formed below -2.5% for the second year in
succession and it is considered to be below the agreed level
with the IMF. This was achieved on one hand by the strict
conditions established with IMF and on the other hand by
limiting the available investing funds spent from the central
budget.
The inflation rate remains at a stable level in line with the
previous year, around 4% on average for the entire 2013, and
even lower at the end of the year. The current level is still one of
the highest in the European Union, surpassing the conditions
for the ERM II. Part of the low level is due to the newly
introduced VAT for bakery products of 9%, as opposed to the
normally applied VAT taxation of 24% in the Romanian market.
Due to the stability of the inflations, the National Bank (BNR)
has decided to tackle the policy rate, reaching 3.50% which is
the lowest level in the last 24 years. It is most likely that the BNR
will not proceed to further reduction of the policy rate after the
recent campaign, which spanned on the past 2 years. The main
purpose is to boost the banking credit, which is more or less
blocked since the beginning of the financial crisis. In time these
steps will also accelerate the retail consumption.
purchasing power in Romania is also on a positive trend and is
incorporating some effect from the macro-economic stabilization
and the GDP growth, reaching 50% of the European Union (EU28)
level, from the previous year's level of 48%. The unemployment rate
was stable in 2013 at a level around 7.3%.
EU funds and the opportunity of using non-refundable funding was
better exploited during 2013 compared with the previous years. The
total absorption rate has surpassed 25% of the allotted funds for the
current budget 2007-2013 plus 2 years. However, the pertinent
bodies need to pick-up the pace in absorbing the available funds
since the funding program is getting close to its end and the
reported absorption rate is the lowest among all EU countries.
Romania: Key Macroeconomic Indicators
2012
2013e
Real GDP (yoy%)
CPI (annual average yoy%)
Unemployment Rate (% of labor force)
Current Account (%GDP)
Exports (%yoy)
0.7
3.3
-3.0
-4.4
4.44
3.5
4.0
-2.6
-1.0
4.46
2.7
3.8
-2.2
-1.2
4.7
Policy Rates
2013
4.00
curent
3.50
2014
3.50
2014f
Surce: Eurobank Research & Forecasting Division, NBR
The consumption however, is hampered by the evolution of the
average net salary in real terms, which is rising with less than
inflation rate, resulting in a real negative growth to an
equivalent level of slightly less than 400 Euro per month. The
ROMANIA • May 2014
2
Property News
T
he activity on the investment market at the end of 2013 –
beginning of 2014 cannot be characterized as booming,
however, there are signs of clear improvements versus
the previous 24-36 months.
In the office market sector, the most active investors remain
NEPI and Globalworth, both of them raising new funds from
the stock exchanges and through issuing new bonds. The
funds attracted are invested either in new developments or in
already operated income producing assets.
Globalworth has started its prime office project of Bucharest
One in the Aviatiei area. A small acquisition of industrial assets
targeting a property in Timisoara was also completed. At the
same time, some main issues concerning Tower Centre
International were overcome and this facilitated Globalworth to
gain the whole ownership of the asset.
Regarding the City Office project, following the completion of
the necessary refurbishment works it is considered to be the
first successful large-scale scheme that was converted to be
used for a different purpose. In the meanwhile, Globalworth is
sending signals of future acquisitions, a potential target being
UniCredit HQ owned by a local developer.
As for investing in the retail market, NEPI has been very active
by starting the construction of the Mega Mall project in
Pantelimon Borough. The South-African investment fund has
acquired the prime shopping mall in Constanta – City Park valued
at about 81M Euro, which is estimated as a record transaction
considering the current situation on the market. Smaller size
transaction involved retail schemes in Deva and Drobeta Turnu
Severin, effectively balancing the portfolio of the fund. The two main
investors continue to dominate the market, while other players are
not so active.
However, unlike the previous 1-2 years the market registered other
transactions. Secure Property Development & Investment, a fund
registered at the London Stock Exchange, has made its first major
investment on the local market by acquiring the Innovations
Logistics Park located on the A1 Motorway.
In general, there is a considerable interest on the local market
generated by the growing potential and the relative macroeconomic stability. However the major players in the real estate
investment sector are not yet very active, preferring to explore the
major opportunities and to make long term plans. The main
markets in the region have been affected either by a prolong lack of
major growth despite an unquestionable stability, such as for
Poland and Czech Republic, or by the politic turmoil and unstable
environment, as applied in Ukraine, Turkey and Russia. However,
Romanian market seems to have more privileges from both
situations and in long term is expected to result in a more specific
and dynamic investment activity.
ROMANIA • May 2014
3
Infrastructure
T
he delivery rate of motorway projects has improved
towards the end of 2013, although it has not reached
the same level as the previous year. Specifically, some
80 km in total of new motorways have been delivered on the
market during the second half of 2013. All of them are on A1
Arad – Sibiu motorway which is connecting central Romania
with the western border.
However, the A1 motorway still needs about 150 km to be
completed in order to have a continuous link, with most of
them already in progress and with an expected delivery by the
end of 2014. In total, Romania has about 610 km of motorway
in service, with some other 300 km in various working stages
or contracted and expected works in 2014.
In the area of newly scheduled projects beside the stretches
on A1 Sibiu – Arad, are some important motorways scheduled
to start being constructed in the current year such as
Comarnic – Brasov and Sebes – Turda. The first one is
servicing important regions of Transylvania and Bucharest,
while the second one is connecting central Transylvania and
Cluj-Napoca area to the exiting motorway system (A1).
The works on the railroad major connection in Transylvania:
Brasov – Hungarian border are also delayed and there is a
real thread of not meeting the deadline settled for the end of
2015.
On the other hand, in Bucharest several infrastructure works
are progressing steadily, such as the Mihai Bravu road
overpass and the M5 subway line. More than that, new
projects are scheduled to be launched by the City Hall during
2014. Among the most important projects are the Piata Presei
Libere Road Tunnel and the enlargement of segments of the
transportation network in the Pipera area in order to
accommodate the connection with A3 motorway.
ROMANIA • May 2014
4
SUBMARKETS
Office
Market
Although the office market has not been
very active over the winter period,
which is considered normal in the
construction industry, a handful of
projects have been either launched or
announced on the market.
BUCHAREST MARKET is
concentrating most of the demand in
office units as well as the majority of
the supply. Beside the traditional area
of the CBD (around Victoriei Sq.)
where supply and demand are
traditional higher, another area
attracting a heightened interest in
office market is Aviatiei, where the
largest project under construction,
Bucharest One, is in the construction
pipeline, in the same area the tallest
building in Romania Sky Tower has
been completed.
In addition, there are quite a few areas
that have experienced a targeted
interest of investors, such as the
central area near Romana Sq. or Unirii
Sq., and the centre-south area, where
Green Gate project is located.
In the west part of the capital, there are
several areas benefiting of a an
increasing interest, beside the west –
exterior area, located near the A1
Motorway, at the end of the subway
line, where the large West Gate
project is located. AFI is planning to
develop a major office hub targeting IT
& Telecom companies by utilizing its
proximity to the shopping mall and the
Technical University.
Beside Bucharest, the cities with the
most developed office markets are
Timisoara, Cluj-Napoca and Iasi in
this order. The same markets benefit
from the supply of proper office
building during the last 24 months,
developing incipient stages of local
CBDs.
Several developers and investors are
scouting the market in order to find
good opportunities for development
and the office sector seems well
positioned in order to attract larger
investment compared with the previous
terms.
For the next term, it is expected that the
market will start improving and not only
the number of deliveries will increase,
but also the construction activity will
multiply considerably in comparison
with the previous period.
Due to the overall situation, lack of
confidence in the market and low
financing available budget, most of the
investors preferred to postpone their
projects, therefore the number of
projects launched during 2011-2012
with expected delivery during the
current term is at a low point, with very
few notable exceptions. On the other
hand, the slowly growing confidence in
the market represents signs for a
considerable improvement of the
market, partially due to the low level of
the benchmark.
ROMANIA • May 2014
5
Office Market
PROPERTY NEWS
THE SUPPLY of new office buildings is at a low level. The deliveries on
the market comprise the buildings started 18-24 months ago, when the
confidence in the real estate market was at a low point. Fortunately over
the last 12 months the situation has improved and is expected that in the
next 6 months, over the summer period, the rate of delivery will show an
upward trend.
Even so, during the current term Floreasca Park, the only major scheme
delivered, was successfully rented. Oracle, a major player in the
Romanian market will consolidate the activities from different buildings in
the new space, turning Floreasca Park into a success story.
On the other hand, tenants like Oracle, by relocating are freeing spaces in
their current occupied buildings, which will need to be filled in by other
tenants. Finding new tenants will be more difficult on the Aviatiei area submarket which registered most of the available supply in the past 12-18
months and therefore older spaces are directly competing with brand new
projects that are not fully occupied yet.
There is low volume of new office units' delivery which results in a
vacancy rate that currently is on a descending trend. Overall, in Bucharest
the vacancy rate is around 15%, but with significant differences between
various sub-markets.
both the architecture and the nearby connection to a major subway line.
Outside Bucharest, there is the important expected delivery of The Office
1 in Cluj-Napoca, the first major project compliant with A-class
characteristics in the city. The prime projects in Timisoara and in Iasi are
also benefiting from large exposure and may start a trend of
developments in the first tier of cities outside the capital.
Main Pipeline Office Projects in Bucharest (in construction)
Rentable
area (sq m)
Location
Expected
Delivery
Hermes BC 1
18,000
North
2014
Green Court 1
19,500
North
2014
Green Gate
27,000
Centre South
2014
AFI Park 2
11,500
West
2014
The Office
19,000
Cluj-Napoca
2014
AFI Park 3
12,500
West
2014
Center Square
24,000
Centre
2015
Bucharest One
48,000
North
2015
Property
In Pipera area, there are buildings with more than 50% vacancy, and with
spaces which have never been occupied since the delivery of the
buildings in 2008-2010. These buildings are significantly affecting the
overall vacancy rate of Bucharest, therefore in the rest of the areas the
average occupancy rate is close to 90%, a status similar to other East
European cities.
Latest delivered major schemes in Bucharest
Property
CSDA Siriului
Size (sq m)
Location
Delivery
3,000
North
2013
Floreasca Park
38,000
North
2014
City Offices (conversion)
20,000
South
2014
PROJECTS PIPELINE
SUPPLY is estimated to follow an ascending trend in contradiction to the
previous 12 months. It appears that many developers have renewed the
confidence in the local office market to a sufficient level in order to restart
the shelved projects and even to plan new ones.
Unlike the past situation, the new projects are not targeting a single area.
Therefore the clustering of projects is more divers, being scattered in the
centre, south and west areas in addition to the traditionally preferred north
area.
This new strategy have been planned in order to avoid the traffic issues
generated by the large commuting towards the north by establishing new
hubs in other parts of the city. A main criterion for selecting new locations
remains the accessibility of public transport, especially the subway
network.
However, the long term trend shows that North will become again the
most interesting area of the city, since several of the expected deliveries
are already in various construction stages in this part of the city.
Beside the advanced Hermes BC 1 and Green Court 1, there is also the
recently announced Bucharest One, a building which will benefit from
ROMANIA • May 2014
6
Office Market
DEMAND - SUPPLY
CONTINUING the previous semester,
during the second part of the year, the
demand for quality office spaces has risen
and new companies have entered the
market. Benefiting from the overall
economic recovery in the EU area, as well
as from the macro-economic stability of
Romania during 2013, some companies
are scouting the local market looking for
opportunities.
However, the largest demand is generated
by the existing companies in need of
additional spaces either for relocation or for
extension of their currently occupied areas.
At the same time, the tenants are looking
for more qualitative office spaces, while
means of transports and the accessibility
are paramount on the current conditions.
Main office leasing transaction in Bucharest in H2 2013
Tenant
Location
Size (sq m)
Building
Vodafone (prelease)
16,000
Bucharest One
Electronic Arts
Honeywell (additional)
Deutsche Bank
11,500
6,000
6,000
AFI Park 2
West
UpGround Offices
North
North
UpGround Offices
United Business Tower Cluj-Napoca
North
Green Court
United Business Centre 3 Iasi
West Gate
West
Novo Park
North
Bucharest One
North
Hermes BC 1
North
Endava
Schneider Electric
Capgemini
Societe Generale
UniCredit BIS
2,500
2,500
Huawei (prelease)
2,500
Xerox
1,200
5,000
3,000
2,800
North
This trend has resulted in a noticeable
change of interest towards qualitative
office spaces versus 5-10 years ago. The
rental levels is still a key factor for choosing
an office location, however, since many
owners are willing to negotiate the rentals
the differences are made also by other
factors.
In the past the contributing factors of the
market in the northern locations have
been the proximity to the airport and the
Pipera Residential area, where most of the
top management used to live. Currently
these factors refer to the proximity to the
subway stations or other public transport
facilities, the lay-out of the office buildings,
the available amenities around them.
The demand in the market continues to be
dominated by the IT & Telecom
companies, especially the call centre or
business process outsourcing. The
companies in this specific industry prefer
the proximity to the Technical University,
due to the need of pool of students as the
main source of employees.
Other companies prefer to consolidate
their business from several buildings into a
single, larger HQ. After such a move from
Oracle Company, similar actions are
expected to be made by the main players
in mobile phone industry: Vodafone and
Orange.
ROMANIA • May 2014
7
Office Market
PRICES – RENTS – YIELDS
THE RENTAL LEVELS are at a
generally stable level, ever since 2011,
with slight variations. The tenants are
usually succeeding in imposing
reasonable conditions, due to the level
of the existing vacancy rate. Some of the
owners are offering important incentives
for long term contracts, large occupiers
or superbrands tenants.
Yields variation
Bucharest office market
12%
Prime market
Secondary market
8%
4%
0%
The vacancy rate overall is decreasing,
despite the recent supply in the market,
showing additional signs of recovery
and also fueling the need for future
projects. At the same time, in areas like
Pipera North there are buildings with a
high degree of vacancy, having
unoccupied spaces for more than 3
year.
The prime rent is on slight decreasing
trend without major changes. The
achieved level is in the area of 16-18
Euro/sq m/ month on average for the
office spaces of prime quality. Most of
the secondary locations are achieving
10-14 Euro/sq m/month, while in noncore offices, such as the ones situated in
Pipera North rental prices are below this
level.
Without suffering major changes since
the previous year the office rental levels
in other major cities outside Bucharest
are in the same area of 8-12 Euro/sq
m/month for the first tier of cities, and 6
to 10 Euro/sq m/month for the second
tier of cities.
Transactions in the field of investments
sector involving proper office building
are rather limited, with a yield for prime
products estimated at approximately
8.25%. The Romanian market has a
certain attractiveness of the investment
sector, although is relatively low
compared to the peak of the market prior
to the financial crisis. However, there are
City
Prime rent Trend
(Euro/sq m) 12M
16 - 18
Bucharest - CBD
Bucharest - secondary market 10 - 14
8 - 12
Timisoara
8 - 12
Cluj - Napoca
8 - 11
Iasi
8 - 11
Constanta
7 - 11
Brasov
6 - 10
Ploiesti
6-9
Craiova
2008
2009
2010
2011
2012
2013
2014f
some encouraging signs of increased
interest in 2014 versus 2013.
TRENDS – FORECASTS
FOR THE FIRST HALF 2014, there are not
many delivery scheduled in Bucharest,
while starting with the second half of the
year and during the next year the supply will
pick up again in order to match the rising
demand.
Most of the demand is represented either
by relocation or consolidation of the
existing businesses with few new entrants.
However, the overall vacancy rate is
expected to be on a decreasing trend,
although not on equally for all the office
submarkets of Bucharest.
The rental level will most probably follow a
stable tendency in 2014, without major
fluctuations expected. Only a significant
increase of the demand can influence the
rent levels in some of the submarkets, in
which supply will be lower in comparison to
the demand.
Yields variation
Year Prime market
2008
6.25%
2009
2010
2011
2012
2013
2014f
7.00%
9.00%
8.50%
8.50%
8.25%
8.25%
Secondary market
8.00%
9.00%
10.50%
10.50%
10.50%
10.50%
10.50%
ROMANIA • May 2014
8
Key existing Shopping Malls in Romania (openings 2013)
Project name
Location/city Rentable Area
(sq m)
6,000
Botosani
Uvertura
Corall Constanta
Constanta
17,000
2013
Promenada Mall
Bucharest
36,000
2013
Ploiesti
29,000
2013
Galati
30,000
2013
AFI Palace
Retail
Market
After 5 years of decrease, the consumption
has returned to the growing trend once again.
December 2013 was the most productive
month since December 2008 in terms of
consumptions. The trend appears to remain
positive for the first quarter of 2014 versus the
same period of the previous year (year-onyear evolution).
The situation of consumptions is rewarding
the efforts of the retailers that have invested
in opening and refurbishing new outlets even
in the years in which the financial crisis was
affecting the revenues, cash-flow and profits.
The most eager to expand the business are
still the food retailers, especially the
discounters and convenience stores. The last
format is successfully competing with the
traditional trade and so far each new opening
of a convenience store meant closing 3-4
other traditional retailers in the close
proximity.
Emphasizing the success of the discount
format, one of the most successful retailer,
Carrefour, once a leader of the market, has
introduced the discount division by acquiring
several spaces formally owned by the Interex
supermarket, which recently exited the local
market.
The process of closing down, refurbishing or
even conversion of some of the commercial
spaces has continued throughout the country.
The cases of City Mall and the GTC Mall in
Suceava converted in office areas are more
or less successful, however not all schemes
have the same degree of good stories, and
some of the spaces, such as Armonia Braila
can be considered lost cases.
A new arrival that is expected to play a
significant role in the formation of the retail
market is the on-line food selling under the
brand of large hypermarket with the main
purpose of lowering the prices and increasing
the demand.
Opening
Year
2013
Galati Shopping City
SHOPPING MALLS
UNDERMINED BY the continue decrease of
the consumption in the last 5 years and by the
recent bankrupt of several shopping schemes,
most developers have limited the delivery of
new projects on the market in the past 2 years.
Notable exceptions are Raiffeisen Evolution
and NEPI.
The first one has developed Promenada Mall
in order to complete the mix project which also
includes Sky Tower. The shopping mall
targeted on the day shopping, focusing on the
employees of the nearby office buildings.
NEPI on the other hand is investing in the
areas which lack proper shopping malls such
as Galati Shopping City or Mega Mall in east
Bucharest. The South African investor is
looking for successful partnership in order to
actively develop new projects in untapped
locations in a timely manner.
At the same time, NEPI has applied a new
concept which is based on developing, a
neighborhood centre type of retail rather than
the classic shopping mall, in the case of the
Vulcan Value Centre. A reposition has been
done also by Cocor Centre, which has also
changed its character from a luxury brand
centre to a youth oriented one.
On the other hand, there are several shopping
centres in need of repositioning, such as City
Mall that has been refurbished and can
operate as a City Office Complex, while
Plaza Romania is planning to convert some
of the retail spaces in office units.
STREET RETAIL
HIGH STREET RETAIL seems to still
struggle in the secondary location compared
to the shopping malls. Most of the prime
locations are characterized by the lack of the
conditions required by the clients, such as
easy access, parking places, diversity of
products, which affects negatively sales and
drives most of the retailers to avoid high
street location.
However, the Old Town of Bucharest has
undergone a successful conversion, and
started to attract a variety of tenants, not only
in leisure and entertainment sector. After the
operation of the major brand outlets (H&M,
Zara and Koton) there are tenants in
complementary sectors actively looking for
spaces in Old Town premises, such as
bookstores (Carturesti).
Food sellers prefer secondary locations that
were previously engaged by bank branches
and pharmaceutical stores currently
repositioned. These secondary locations are
mostly characterized by convenience and
discount stores, which are less demanding
on consumer activity.
Major Retail Projects Pipeline in Romania
Project name
Location Surface (sq m) Developer
60,000
Real4You & NEPI
Bucharest
Mega Mall
ParkLake Plaza
Vulcan Value Centre
Bucharest
70,000
Sonae Sierra & Caelum
Bucharest
28,000
68,000
NEPI
Benevo & CD Capital
Brasov
25,000
40,000
Prodplast Imobiliare
Immochan
Brasov
45,000
Echo Investment
Victoria City Lifestyle Center Bucharest
Veranda Shopping Center Bucharest
Coresi Shopping Centre
Korona Gallery
ROMANIA • May 2014
9
Retail Market
BIG BOX – OUTLET –
HYPERMARKETS
THE EXPANSION of Kaufland hypermarkets
has continued both in the countryside and in
Bucharest during 2013, consolidating its
leader position. Since the crisis has affected
the local market, Kaufland has doubled the
number of outlets and almost doubled the
turnover to more than 1.5 billion Euro per
year, with a slight decrease of the turnover
per sq m.
The expansion of the network will continue at
about the same pace in 2014, especially in
Bucharest where Kaufland is targeting a total
of 12 outlets from the current 6, with most of
the location being already secured.
Auchan has increased strongly the position in
the market since the acquisition of Real
network, with the refurbishment and
rebranding process almost complete, while
Cora is making some efforts by fueling its
expansion albeit at a slower pace.
Carrefour is interested in exploring new
format and is in the process of opening the
first 3 outlets with discount policy in the
former Interex location. The discount channel
is still the busiest one with Lidl also expanding
at a high rate.
BIG BOX
PROJECTS PIPELINE
ALTHOUGH the hypermarket sector is
becoming more competitive, new market
schemes are expected to be implemented
such as the on-line food shopping, while the
evolution of the discount sector is considered
to be the powerhouse for at least two-three
years.
However, the sector that is in complete
turmoil is the do-it-yourself. Besides the
transaction involving Bricostore, which is one
of the major investors in the market, and
Kingfisher, there are several other players
interested in M&A. Both Baumax and Obi
have announced their intention of exiting the
Romanian market due to the poor results and
financial issues in their primary markets.
Recently, Praktiker, which has been in
insolvency status for almost 12 months,
severely affected by the financial crisis, has
been acquired by a Turkish investor. Most of
the players in the sector have been affected
by the low sales and the freezing of the
construction market.
On the other hand, the current leader of the
market, Dedeman is taking advantage of
their rivals' problems and expanding in the
past 3 years more than in the booming
period.
ROMANIA • May 2014
10
Retail Market
DEMAND - SUPPLY
THERE ARE SOME encouraging signs
on the retail market, mostly fueled by the
overall macro-economic stability and by
the timid growing trend of consumption.
However, in order to allow for a surge of
confidence and a spending frenzy, the
economic growth registered in 2013 has
to be transferred to the population
through higher wages and lower
unemployment rate.
It is concluded that, the ideal mix of tenants
for an area, which carries the characteristics
of an open-air shopping mall needs to
include service providers that derive from
the public relations' sector of official
institutions, (i.e. tax, urbanism offices).
Under this circumstantial, the Old Town
will claim the unofficial title of the prime
high-street location of the city.
Some of the developers have become
more confident due to the slight
stabilization trend and have started new
developments, part being older plans
shelved until the crisis is over. The most
sought-after area in Bucharest is the east
side that is lacking a proper shopping
mall, and expected to receive 2 in the
following 12-18 months with construction
works already started on Mega Mall and
ParkLake Plaza.
With some notable exceptions, the
retailers are not keen in large expansion
plans at the moment; however, new
openings of outlets are reported in
shopping malls and on high-street retail
market, especially in the fashion and
footwear sector.
The most aggressive retailers are still
food operators, with Mega Image
continuing the expansion at the ground
floors of every residential building in
Bucharest and in the neighboring
counties, reaching a network of more
than 300 outlets. The yearly turnover is
approximately at 25% of Kaufland's, the
market leader.
In Old Town of Bucharest the demand is
on the rise with a handful of new projects
delivered to the market, that have taken
advantage of the new infrastructure, the
operation of the leisure & entertainment
units available and the new parking
facilities in the area.
The owners of the currently vacant
buildings have already started to convert
spaces into qualitative and modern retail
facility. Most of the retailers interested in
spaces in the Old Town area coming from
the fashion and footwear sector, which
will surpass the leisure & entertainment
sector by occupied area.
ROMANIA • May 2014
11
Retail Market
PRICE – RENTS-YIELDS
Main retail Secondary
street retail locations
Bucharest
€45 - 60
Cluj-Napoca €30 - 35
Iasi
€20 - 25
Timisoara
€25 - 30
Constanta
€20 - 30
Brasov
€20 - 30
€20 - 40
€15 - 25
€10 - 20
€10 - 20
€10 - 20
€10 - 20
THE RENTAL LEVEL for the high street
spaces have been kept on a relatively stable
trend without major changes in the past 12
months at 45-60 euro / sq m / month
depending on the surface rented and the
refurbishment works needed.
The vacancy rate for prime locations in
Bucharest is at a relatively high level;
therefore, there are several encouraging
signs that the asking prices and the demand
are closing the gap.
Concerning shopping centre, the rental levels
remain at approximately 60 Euro/ sq m /
month for small surface stores. While there
are shopping centers with satisfying sales
rates' efficiency that gives them the ability to
choose from a range of potential tenants,
there still are several schemes that struggle to
keep their current tenants and to avoid the
bankruptcy status.
The major trend in retail market investment is
the transaction of projects in the countryside
outside Bucharest such as the City Park in
Constanta, recently acquired by NEPI. So far,
the yields do not appear to be influenced
significantly, but any transaction to be
completed in the future will show the tendency
of the retail market.
On the other hand, high street retail is
considered again attractive for the smaller
size investors, which are cash based, and
attracted by the tenants considered more
stable, such as bank branches and
supermarkets.
Malls Hypermarkets
€40 -60
€20 - 30
€20 - 30
€20 - 30
€20 - 30
€20 - 30
€8 - 10
€7 - 8
€7 - 8
€7 - 8
€7 - 8
€7 - 8
DIY
Furniture
€6-10
€6-8
€6-8
€6-8
€6-8
€6-8
€8-10
€6-8
€6-8
€6-8
€6-8
€6-8
capital, both of them expected to be delivered
in early 2015.
Food operators will continue the process of
new openings, especially on the segments of
discounters and convenience stores. With this
strategy they are planning to cut the share of
traditional trade, with a significant increase of
the modern format both in Bucharest,
especially since land pricing approaches
sustainable levels, and in the countryside. It is,
also, noted that in some locations there is only
one modern operator.
The market will continue to be influenced by
new expected merger and acquisitions, mainly
on the do-it-yourself sector, since there are
several networks registering negative
numbers. Fortunately, overall the consumer
spending is on an increasing trend, starting
from the pre-Christmas 2013 period. In
addition, available data show that numbers
have improved gradually in the first quarter of
2014 versus the similar period of 2013,
showing a long term influence.
Main retail Secondary
Malls Hypermarkets
street retail locations
Bucharest
DIY
Furniture
8-9%
9-10%
7-8%
7-8%
9%
9%
Cluj-Napoca
9-10%
10-11%
8-9%
8-9%
9-10%
9-10%
Iasi
9-11%
10-12%
8-10%
8-9%
9-10%
9-10%
Timisoara
9-10%
10-12%
8-9%
8-9%
9-10%
9-10%
Constanta
9-10%
10-12%
7-9%
8-9%
9-10%
9-10%
TRENDS – FORECASTS
DURING 2013, few projects have
experienced significant progress of works,
which in turn will trigger few results for 2014.
Most likely there will be no openings during
the first half of the year, and few such events
before Christmas 2014. However, since the
beginning of the current year, major
progresses have been announced for Mega
Mall and ParkLake in eastern part of the
ROMANIA • May 2014
12
SUBMARKETS
Logistics
Market
Usually key tenants for logistics
development, such as food operators
prefer to own the facility in which they
store the goods. In the case of renting,
necessary warehouses follow the builtto-suite scheme according to the tenants'
needs. No major retailer accepts already
constructed space, needing specific
requirements as well as taking
advantage of the current favorable
market imbalance.
THE SUPPLY and the development of
submarkets on the logistics and light
industrial sector are closely linked to the
existing and expected infrastructure works
and especially to the direct connections to
the impor ting markets of Romanian
products, most of them being located in the
Western Europe.
Therefore, it is only logical that, beside the
hub developed near Bucharest (west and
nor th-west par t), most of the
d eve l o p m e n t s a r e s c a t t e r e d i n
Transylvania connecting the traditional
s p e c i a l i z e d w o r k fo r c e a n d t h e
Hungarian border, the main gate for
transport goods. In the last 2-3 years,
Ploiesti has also become an important
hub for logistics centre, due to its good
position south of the Carpathian
Mountains and taking advantage of the
existing infrastructure.
Therefore, the main tenants for such
facilities remain the auto-parts industry
and the mid-size clients, with a lower
negotiation power. Although the sector is
capitalizing on the current macroeconomic stability and relatively high
ex p o r t s , t h e r e w e r e n o m a j o r
developments in 2013 and during the
current year no high improvements are
foreseeable.
ROMANIA • May 2014
13
Logistics Market
DEMAND - SUPPLY
PROPERTY NEWS
THERE ARE NOT too many independent
developers taking the risk of building
speculative logistics and industrial
spaces without a secured tenant. The
most representative such example for
2013 was Ploiesti West Park, which
continues its policy of attracting new
tenants, with the aim of completing the
successful mix of clients, developing one
of the most representative hub in
Romania.
THE MAJORITY of investors are
developing built-to-suit logistics centre,
with only few of them taking the risk
associated with speculative developments.
Most of the recent built spaces have been
occupied. However, the relatively high
vacancy rate is fueled mainly by spaces of
significant ageing (built prior to 2009-2010)
not currently occupied since tenants prefer
to relocate to contemporary spaces.
However, the main criterion of demand of
such spaces is flexibility of the inner space
and contractual terms.
At the same time, there is still demand for
old spaces, even the ones built before
1990, considered of inferior quality, from
the part of tenants in need of smaller
spaces at the lowest costs available.
The demand is coming mainly from the
automotive sector. In fact, auto parts
production and assembly is responsible
for many new tenanting contracts in the
past 12 months. Such was the case for a
newly developed warehouse near
Brasov, by WDP.
However, most of the developers are
either state-owned enterprises or private
that prefer to develop in state-owned
industrial areas with favorable taxation
status. Such examples are the Tetarom
projects in Cluj-Napoca, Strabag project
in Bistrita South and Eurobusiness in
Oradea.
The development of organized logistics
units in industrial areas is linked to the
offered beneficial taxation status that is
relative to the risks found in these largescale investments. In addition, this
measure aims to provide significant
incentives to both the tenants and the
developers, with a long term goal of
lowering service charges for consumers
in combination with increasing the
attractiveness of the projects.
ROMANIA • May 2014
14
Logistics Market
PRICE – RENTS – YIELDS
THE RENTAL LEVELS have remained on a
relatively stable trend in the past 12 months,
although the warehouses of a significant ageing
are offering considerable incentives in order to
rent the vacant spaces.
The yields in the light industrial and logistics
sector is attractive, due to the scarcity of the
investors, with the prime level in Bucharest
starting from 10.50%, while in countryside is
surpassing 12.50% in some cases.
TRENDS – FORECASTS
MOST OF the developers continue to be
conser vative about the speculative
developments due to the high risk associated
with such developments In addition most of the
landlords that cannot secure pre-lease contracts
prefer to wait for more lucrative periods.
On the other hand, the operation of new
companies, mainly in the automotive industry, is
estimated to positively affect the market. It is
expected that demand and supply in logistics
sector will start growing steadily during 2014 and
continue in the forthcoming year.
Location
Rent level
Euro/sq m
Bucharest
€3.50 - 4.50
20-60€
10.5 – 11%
Constanta
€3.25 - 4.00
15-35€
11 – 12.50%
Brasov
€3.00 - 4.00
15-35€
11 – 12.50%
Timisoara
€3.00 - 4.00
15-35€
11 – 12.50%
Cluj-Napoca
€3.00 - 4.00
15-35€
11 – 12.50%
Ploiesti
€3.00 - 4.00
15-35€
11 – 12.50%
Sale price
for industrial land
Euro/sq m
Yield %
ROMANIA • May 2014
15
Contact Information
>
me
ar
nt
ke
tR
es
vis
Ad
est
M
e
tat
Inv
Es
>
al
Re
>
TOT
A
T
A
T
L R EAL E S
LU
T
>
Te
c
hn
ica
lS
er
vic
ION
S
es
y
or
ea
r
n
>A
ppra agem ch
isals
en
t
> Broker
age
ment
e
g
a
n
a
M
s
e
i
ty & Facilit
e ent
t
> Proper
a
t
Es gem
l
a
Re
e
na
t
a
a
r
rpo
tM
o
e
C
>
ss
A
te
a
t
Es
l
ea
R
>
Ma
O
S
E
Eurobank Property Services S.A.
6A Dimitrie Pompeiu Blvd, Olympus House, Fifth Floor, Bucharest, District 2, Romania, tel.: + 40 21 308 6101
Disclaimer
This report has been issued for advertising purposes by Eurobank Property Services S.A., a member of the Eurobank Group, and may not be reproduced in any manner or
provided to any other person. Each person that receives a copy by acceptance thereof represents and agrees that it will not distribute or provide it to any other person. This report
is not an offer to buy or sell or a solicitation of an offer to buy or sell the real estate mentioned herein. Eurobank Property Services S.A. and others associated with it may have
positions in, and may effect transactions in the real estate mentioned herein, and may also provide or seek to provide services (investment banking, brokerage or other) for those
companies. The investments discussed in this report may be unsuitable for investors, depending on the specific investment objectives and financial situation. The information
contained herein has been obtained from sources believed to be reliable but it has not been verified by Eurobank Property Services S.A. The opinions expressed herein may not
necessarily coincide with those of any member of the Eurobank Group. No representation or warranty (express or implied) is made as to the accuracy, completeness,
correctness, timeliness or fairness of the information or opinions herein, all of which are subject to change without notice. No responsibility or liability, whatsoever and howsoever
arising is accepted in relation to the contents hereof by Eurobank Property Services S.A. or any of its directors, officers or employees. This is an advertising report and is
distributed free of charge.
ROMANIA • May 2014
16