Bucharest real estate markets have seen strong sales in 2015

A stable economic environment and growth potential has resulted in the commercial real estate market in Bucharest, Romani, gaining momentum with sales expected to be close to €800 million by the end of 2015.

This year has continued the growth trend begun in 2014 and saw a real estate market dominated by more courageous players, according to the latest analysis report from real estate firm Colliers International.

It forecast at the beginning of the year that the Romanian investment market would see sizable transactions value exceeding the €100 million threshold, and international investors either entering or consolidating their positions on the local market. 

The report says that outsourcing businesses are still the prominent pillars of the office sector, as Romania becomes more visible for reputable BPOs, SSCs and IT companies, with focus on Bucharest, but also secondary cities.

More than 60,000 people are currently employed in outsourcing activities and forecasts provision up to 150,000 in the next five years. Characterized by vibrant activity, office sector in Bucharest is on the verge of a new era of premium quality deliveries in what is to become a half million square meter office hub by 2020 in the Floreasca Barbu Vacarescu area.

‘Aligned with our expectations from the beginning of the year, real estate market has been characterized by general positive evolution for transactional activity for all sectors. Relying on good macroeconomics indicators, the year brought more intense consumption and higher interest in investment,’ said Ilinca Paun, managing director of Colliers International.

‘With take-up picking up and vacancy rates reporting low record levels, developers felt confident enough to start projects across the entire market. Industrial sector will add new stock to the static inventory registered in the past years, while investment market continues to post remarkable results this year also, with total volume expected to reach Euro 800 million by the end of the year,’ added Paun.

The report says that the Floreasca Barbu Vacarescu sub-market stands out as the new CBD area in Bucharest. The modern stock of buildings in the area was subject to the biggest part of the demand, with 215,000 square meters leased in the past five years.

The area will continue to be in the spotlight in the years to come with 155,000 square meters of GLA of office space being planned for development. Nevertheless, the competition in the sub-market becomes fiercer with each new announced development, the report says.

According to Andreea Paun, associate director of office agency at Colliers International, Romania not only has become an attractive destination for the outsourcing industry, but has also changed the way it’s being perceived by large companies.

‘Romania is no longer seen solely as a cost effective destination, but rather a value added generator and valuable talent pool. Similar to previous years, the business services industry has driven most of the office demand. We foresee this trend will grow stronger in the future as renowned outsourcing companies are consolidating their business on the local market, but also new players have entered or announced their presence in Romania,’ she added.

The investment market attracted new investors that will have closed transactions worth around €800 million by the end of the year, close to the level registered in 2014 of €950 million, being supported by the positive economic context and development of real estate fundamentals, and a yield crunch in competing markets.

With more than 3% GDP growth expected for the end of the year, Romania outpaces other European countries and has the smallest public debt to GDP in EU, 38% compared with European Union’s 90% average.

Bucharest’s prime yields are some of the highest in Central East Europe capital cities and have seized investors’ interest. With 7.5% yield for office sector, similar for retail and approximately 9% for industrial, with continued downwards pressure, Bucharest offers investors a wide range of high quality real estate assets, the report says.

‘This year investment volumes are expected to be similar to that of last year, the difference being that the market is becoming more diverse with new sources of capital being attracted by the relatively high returns achievable with high quality investments,’ said Robert Miklo, associate director of investment services for Colliers International.

‘Moreover, it is notable that large volume transactions are taking place across all sectors, office, retail and industrial, a positive indication to investors interested to enter the market with scale. With strong asset fundamentals, capital markets liquidity improving and the still generous yield levels present in all sectors, we believe an important arbitrage opportunity is still present in Romania,’ he added.

For the first time in recent years, Bucharest’s logistic stock is expected to increase by the end of 2016 with more than 100,000 square meters of new projects currently under construction which will be added to the current stock. The constant volume of logistics stock has contributed to lower vacancy rate, reaching values below 8% in the first half of 2015.

‘Industrial investments are entering a new era of growth as the interest in spaces and locations in Romania is rising in the late period. Not only Bucharest is seizing investors’ enthusiasm, but also other large cities are rivalling the capital, such as Timisoara, Arad, Brasov, Pitesti, and Sibiu. The end of the year should reveal a stable and mature market, with new developers ready to consolidate their position. The new stock announced to be delivered next year stands to prove this trend,’ said Costin Banica, senior associate for industrial agency at Colliers International.

There has also been an increase in land sales across all segments with office leasing seeing a strong performance while the residential land market was dynamic throughout Bucharest, including the very peripheral areas with improving infrastructure. The report says that price levels are stable and depend to a large extent on the plot destination and the status of the zoning process.