bucharest property, year end 2008

Transcription

1
Research
BUCHAREST PROPERTY, YEAR END 2008
BUCHAREST
PROPERTY
year end 2008
2
3 Introduction
21 Introducere
4 Economic Overview
22 Situatia Economica
5 Office Market Overview
23 Piata spatiilor de birouri
9 Residential Market Overview
27 Piata spatiilor rezidentiale
13 Retail Market Overview
31 Piata spatiilor comerciale
16 Industrial Market Overview
34 Piata spatiilor industriale
17 Land Market Overview
35 Piata terenurilor
18 Investment Market Overview
36 Piata de investitii
20 Green Buildings
38 Cladiri verzi
The office market is experiencing the negative effects of the economic downturn manifested in declining rents and leasing activity.
Although this segment performed remarkably well during the first
semester of 2008, market fundamentals have been softening at a
moderate pace especially since the last quarter of the year.
The current real estate market situation creates demand coming
from companies that are currently paying rents already indexed
for several times, thus exceeding the current rental market value.
These tenants are trying either to renegotiate their ongoing lease
or obtain a better quality for the price they pay in other buildings.
Despite cost cutting policies, tenants remain willing to secure
quality office accommodation at a lower more competitive price
and are trying to speculate the contraction of demand in the circumstances of increasing availability of office spaces.
Tenants have a more global approach of cost savings looking to
increase efficiency of their office use, while reducing overall occupancy costs (energy savings, low maintenance costs, flexibility
in partitioning).
In addition tenants with expiring leases prefer to renew the contracts as they benefit from substantial discounts proposed by landlords rather than incurring costs associated with relocations.
Over the past few months the market has obviously recorded a
downward correction in asking rents and greater flexibility of
landlords in negotiation process. Especially owners of newly completed buildings have significantly lowered the rents in order to
achieve a certain level of occupancy.
The level of the total occupational costs, building quality and efficiency will become the most important decision factors in detriment of location. As the cost building policies are affecting the
demand characteristics, on the long term the proposed supply
should adapt to an emerging new trend, the development of green
buildings.
In 2008 the increasing trend of supply initiated in last two years
continued on the residential segment. In the second half of the
year, the first challenges appeared for developers, due to the
worsening of the local and international economic situation. As a
result, many projects experienced slow construction works, while
others have been postponed for 2009 or even later.
The retail market has experienced a remarkable evolution in 2008,
characterized by significant increasing of supply and diversification of retail type of properties.
The industrial segment continued to perform remarkably well during H1 2008 as the leasing activity corroborated with the development process contributed to a further market expansion. However,
starting with H2 2008 the worsening of the international and local
economic context led to the slight decrease of demand, while the
launching of new projects was virtually non-existent.
During 2008 the land segment has recorded a fundamental change,
from a vendor to customer market, this trend becoming more visible in the second half of the year. Despite the evident downtrend
in prices, the number of transactions has severely decreased while
significant transactions have been virtually non-existent.
The global financial and economic turmoil strongly corroborated
with the softening of local real estate market fundamentals have
negatively impacted the property investment market. In addition
to the specific factors of the local real estate market, the investors’
restrain was induced by the less favorable country risk indicators
and fear over a prolonged economic slowdown.
As a consequence of the market evolution, the profile of investors
has changed. Opportunistic equity investors became the most active market players during H2 2008, outstripping the heavily leveraged investors that dominated the market in previous years.
The investment market is experiencing a price readjustment
across all segments. Starting with the end of 2007 the average
prime yields increased in all sectors after five successive years of
compressing evolution, as a result of general market uncertainty
doubled by limited availability of finance and diminishing market
capitalization of some international companies.
Equity opportunistic investors will continue to represent the main
driving force of the demand in 2009, being attracted by the investment products coming to the market. In addition the worsening
investment environment creates new opportunities, as distressed
transactions are occurring and large investors intend to increase
the efficiency of their portfolios and consider implementing exit
strategies.
Ioana MOMICEANU MRICS
Managing Director, President of the Board
BNP Paribas Real Estate Romania
3
4
Economic Overview
In 2008 Romania had a significant economic growth of 7.1%,
level that almost matches the impressive expansion in 2004 and
2006. The economic activity has recorded a significant fluctuation
throughout 2008. After the impressive growth of 9.1% and 9.3%
recorded in Q2 and Q3, the effects of the international economic
crisis reflected into the statistic data from Q4 2008 published by the
National Institute of Statistics, when the GDP increase was 2.9%.
The opinions of economists regarding the future economic evolution of Romania differ significantly. Optimistic economic forecasts
predict a slight advance for the Romanian economy in the next 3
years. According to the National Commission for Prognosis, the annual y-o-y GDP growth for 2009 is expected to reach 2.5%.
ECONOMIC FORECAST
GDP (%)
2009
2010
2011
2012
+2.5
+4.5
+5.5
+6.0
Average annual
inflation rate (%)
4.8
3.6
3.2
2.8
Annual
unemployment
rate (%)
5.5
5.0
4.8
4.5
Exchange rate
(Euro/RON)
4.0
4.09
4.17
4.24
Source: National Commission for Prognosis (Autumn prognosis 2008)
According to the Romanian Agency for Foreign Investment, the
volume of Foreign Direct Investment (FDI) grew by 24.4% in 2008,
totalling Euro 9.02 billion and thus approaching the historical record reached in 2006 (Euro 9.1 billion). Only in December 2008,
the monthly FDI flow attracted in the economy increased by 20.5%
compared to the previous month, even under the circumstances
of the economic international crisis. Foreign direct investments financed 53.5% of the current account deficit, compared with 43.5%
in the previous year.
At the end of 2008, the total number of registered unemployment
was 403,441 (national basis), representing 4.4% of the active population. The national average unemployment rate has increased with
0.3 percentage points compared to the same period of 2007.
At the end of 2008 the annual inflation rate was 6.3%, decreasing from the maximum level of 9.04% reached in July last year.
This value was also slightly below the level recorded in December
2007(6.57%). However, the annual inflation rate was still well above
the target set by the National Bank of Romania - 3.8%.
The National Bank of Romania (NBR) has successively increased the
monetary policy rate, from 7.5% in January 2008 to 10.25% in January 2009, also adopting additional prudence measures regarding
the banking system. These measures target primarily the inflation
pressure, the local currency exchange rate and the financial behavior of households and companies.
Average gross monthly salary increased steadily during 2008, from
RON 1,730 (Euro 491) in December 2007 to RON 2,023 (Euro 517)
at the end of 2008. According to the National Institute of Statistics, during Q3 2008, the average monthly income per household in
Romania was RON 2,164 (Euro 606). The most important financial
sources for household income were represented by salaries (53.3%)
and social allowances (20.8%). The monthly household expenditures
in Romania reached RON 1,954 ( Euro 547) in Q3 2008, of which
consumption expenditures represent 70.9%, while taxes and duties
represent 15.9%.
NBR’S MONETARY POLICY RATE AND ANNUAL INFLATION RATE
NBR's Reference Rate
Annual inflation rate
24.00
20.00
16.00
12.00
8.00
4.00
0.00
1/1/2004
1/1/2005
1/1/2006
1/1/2007
1/1/2008
1/1/2009
Source: National Institute of Statistics; National Bank of Romania
STRUCTURE OF HOUSEHOLD CONSUMPTION EXPENDITURE IN Q3
2008 (%)
1.5
0.6
3.6
Agro-food products and non-alcoholic drinks
5.6
Beverages and tobacco
5.1
Clothing and footwear
Housing, water, electricity, gas and other fuels
40.3
7.6
Furniture, dwelling endowment and maintenance
Health
Transport
3.9
Communications
5
Leisure and culture
Education
Hotels, cafés and restaurants
13.6
6.8
6.4
Source: National Institute of Statistics
Miscellaneous (products and services )
Office Market Overview
EXISTING STOCK
OFFICE COMPLETIONS
New
The office market is experiencing the negative effects of the
economic downturn manifested in declining rents and leasing
activity. Although this segment performed remarkably well during
the first semester of 2008, market fundamentals have been
softening at a moderate pace especially since the last quarter
of the year. However the office market lags the other segments
by few months concerning the effects induced by the economic
slump.
Refurbished
400
Thousand sq m
350
300
250
200
150
100
50
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: BNP Paribas Real Estate
EXISTING OFFICE STOCK AS AT H2 2008 BY LOCATION
Central-North and North
South
East
Central
West
SIGNIFICANT OFFICES COMPLETED IN 2008
Building
1
Location
GEA (sq m)
Sema Park I
West
17,500
2
IEMI Phase I
North
40,000
2
Tower Centre International
Centre
31,135
3
Twin Barba Center II
North
30,000
4
Alexander Center
North
7,580
As anticipated based on the data regarding the proposed supply for
2008, last year completions have almost matched the forecasted
level of 410,000 sq m (GEA) of offices. However, a number of
projects have been temporarily stopped or have been witnessing
slow construction works progress due to financing problems or low
rate of pre-leases, mainly affecting the supply for 2009-2010.
The geographical pattern of the new added stock reflects the
growth of the market in the northern and western parts of
Bucharest with 40% and respectively 22% of completions. The
structure of new added stock is dominated by class A office
buildings representing approximately 55% of completions. The rise
in supply on this segment was mainly due to the completion of
international standard properties of over 15,000 sq m.
Q
Supply has diversified as concerned the geographic location and
the quality of the buildings, as a result of significant new supply
delivered in 2008 and the emergence of the sub-lease market. The
development of large modern premises sustained by the significant
pre-lease activity recorded during 2007 and H1 2008 has
contributed to the market growth by adding around 395,000 sq
m (gross external area) of modern office spaces, the highest figure
since 2000. Compared to 2007 new added stock has increased by
25% as the market has continued the shifting towards large, high
quality premises. Of the proposed supply for 2008, already 45%
have been pre-leased during 2007.
As a result of the significant amount of completions, at the end
of 2008 the stock of modern office space in Bucharest reached a
total of 1.9 million sq m (gross external area), up 25% compared to
the existing stock as at Q4 2007. Despite the extensive completion
of class A premises in the last 2 years, class B offices still represent
the largest market segment, accounting for around 56% of the
existing supply.
A new trend worth mentioning is the extension of the sublease
market. The majority of the sublease space available on the market
mainly results from the downsizing of tenants’ business, rather
than ceasing of activity as they have pre-leased a significant
amount of spaces (over 1,000 sq m) on the expectation of a further
business expansion.
5
Office Market Overview (cont.)
EXISTING STOCK (CONT.)
OFFICE STOCK BY BUILDING SIZE
This market segment is offering shorter term sublease opportunities
(less than 5 years), also meeting the characteristics of demand for
smaller and less expensive units. On this segment the offer is mainly
represented by small and medium size spaces ranging between 500
and 1,500 sq m generally located in buildings completed in 20072008. Back operation centers which represented the main drivers
of the demand during previous years are currently the major office
accommodation suppliers on the sublease market.
16%
<=2,500 sq m
16%
50%
DEMAND ANF TAKE-UP
9%
TAKE-UP BY SUBMARKET IN 2008
21%
During H2 2008 the leasing activity was dominated by the concentration and rationalization of office accommodation, as companies
adjusted the space requirements based on their specific market situation, in connection to the real estate market conditions. A large
number of tenants reconsidered their relocation/extension plans
and adopted a wait-and-see attitude expecting a further down
trend in rents.
However the ‘freezing’ of demand was mainly related to the segment of larger requirements. The most active leasing activity was
generated by small and medium companies belonging to advertising, audit, IT and Telecom sectors. As a result the number and the
average size of office enquiries sensibly decreased, ranging between
500 and 1,000 sq m. Generally tenants targeted budgets fluctuating around Euro 20/sq m/month for centrally located premises,
Euro 15-16/sq m/month for spaces located in Barbu Vacarescu and
Floreasca areas and a lower buget of Euro 10-14/sq m/month for
premises in descentralized and pheripheral buildings.
The current real estate market situation creates demand coming
from companies that are currently paying rents alredy indexated
for several times, thus exceeding the current rental market value.
These tenants are trying either to renegotiate their ongoing lease
or obtain a better quality for the price they pay in other buildings.
Relocations and expansions have no longer represented the main
demand driving factors.
Despite cost cutting policies, tenants remain willing to secure quality office accommodation at a lower more competitive price and
are trying to speculate the contraction of demand in the circumstances of increasing availability of office spaces. The absorption for
Class A offices has reached approximately 65% of the total takeup recorded in 2008 being exclusively located in new buildings or
pipeline developments.
5,001-7,500 sq m
> 10,000 sq m
9%
During H1 2008 the office market has maintained relatively high
take-up rates (192,000 sq m) despite a 20% fall compared to H1
2007. However the leasing activity has significantly slowed down
to approximately 120,000 sq m during H2 2008, as the worsening
business environment negativelly impacted on the office market
beginning with September 2008. As a result, the total office takeup recorded in 2008 decreased by 30% compared to last year.
2,501-5,000 sq m
7,501-10,000 sq m
18%
Central submarket
Northern submarket
Eastern submarket
Southern submarket
Western submarket
2%
9%
50%
Source: National Bank of Romania
OFFICE TAKE-UP
Class A
Thousand sq m
6
Class B
300
270
240
210
180
150
120
90
60
30
0
2002
2003
2004
2005
2006
2007
2008
DEMAND AND TAKE-UP (CONT.)
SIGNIFICANT OFFICE TRANSACTIONS IN 2008
Tenant
Building
Area (sq m)
ABN Amro *
LakeView
12,000
Siemens *
West Gate
10,000
Rams
4,200
Premium Point
3,600
S-Park
2,550
West Gate
2,300
Cheque Dejeuner
Aviva
Intesa Sanpaolo Bank**
CitiFinancial
* pre-lease
** sublease
OFFICE VACANCY RATES
Total vacancy
Class-A vacancy
20
18
%
16
14
12
10
8
6
4
2
0
2001
2002
2003
2004
2005
2006
2007 H2 2008
Class A
Class B
2007
H22008
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
35
30
25
20
15
10
5
0
1996
Euro/sq m/month
In addition tenants with expiring leases prefer to renew the contracts as they benefit from substantial discounts proposed by landlords rather than incurring costs associated with relocations. However this situation is not applicable in the circumstances of tenants
currently located in low quality buildings which prefer to relocate
in better buildings at similar or lower costs.
Extensive completions, reduction in take-up, renewals and the
emergence of subletting market led to rising availability in the
local market. After a quick and continous decline in vacancy recorded between 2003 and Q4 2007, the overall market vacancy
increased to 4.5% at the end of the year. During 2008 the overall
vacancy rate increased with 2.5 basis points resulting in a total
of 85,000 sq m (GEA) of available offices. Of the total amount of
vacant space class A offices represent 15% and class B, 79%.
During 2008 pre-lease transactions still have represented a significant amount of the total transactions reaching approximately
60%. This type of transactions has not affected the availability of
existing office premises in 2008, space since the pressure on supply
has been transferred for the next years. As a result of the current
market and economic conditions tenants have become reluctant to
conclude pre-leases since Q4 2008.
RENTAL LEVELS
OFFICE RENTS
A notable positive aspect is emerging into the market. Tenants
have a more global approach of cost savings looking to increase
efficiency of their office use, while reducing overall occupancy
costs (energy savings, low maintenance costs, flexibility in partitioning).
Other trends that are becoming more obvious are shorter term
leases and renewals. As a result of the difficulty in predicting their
business over a longer period of time, tenants are looking for
greater flexibility and shorter commitments (up to 3 year terms).
This type of demand can be potentially matched by the offers existent on the sublease market.
During H2 2008 the office segment experienced the negative effects of the weakening demand and economic turmoil manifested
in declining rents. This trend is also sustained by the considerable
rise in volume of new supply and available spaces offered on the
sublease market.
Although landlords have tried to maintain the rents stable during
H1 2008, over the past few months the market has obviously recorded a downward correction in asking rents and greater flexibility of landlords in negotiation process. Especially owners of newly
completed buildings have significantly lowered the rents in order
to achieve a certain level of occupancy. Additionally, landlords that
are experiencing tenant rollover issues in the next 6-12 months are
willing to offer important discounts to retain the current tenants.
Furthermore the growth of the subletting market is pressuring
landlords to decrease asking rents to compete with sublease offers
that are priced 5% to 10% less than their offers.
7
RENTAL LEVELS (CONT.)
TRENDS
The decrease in rental levels was recorded across the whole quality spectrum of the buildings and market segments. In the second
semester of 2008 the average prime office rents decreased by 10%
compared to H1 2008, reaching approximately Euro 21-22/sq m/
month, while for quality Class B office buildings located in decentralized areas, rents are currently ranging between Euro 14-15/sq
m/month, up to Euro 17/sq m/month.
The office market will continue to face many of the challenges that
manifested in the second semester of 2008 some of them becoming more acute. The completion of 450,000 sq m of new supply
in 2009 will increase the downward pressure on rents, as leasing
market fundamentals are expected to deteriorate as a result of the
difficult economic context. However, the above-mentioned figure
should be treated with caution, as a number of projects are temporarily stopped or witnessing slow construction works progress. In
addition, the high level of uncertainty on the market is discouraging other developers from undertaking new developments, mainly
affecting the supply for 2010-2011.
Following the significant growth in rents in the central submarket
during the last 2 years, average rents started to decline, although
at a much slower pace than in other submarkets. Asking rents are
fluctuating between Euro 22-23/sq m/month, but considering the
rent-free periods and other incentives, the net effective rent is generally ranging from Euro 21-22/sq m/month.
In the peripheral locations newly completed premises or those
about to be finished have been more sensitive to the current market difficulties. The achieved rental levels for less attractive class B
offices (mainly in terms of location) ranged between Euro 10-12/
sq m/month.
LEASE TERMS
Landlords adapt to the changing market conditions and become
more flexible in the negotiation process. Flexible options and tenant’s rights have become a general practice both for large and small
occupants. However the current market conditions have not made
a significant impact on lease terms of large tenants, which remain
comparable with those recorded in last year.
Standard lease terms were 5 years in 2008, however longer leases
(5+ years) are common for quality offices in prime areas and for
larger occupiers. Shorter lease terms, up to 3 years, are common
for spaces offered on the sublease market or located in less attractive buildings. Incentives, such as rent free periods for 1-3 months
and landlord contribution to tenant fit-out are also becoming more
common. In fact such incentives are lowering net effective rents
by 5-10%.
The level of the total occupational costs, building quality and efficiency will become the most important decision factors in detriment of location. As the cost building policies are affecting the
demand characteristics, on the long term the proposed supply
should adapt to an emerging new trend, the development of green
buildings. The main features of this type or properties, such as using
sustainable construction materials, high energetic efficiency, water
and waste recycling, less carbon emissions, etc, lead to higher overall efficiency and lower occupancy costs.
SIGNIFICANT OFFICE PROJECTS TO BE COMPLETED IN H1 2009
Q Building
Location
GEA
(sq m)
Metropolis Center
Central
12,800
85
1
Excelsior BC
Central
12,000
100
1
River Side Tower
West
13,000
0
2
Executive BC
North
10,000
0
2
Galaxy BC II
North
10,690
0
PROPOSED OFFICE SUPPLY FOR 2009 - 2010
Landlords have become more aware of cost cutting policies implemented by tenants. As the majority of tenants base their decisions
on the total occupational costs, landlords have maintained or even
decreased the service charges for certain office buildings. Currently
service charges for Class A office spaces record a decrease by around
10% compared to H1 2008, reaching the level recorded in H2 2007
(Euro 3.5-4.0/sq m/month). Class B services have remained stable at
around Euro 3.0-3.5/sq m/month. In the central submarket, monthly parking rents are currently Euro 100-120/ space for off-street
units and between Euro 130-150/space for underground parking.
For the underground parking spaces in non-central locations, the
rental levels are in the region of Euro 90-120/space/month, whilst
the off-street parking is leased at Euro 60-80/space/month.
Pre-leased
(%)
1
Class A
Class B
500.000
400.000
Thousand sq m
8
300.000
200.000
100.000
0
2009
2010
Residential Market Overview
EXISTING STOCK
ANNUAL COMPLETIONS OF HOUSING UNITS
Bucharest
Ilfov County
8.000
7.000
6.000
5.000
4.000
3.000
2.000
1.000
0
2000
2001
2002
2003
2004
2005
2006
2007
Q1-Q3
2008
According to the National Institute of Statistics, at the end of 2007
the total stock of residential units in Bucharest-Ilfov region was
899,125 units. Between Q1-Q3 2008, 5,012 units were completed
in Bucharest – Ilfov region, with 644 more units than the same
period of 2007.
ANNUAL COMPLETIONS BY NUMBER OF ROOMS IN
BUCHAREST-ILFOV REGION
1 room
2 rooms
3 rooms
4 rooms
The residential stock for newly built apartments, especially the
ones in large residential projects targeting the medium class, increased significantly in 2008 compared with the previous years.
The very high rhythm of sales in 2007 and constant price increase
of residential units in the last years made the developers consider
that the existing volume of demand from the mid-budget population clients could generate very high profit margins. As a consequence the total number of new residential units proposed to be
delivered in 2008 increased to about 9,000 of which less than half
were completed. In addition to the new built residential units, the
existing residential stock increased in 2008 also with about 50 %
of the units delivered in 2007, units which were purchased in the
previous years by investors in initial stages of construction for reselling after completion.
5 rooms and over
8.000
The main development activity was recorded in Ilfov County where
the completions reached 3,484 units, representing almost 70% of
the total units completed in the region between Q1-Q3 2008.
7.000
6.000
5.000
4.000
3.000
2.000
1.000
0
2000
2001
2002
2003
2004
2005
2006
2007
However, in H2 2008 some of the developers changed their strategy
by slowing down the construction works or by freezing completely
the developments. The explanation is the increased availability of
residential units in existing and proposed new developments, the
worsening economic situation and the constant decrease of the
number of units sold in H2 2008.
STOCK EVOLUTION BY OWNERSHIP
State owned
The stock of private owned properties increased constantly in the
last years in Bucharest-Ilfov region, reaching a total of 877,875
units by the end of 2007, according to the National Institute of
Statistics. The stock of state owned properties reached a total
number of 21,250 units registering a slight decrease.
Private owned
1.000.000
900.000
Some developers tried to adapt and find solutions by changing the
size of the apartments or offering incentives or discounts to attract potential buyers. Also, in these conditions, the differentiation
of the project concepts has become a very important aspect on an
increasingly competitive residential market.
800.000
700.000
600.000
500.000
400.000
300.000
200.000
100.000
0
1998
2002
2006
2007
9
Residential Market Overview (cont.)
Smaller developers diminished their presence on the market, delaying construction works or stopping certain announced developments. Many announced residential projects remained in project
status. Large developers have chosen to complete only the projects
in advanced work stages and decide later the future of other announced projects.
COST ELEMENTS EVOLUTION IN CONSTRUCTIONS (2000=1)
Construction costs for residential units
Average net salary in constructions
7,0
6,0
5,0
4,0
3,0
DEMAND
2,0
1,0
One of the most important factors which determined the slowdown in sales during 2008 was the lower number of transactions
concluded by opportunistic investors, which decreased from over
50% in 2007 to less than 10% in 2008. This was mainly determined
by the depreciation of the economic environment, lack of liquidity and the changing of the Fiscal Code, which no longer allowed
the chargeback of VAT for companies when purchasing a property.
Other important factors were the new regulations related to the
mortgage loans imposed by the National Bank which considerably
diminished the possibility of potential buyers to access or qualify
for credit loans.
The average interest rate for residential loans in local currency increased from 10.17% in November 2007 to 11.07% in November
2008, while in the same period, the average interest rate for the
loans granted in Euro increased from 8.02% to 8.6%. Mortgage
loans remained the main source of finance for residential acquisitions by private individuals in 2008.
According to the National Bank of Romania, at the end of 2008
the total volume of loans granted for real estate purchase reached
approximately RON 8.75 billion in Bucharest – Ilfov County region.
Increased costs of financing, rigorous conditions imposed by the
banks and the speculations about future price corrections generated by the current economic context caused a prudent attitude of
potential buyers towards the acquisition of new apartments.
In 2008 the demand for studios and 2 room apartments represented
75% of the total demand. The price level was a decisive factor for
the medium and upper-medium class. High demand came from
young people (between 35 and 40) which earn monthly between
Euro 2,200 – 2,500 per household.
Demand for old apartments mainly came from those who did not
meet the financing conditions necessary for the acquisition of new
apartments.
2000
0,0
2001
2002
2003
2004
2005
2006
2007
Q3
2008
AVERAGE INTEREST RATE ON NEW LOANS TO HOUSEHOLDS GRANTED
FOR REAL ESTATE PURCHASE
EURO
RON
12
10
8
%
In the recent three years the increased demand on the residential
segment was primarily fueled by the desire of the population to
relocate from the old blocks of flats in new larger apartments and
by the availability of mortgage loans. Despite the completion of
the first residential projects in Bucharest, demand remained consistently higher than the offer by the end of 2007, when the rhythm
of sales began to decrease slightly.
6
4
2
0
Jun07
Jan08
Jun08
Nov08
LOANS GRANTED FOR REAL ESTATE PURCHASE IN
BUCHAREST-ILFOV REGION
10.000
8.000
RON Millions
10
6.000
4.000
2.000
0
ian.04
iun.04
ian.05
iun.05
ian.06
iun.06
Jan-07
Jun-07
ian.08
Iun-08 Dec-08
DEMAND (CONT.)
DEMAND STRUCTURE ON APARTMENT SUBMARKET
5%
20%
30%
Studios
1 bedroom
2 bedrooms
3 bedrooms or more
SALE PRICES AND RENTS
45%
AVERAGE ASKING SALE PRICES (EURO/SQ M)
Location
Apartments
Villas
Baneasa/Pipera
1,800-2,500
-
1,700-2,200
-
Domenii
2,200-3,000
-
2,200-3,200
-
Herastrau
2,300-3,500
-
2,200-3,200
-
Floreasca
2,100-3,000
-
2,400-3,500
-
Primaverii
3,500-5,000
-
3,000-5,000
-
Aviatorilor
3,500-4,700
-
3,300-4,600
-
Dorobanti
3,000-4,000
-
3,000-5,300
-
AVERAGE ASKING MONTHLY RENTS (EURO)
Location
Apartments
Villas
Primaverii
2,500-6,000
3,500-8,000
Dorobanti
2,000-4,000
3,500-6,500
Herastrau
2,000-5,000
3,000-6,000
Floreasca
2,000-4,500
3,000-5,500
Aviatorilor
2,000-4,000
3,500-7,500
In 2008 the rental market did not suffer significant changes, being
dominated on the luxury and upper-medium segment by clients
working in multinational companies. High profile residential locations such as central and northern Bucharest (Herastrau), near
parks and special amenities are mainly required by these clients.
The rental market for medium class properties was dominated
by young professionals who currently cannot afford to acquire a
home, but could become potential demand in the next years.
At the beginning of 2008 a tendency of stabilization was registered after the steady increase of sale prices of previous years.
During last year the limited access to financing, instability and obvious discrepancies in price expectations between developers and
customers led to a severe decrease in the number of transactions.
As a consequence, in the last quarter of 2008 the residential transactions were almost frozen and we have assisted to an important
decrease of asking prices of the residential units. The price corrections referred especially the units in old blocks, where in some
cases prices went down up to 40%.
In H2 2008, the developers tried to maintain a constant level of the
sale prices, while offering some financial incentives through different promotional campaigns. They preferred to offer incentives
as a substitute to a price decrease, in order to avoid a negative psychological effect on the market: free parking, free storage rooms,
furnished/equipped kitchen or exemption from VAT.
The downtrend pressure on developers’ profit continued and they
were forced to find alternative solutions to make their projects
more affordable. The fierce competition between developers, but
also the pressure coming from investors created the conditions for
a further price decrease.
Some developers have chosen to rent the completed apartments
with further option for tenants to purchase them, or to offer alternative payment methods for clients to avoid bank financing.
In H1 2008 the average prices for apartments addressing the medium and upper-medium income customers have been maintained at
the level of Euro 1,300-1,800/ sq m. The few transactions recorded
in H2 2008 have shown price decreases of 15-20% compared to
the levels recorded at the end of 2007.
11
12
The average prices for villas and apartments located in low rise
buildings situated in prestigious areas (Primaverii, Dorobanti,
Kiseleff) started from around Euro 3,000/sq m and reached up to
Euro 5,000/sq m.
Asking rents for high-class properties located in established residential areas of the city (Primaverii, Dorobanti, Herastrau, Aviatorilor) ranged between Euro 2,000 and 6,000/month for apartments,
and between Euro 3,000 and 8,000/month for villas.
CONSTRUCTION PERMITS ISSUED FOR RESIDENTIAL UNITS NOV
2007-NOV 2008
Bucharest
Ilfov County
900
800
700
600
500
400
300
TRENDS
Considering the actual economic and financial environment the
local residential market will remain relatively stagnant in the first
semester of 2009, being mainly influenced by the high cost of finance.
Comparing with the residential markets in other capital cities, in
Bucharest the real need of new residential properties still exceeds
the existing supply. It is expected that the demand, so far coming
from the medium class looking to upgrade their living standards,
can be re-activated by the availability of finance at reasonable
costs, by selling prices corresponding to the real purchase power
of the middle class population and by launching of new cost effective products. In addition, any fiscal incentives granted through
governmental decisions could boost the level of transactions on
the residential segment of the market.
200
100
0
XI
XII
I
II
III
IV
V
VI
VII
VIII
IX
X
XI
SELECTED PROPOSED RESIDENTIAL DEVELOPMENTS
Project
Newtown
Residence
Location
Nr. of units to be
completed in 2009
Total
proposed
Total proposed
units
units
Central-East
316
651
900
Rose Garden
East
276
Ten Blocks
West
430
430
Citadella
East
224
224
Retail Market Overview
EVOLUTION OF RETAIL TRADE IN CEE (% VARIATION COMPARED
WITH THE SAME MONTH OF THE PREVIOUS YEAR)
Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08
EA-15
-1.5
-1.7
-1.0
-2.1
-2.6
-1.6
EU-27
-0.2
-0.3
-0.1
-0.9
-1.1
-0.8
Romania
18.5
16.8
13.0
8.3
6.4
-0.2
Hungary
-1.7
-1.4
-1.6
-1.4
-2.0
N/A
Bulgaria
5.1
2.4
3.8
2.8
-0.9
-0.6
Poland
8.1
4.9
5.8
5.1
6.2
4.6
-0.6
-0.2
2.1
-1.1
-1.2
N/A
Czech Rep
Source: EUROSTAT
EVOLUTION OF HOUSEHOLD INCOME AND CONSUMPTION
EXPENDITURE
Total household income
EXISTING STOCK
The retail market has experienced a remarkable evolution in 2008,
characterized by significant increasing of supply and diversification of retail type of properties. In 2008 the modern retail stock
has increased with approximately 250,000 sq m gross external
area, reaching a total of 950,000 sq m.
After 3 years from the last completion of a shopping mall (City
Mall, in 2005) the most active segment was the development of
shopping centers, that added approximately 155,000 sq m built
area to the existing stock. After the completion of Baneasa Shopping City (85,000 sq m) and Liberty Center (65,500 sq m), the total
surface of shopping malls reached 350,000 sq m built area.
Last year the dynamic of this segment was sustained by numerous
pre-leasing agreements that have demonstrated once again the
lack of modern retail spaces compared to the high demand mainly
coming from international brands that were looking to enter to
the local market, and to open stores in shopping malls rather than
in street units.
Consumption expenditure per household
Although in Bucharest the retail market has recorded a high supply and leasing activity, starting with Q4 2008 the growth of the
volume of retail trade has slightly diminished. December 2008 was
the first month when a decrease of the retail trade (0.2%) was
recorded compared with the same month of the previous year.
2500
2000
RON
1500
1000
500
0
2004
2005
2006
2007
Q3 2008
EXISTING RETAIL SUPPLY BY TYPE
Malls
Hypermarkets
New important players entered on the market in 2008. OBI chose
to open its first outlet in the southern part of Bucharest, completing the supply on the DIY market. Austrian retailer KIKA chose the
western side of town, next to A1 highway for the opening of the
first outlet, within West Park. Also, Fashion House Outlet Center
(the first multi – brand factory outlet center in Romania) and the
second Technomarket outlet were delivered on the market.
In addition to the above-mentioned projects, others were completed during 2008: Auchan hypermarket in Militari Shopping Centre
and the second Hornbach store in Bucharest, in West Park. Also,
the completion of the entire project Vitantis Shopping Center has
added approximately 37,000 sq m to the existing stock. The project
has a commercial gallery and adjacent buildings leased by Praktiker, Carrefour, Technomarket and Bontas Furniture.
On street units
Other projects delivered in 2008 were small and medium developments, mostly discount stores such as Profi, Plus, supermarkets and
hypermarkets (Real in Berceni area) but also the extension of Cora
Lujerului gallery with about 3,000 sq m.
Do-it-yourself
Shopping Galleries
Shopping Centres
Cash&Carry
Department stores
Outlet
Discount stores
Supermarkets
0
25
50 75 100 125 150 175 200 225 250 275 300 325 350 375
Thousand sq m
13
Retail Market Overview (cont.)
SELECTED RETAIL SCHEMES DELIVERED IN 2008
The modern retail stock could have reached even a higher level in
2008, if the projects with delivery dates initially announced during the
year had not been delayed until the first half of 2009 or even later. In
this situation was Grand Arena Mall, the project developed in southern
Bucharest re-scheduled to become operational in the first quarter of
2009, Sun Plaza, and the first phase of Mega Designer Outlet, initially
proposed for completion for the end of 2008.
Although the decrease of the sales volume has been recorded only in
the last month of 2008, the increasing competition and the inability to
adapt to the market have also caused the closedown of Teknosa, a new
comer on the home appliance market, after Anador Shopping Center
and Univers’all supermarket chain.
Sellable Area
(Sq m)
North
85,000
Vitantis - Phase II+III
South-East
25,550
Liberty Center
South-West
25,000
Fashion House Outlet
West
20,000
Auchan
West
12,500
Real - Berceni
South
7,320
Baneasa Shopping City
The availability of high street units has increased visibly as a number of retailers ceased their businesses or preferred to relocate within
shopping malls. The relocations were caused by the current excessive
rental levels charged by the owners of high street units, the attractiveness of the high traffic inside shopping malls and by the current
economic conditions.
2008 marked the exit from the market of investment funds, with the
takeover of La Fourmi by the Belgian group Delhaize (owner of Mega
Image), thus continuing the trend initiated in 2007, when several such
acquisitions were completed: Artima chain was taken over by Carrefour and Albinuta was acquired by Profi.
Location
Building
ASKING RENTS BY LOCATION
Peripheral
Secondary
Prime
DEMAND AND TAKE-UP
In 2008 the leasing activity remained strong. The completion of two
shopping malls, Baneasa Shopping City and Liberty Center has marked
the entry of new international brands on the local market. Thus, in
the first half of 2008, Peek & Cloppenburg, Douglas, Manoush, Next,
IKKS, Elle, Maria Rinaldi and fast food operators, Burger King and Nordsee have started operations in Baneasa Shopping City. Hervis became
the anchor of Liberty Center, Cache Cache and Migato also choosing
to open the first stores in Romania there. It is expected that some
requirements active in 2008, such as C&A and Decathlon, will start
operations in the second phase of Militari Shopping Centre.
Last year a strong demand came from supermarkets or hypermarkets
that chose to become strong anchors in shopping malls in detriment
of green-field investments. Billa became anchor for City Mall and Liberty Center while Carrefour will be the anchor tenant for Grand Arena
Mall in the southern part of the city. Other two important retailers,
Real and Cora announced their plans to secure extensive sellable areas
in AFI Cotroceni Park and Sun Plaza at the moment of their completion.
0
30
60
90
120
150
Euro/sq m/month
PRIME RETAIL RENTS
160
140
120
Euro/sq m/ month
14
100
80
60
40
20
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Retail Market Overview (cont.)
An abrupt slowdown in the expansion of banking networks, financial non-banking institutions and pharmacy chains, corroborated
with the high asking rents compared to the space quality led to
a decrease of demand for high street units in 2008. In these circumstances when competition between retailers has focused on
the best locations in shopping centers, developers had to find innovative solutions to improve the design, architecture and services
of their projects, elements that will make the difference and will
ensure the success in the future.
The length of standard lease for retail units located within shopping centers remains 5 - 7 years up to 10 years for anchor tenants
(over 2,500 sq m leased) with renewal/ break options.
SELECTED RETAIL DEVELOPMENTS PROPOSED FOR DELIVERY IN 2009
Location
Sellable Area
(Sq m)
Grand Arena
South
50,000
AFI Cotroceni Park
West
75,000
Building
Sun Plaza
South
76,000
Downtown
10,000
Plaza Romania extension
West
6,000
Mega Designer Outlet Phase I
West
16,000
Iris Shopping Center Phase II
East
14,000
Militari Shopping Centre
Phase II
West
24,000
Cocor Luxury Store
RENTAL LEVELS
The beginning of 2008 brought a slight increase of around 10-15%
of the average rents for high street units, while at the end of the
year, in the conditions of a weaker demand and economic difficulties, rents have stagnated or even recorded a slight decrease. In H2
2008 rents have reached a maximum level of Euro 120-130/sq m/
month for prime high street units up to 75 sq m, and Euro 80-90/
sq m/month for units over 75 sq m. In secondary areas rents ranged
between Euro 45-75/sq m/month, and at the periphery between
Euro 20-30/sq m/ month.
Shopping galleries generally maintained the rents at a similar level
with 2007. The rented area, tenant’s name and lease terms were
the key factors to determine the level of the rent, which varied
from Euro 25 to 40/sq m/month for larger spaces, reaching Euro
100-120/sq m/month for spaces up to 75 sq m.
TRENDS
Despite the worsening economic environment and real estate market evolution, in H2 2008 the retail segment was active, continuing
the upward trend of the previous years. The economic worsening
conditions have changed the plans of growth for some traders and
developers. However, 2009 will be the year with the completion
of some major projects already in the last phases of construction.
Approximately 240,000 sq m of gross external area is estimated to
be added at the existing stock.
The biggest projects proposed to be completed in 2009 are: AFI
Cotroceni Park (75,000 sq m) in the western part of Bucharest, Sun
Plaza (76,000 sq m) in the southern part of Bucharest, Grand Arena
Mall (50,000 sq m), phase I of Mega Designer Outlet and the completion of Plaza Romania extension (6,000 sq m). The first shopping
center with luxury brands only, Cocor Luxury Store (10,000 sq m)
will also be launched in 2009.
The competition between retailers will also become fierce on other
segments in the western submarket. The two retail parks (Militari
Shopping Centre and West Park) are located at the exit towards A1
Highway, forming a narrow retail cluster.
New types of retail spaces will be encouraged in the near future,
such as retail parks and multi – brand factory outlet centers. Also
considering the current economic context, it is estimated that discount chains will be attractive to customers.
The trend of an increasing available supply for high street units
will continue in H1 2009 as many retailers will close unprofitable
locations or downside the existing spaces.
15
16
Industrial Market Overview
EXISTING STOCK
SIGNIFICANT INDUSTRIAL TRANSACTIONS IN 2008
The industrial segment continued to perform remarkably well during H1
2008 as the leasing activity corroborated with the development process
contributed to a further market expansion. However, starting with H2
2008 the worsening of the international and local economic context led
to the slight decrease of demand, while the launching of new projects
was virtually non-existent.
The majority of new modern industrial facilities were completed on
a built-to-suit basis providing medium to large areas (10,000 sq m to
20,000 sq m) mainly suitable for logistic activities. The industrial schemes
delivered during 2008 have increased the total modern stock to around
650,000 sq m.
The most active submarket remained the western industrial cluster, as
the majority of new added stock represents the development phases of
projects already commenced within this location. The previous market
evolution and the typology of the infrastructure still preserve the geographic pattern of the market development in this sector.
Company
DEMAND
The relocation plans of companies or expanding activities have sustained
the high demand for new quality industrial spaces in the first half of
2008.
The demand came mainly from logistics operators and retail companies
,especially for the western submarket, but the proposed infrastructure
projects in the north-eastern part of the city increased the interest of
tenants for this area.
The average size of industrial space inquiries has not recorded significant
changes in 2008 compared to previous years, generally ranging between
2,500-10,000 sq m. The lease contracts were concluded for a period of
3-5 years, except for larger areas, for which the lease terms are longer
than 5 years. However, a slight decrease in demand was recorded in H2
2008, reflected by the decrease in the average size and number of enquiries.
Project
Area (sq m)
Centrum Logistics
ProLogis Bucharest
19,600
Delamode*
Cefin Logistics Park
11,300
Mercury Logistic Park
10,240
ProLogis Bucharest
9,300
General Food Services
Equest Logistic Centre
3,300
Nardo
Equest Logistic Centre
3,300
Enigma Trading
Nord Est Logistic Park
3,068
Miniblu*
A1 Business Park
2,460
IT Genesys Distributie*
A1 Business Park
1,600
Dumagas Transport
Flamingo
* - including office spaces
ASKING INDUSTRIAL RENTS
Location
Building Type
Euro/sq m/month
North/West
New
4.00-5.00
North/West
Old
2.50-3.50
South
New
3.50-4.50
RENTAL LEVELS
South
Old
2.50-3.50
The rent level remained stable during 2008. For modern warehouse developments located in the northern and north-western part of Bucharest
the rental level remained in the range Euro 4.0-5.0/sq m/month, while
in other areas, rents varied between Euro 3.50-4.50/sq m/month. Larger
tenants with strong covenants renting modern premises (over 10,000 sq
m) in the western submarket are achieving lower rents, which fluctuate
around Euro 4.0 up to Euro 4.5/sq m/month.
Cold storage facilities recorded rents from Euro 8 to 12/sq m/month in
2008. Service charges have registered a slight price increase, stimulated
by the raise in cost of utilities and property-taxes, ranging between Euro
0.5-0.8/sq m/month.
East
New
3.50-4.50
East
Old
2.50-3.50
SELECTED WAREHOUSE DEVELOPMENTS TO BE
COMPLETED IN 2009
Property
Developer/
Owner
Location
Area
(sq m)
TRENDS
Cefin Logistic Park
Cefin
West
120,000
Given the current uncertain economic context, in 2009 many developers
might postpone subsequent phases of large projects for an indefinite
period. In addition, certain industrial developments will continue to be
negatively influenced by the difficulties regarding the infrastructure improvements.
Developers will adopt an wait-and-see attitude. The number of speculative developments will remain limited in the near future and developers
will focus almost exclusively on built-to-suit projects.
A1 Business Park
Phase 3
Cefin
West
39,000
Bucharest Industrial
Park
Universal
Logistic
West
27,650
NordEst Logistic Park
Phase 2
European
Future Group
NorthEast
19,300
Land Market Overview
SIGNIFICANT LAND TRANSACTIONS IN BUCHAREST-ILFOV IN 2008
Location
Area
(ha)
Value
(mil Euro)
Corbeanca
8.30
9.0
N/A
8.00
2.0
North
5.58
48.9
Realia
Central-South
0.83
12.2
RPF
Central-South
Central-East
1
N/A
River Invest
Central-West
0.20
2.6
Purchaser
Terra Kapital A.Panayides
Contracting
Kalpinis Simons
D Yapi – Dogan Group
AVERAGE LAND PRICES IN BUCHAREST
District
Location
Average Asking Price
(Euro/sq m)
Aviatorilor-KiseleffMihalache
Central
3,500-5,000
Unirii
Central
1,750-3,200
Herastrau
North
2,000-3,500
Militari
West
700-1,250
Ghencea
West
500-1,000
Berceni
South
300-750
Giurgiului
South
125-30 0
Pantelimon
East
600-1,000
Titan
East
600-1,250
AVERAGE LAND PRICES IN BUCHAREST
Use
Location
asking
Average Asking
Price
price
(Euro/sq m)
Otopeni
Residential
North
125-375
Pipera
Residential
Office
North
North
300-700
1,000-1,250
Chitila
Residential
West
175-400
A1 Highway
Industrial
West
25-75
Popesti Leordeni
Residential
South
125-250
Pantelimon
Residential
East
125-225
Afumati
Residential
East
75-150
Area
During 2008 the land segment has recorded a fundamental change,
from a vendor to customer market, this trend becoming more visible in the second half of the year. Despite the evident downtrend
in prices, the number of transactions has severely decreased while
significant transactions have been virtually non-existent. However,
negotiations on a number of deals concluded in 2008 which had
significant impact on the market were initiated in 2007. The contraction of financing corroborated with the decline of the other
real estate market segments and pessimistic psychological effects
induced by the current economic conditions have contributed to
the lower level of activity on the land market.
The land market witnessed more diversified type of properties offered for sale, compared to the last 2 years. The source of supply
was mainly represented by 2 categories of sellers: opportunistic investors constrained by the current economic conditions to dispose
of their properties and landlords willing to sell as a result of their
anticipation on a further price decrease.
However, under the current market conditions the potential demand remained relatively unchanged compared to 2007, developers still looking for properties with lower risk such as sites located
in central areas and granted with certain urban planning indicators. They are not willing to conclude transactions for the moment, preferring to delay the purchase, waiting for a further price
decrease and market stabilization. The current economic context
and financing restrictions led to a very price sensitive land market,
mainly regarding the total value of the properties. As a consequence potential purchasers were focusing on small and medium
sized plots which do not imply a significant financial risk and effort.
The purchase of plots in view of disposal further to improving the
land development potential was an evident tendency during 20042006, but by the end of 2008 a new profile of opportunistic investors emerged, trying to take advantage of a less liquid market. The
heavily leveraged speculative investors were replaced by equity
investors which are looking for foreclosures or distress properties.
Plots with certain urban planning and located in attractive areas
with high development potential are preferred by this type of purchasers.
During H2 2008 the discrepancies in price expectations between
buyers and vendors became more evident. Landlords have reacted
to the weak demand reducing the asking price and becoming more
flexible in negotiations. However the purchasers are expecting
higher discounts which for the moment owners are not willing to
offer. The difficulties in agreeing the price are fueled by the lack
of transactions and transparency on the market.
Despite a slight increase in sale prices (by 10-15% on average) recorded during the first months of 2008, the trend has shifted in H2
2008, the asking price level decreasing by approximately 15-20%,
especially in the last quarter of 2008. This trend was not homogenous within the city and the asking price fluctuated significantly
depending on location and the development potential. The current
asking price decrease is higher than the above-mentioned range in
the areas inside and outside Bucharest which had an exponential
value appreciation in recent years, due the high interest from opportunistic investors.
Severe real estate market conditions and decreasing demand from
developers will lead to a further price decline as the availability of
financing on the short term is very limited. Both owners and purchasers will still take a wait-and-see attitude, limiting the number
of transactions as the price expectations continue to be irreconcilable.
17
Investment Market Overview
The global financial and economic turmoil strongly corroborated
with the softening of local real estate market fundamentals have
negatively impacted the property investment market. In addition
to the specific factors of the local real estate market, the investors’
restrain was induced by the less favorable country risk indicators
and fear over a prolonged economic slowdown. However financing
remains the most important obstacle as rigorous credit policies
have led to higher capital costs or even blocked specific real estate purchase. Investors became more cautious and took a waitand-see attitude resulting in an abrupt decrease of the number of
transactions.
As a consequence of the market evolution, the profile of investors has changed. Opportunistic equity investors became the most
active market players during H2 2008, outstripping the heavily
leveraged investors that dominated the market in previous years.
Opportunistic funds are mainly looking for foreclosures or distress
properties, hoping for bargain deals with higher yields. In addition
active investors are looking for quality, well-located properties
which generate capital growth through value-adding strategies
rather than by yield evolution on the short term. Particularly income producing properties with strong covenants and tenant base
are the most sought after.
However, investors’ response remained subdued in the last half of
2008, as no investment transaction was concluded in Bucharest.
Additionally the lack of market evidence induced by the limited
number of transactions and low transparency increased the uncertainty over transaction values and yields. The timeframe and the
complexity of the negotiation process have increased, as there is
a mismatch in price expectations between investors and owners.
On the supply side, the local market has not recorded encouraging signs which could potentially sustain the transaction activity,
as owners have still tried to resist the downward pressure of the
few enquiries and maintain the prices to a constant level. Starting with November-December 2008, owners which encountered
financing problems have evidently decreased the sale prices, while
the owners of high quality properties are still not willing to sell
their properties, preferring to postpone this decision.
The investment environment became less attractive due to the
high volatility and low transparency of the local market. The property investment market significantly declined in transaction value
during H2 2008 after the increased activity recorded during the
first semester. In 2008 the total volume amounted to Euro 715
million showing a 5% decrease compared to 2007. The investment
activity was mainly sustained by the transactions concluded during
H1 2008 when approximately Euro 596 million were transacted.
Of the total volume of transactions during 2008, two single large
deals are accounting for 67% (Upground and Iris Shopping Center). However, negotiations on a number of deals with significant
impact on the market expansion in 2008 were initiated in 2007.
In contrast to the market evolution recorded in the last years,
which was primarily focused on the office segment, in 2008 the
majority of investment transactions involved mixed-use projects,
accounting for 47% of the total volume. The main reason for the
seeming decline of the office investment activity compared to previous years is that office properties were primarily sold as part of
mixed-use schemes.
INVESTMENT TRANSACTIONS BY MARKET SEGMENT IN 2008
Residential
Office
Retail
Mixed Use
47%
12%
5%
36%
INVESTMENT TRANSACTIONS EVOLUTION
Office
Industrial
Retail
Residential
Hotel
Mixed Use
800
Investment value (mil Euro)
18
700
600
500
400
300
200
100
0
2003
2004
2005
2006
2007
INVESTORS BY COUNTRY IN 2008
Germany
UK
Portugal
13%
14%
6%
67%
Other
2008
Investment Market Overview (cont).
MAIN INVESTMENT TRANSACTIONS IN 2008
Use
Size
(sq m)
Yield
(%)
ART Group - Buzesti
Office
6,500
7.3
2
Parklake Plaza
Retail
110,000
N/A
2
Upground
Mixed-use
116,000
N/A
2
Iris Shopping Centre
Retail
48,000
7.0
2
Biharia OB
Office
8,000
7.4
3
BOB
Office
23,347
N/A
3
Dorally
Retail
57,000
N/A
Q
Property
1
YIELDS BY MARKET SEGMENTS
Industrial
Retail
14,0
12,0
10,0
8,0
6,0
4,0
2,0
0,0
12,0
10,0
8,0
6,0
4,0
2,0
0,0
2003
2004
2005
2006
2007
H1 2008
H2 2008
Retail
Office
Industrial
Office
The retail investment market was the second performing sector
during 2008 in terms of total investment volume, with almost Euro
255 million worth of properties sold in only 3 transactions. The office and residential segments accounted for approximately 17% of
the total investment volume in 2008. On the industrial and hotel
segments, no transactions were concluded during 2008.
The single largest investment transaction recorded to date on the
Romanian property investment market was concluded by RREEF Deutsche Bank’s Asset Management Division, which acquired Upground, a mixed-use project (office and residential), for a total of
Euro 340 million. Another significant transaction was concluded by
a German fund (DEGI) which acquired Iris Shopping Center from
Avrig35 Developer for a total of Euro 140 million.
The investment market is experiencing a price readjustment across
all segments. Starting with the end of 2007 the average prime yields
increased in all sectors after five successive years of compressing
evolution, as a result of general market uncertainty doubled by limited availability of finance and diminishing market capitalization of
some international companies.
Due to obvious discrepancies in price expectations between owners
and investors, the number of transactions has severely decreased.
Investors are still waiting for substantial price reduction, while
owners are trying to maintain a limited decrease. As a consequence,
potential customers are postponing their plans for acquisitions in
view of a further price decline.
Prime yields are currently under upward pressure; prime office
properties with strong covenants, located in good areas were more
resilient to re-pricing, with asking yields increasing from 6.0% in H1
2007 to approximately 8.50-8.75% at the end of 2008. Office prime
yields have recorded a dramatic increase during the last 3 months
of 2008. Office properties located in decentralized and peripheral
areas have been even more sensitive to the market changes and
recorded a more significant increase, from the level recorded during
H1 2007 of 7.50-8.00%, to approximately 9.5%-10.0%.
A similar evolution was recorded by asking yields for shopping
centers and industrial properties, which increased by 1.5-2.0 basis points, currently ranging between 9.0-10.5%. The main reason
which induced this trend was the weak demand represented only by
opportunistic investors trying to put a heavy downward pressure on
prices. However no transactions have been concluded to substantiate the above mentioned figures.
Equity opportunistic investors will continue to represent the main
driving force of the demand in 2009, being attracted by the investment products coming to the market. In addition the worsening
investment environment creates new opportunities, as distressed
transactions are occurring and large investors intend to increase
the efficiency of their portfolios and consider implementing exit
strategies.
The price correction process remains evident in the near future. The
softening market fundamentals corroborated with financing constrains and general lack of trust on the investment markets put an
upward pressure on yields. Investors will become more demanding regarding the operating incomes generated by properties and
expect further decline in values. As a consequence of investors’
preference for income producing properties, the share of forward
purchases of the total investment volume will significantly decrease
compared to 2006 and 2007, when these transactions represented
around 35% of the investment volume.
19
20
Green Buildings in Romania
Page realized with the significant contribution of Mr. Steven Borncamp, President of Romania Green Building Council
Briefly defined as a building that is designed, constructed and
operated to minimize environmental damage and minimize energy
use, the concept of a modern “green building” is a relatively new
concept in Romania.
It has, nevertheless, risen very quickly in the minds of executives and
other professionals as it has received considerable media attention
in recent months. In addition, multinational firms have imported
policies requiring certified green buildings for their workspace and
leading retailers are incorporating the demonstrated benefits of
green retail space.
Energy security and concerns about energy costs have contributed
to a new consciousness about the financial benefits of the energy
efficiency associated with green buildings. Several real estate
developers have started certified green building projects indicating
a commitment to and belief in the development of the sector. It is
our belief that the desire to design, construct, and occupy green
buildings will see a significant increase based on observed activity
and numerous discussions with a variety of stakeholders on the
Romanian market.
Numerous studies show that occupants of green buildings
experience greater comfort as well as productivity gains of
approximately 15% due to the better natural lighting, air quality,
lower building toxicities, and design qualities associated with green
office spaces. As the cost of human resources will far exceeds the
cost of the building rental during the period of occupancy, these
productivity improvements make a direct contribution to corporate
profitability. High performance green buildings also experience
greater tenant retention and lower vacancy rates indicating greater
satisfaction with the work environment. Tenants responsible for
energy costs can realize energy savings often greater than 30%.
On the retailing side, efforts by leading retailers in the U.S. such as
Wal-Mart and Target who implemented green building features in
selected stores – particularly natural day lighting – led to a 25% to
40% increase in sales by customers while reducing energy use by
50% compared to non-green outlets.
Some of the harder to quantify but important other benefits
include:
There is a close correlation between high quality construction and
green construction. The better collaboration between designers,
engineers and project managers’ required to create a green
building result in more rational use of space in a building design
and a building that responds better to the occupants needs.
Given the significant rise in awareness about environmental issues
particular, talented professionals want to associate themselves
with a company that demonstrated environmental leadership.
BNP Paribas Real Estate is internationally committed to
Sustainable Development launching several initiatives across
Europe to inform clients and employees about sustainability.
In Romania BNP Paribas Real Estate is founding member of RoGBC
(Romania Green Building Council), encouraging and advising
Developers and occupiers to have a “green” approach.
ABOUT THE RoGBC
The Romania Green Building Council (RoGBC) is a non-profit,
non-political organization encouraging the market, educational,
and legislative conditions necessary to transform the construction
industry to produce buildings that are both environmentallyresponsible and profitable. The mission is to create an exemplary
development model for the region by ensuring the built
environment will not imperil future generations but rather be a
source of safety, comfort, innovation, and opportunity.
The objectives of the Romania Green Building Council are to:
• Facilitate the availability of the most up to date and highest
quality training to create the necessary pool of national green
building experts.
• Support the development of appropriate regulatory conditions
that promote sustainable constructions while ensuring attractive
returns on investment
• Support the development of best in class in-country green
construction and position Romania as a sustainable construction
leader in the region.
• Build an inclusive organization by facilitating the collaboration
between all relevant players in order to eliminate systemic barriers
and promote a truly sustainable built environment.
• Promote domestic, regional and international collaboration to
share knowledge and encourage innovation.
• Research, compile and disseminate best practices for the region
and encourage their adoption and implementation.
PIATA IMOBILIARA DIN BUCURESTI, 2008
BNP Paribas Real Estate is a leading international real estate company, present in all the major European real estate markets, as well
as in New York, Middle East and India. The company offers a full range of property cycle expertise to its clients.
Combining the multi-expertise services of BNP Paribas Real Estate and the support of a major financial institution known throughout
the world, BNP Paribas Real Estate is able to meet the client’s real estate needs in Transaction, Consulting, Valuation, Property Development, Investment Management and Property Management.
In Romania BNP Paribas Real Estate provides to its clients the same international standard services: Transaction (Letting and Sales,
Investment), Consulting and Valuation. The local team has professional consultants with knowledge of the international real estate
practice and many years of experience on the Romanian real estate market.
2008 Key Facts BNP Paribas Real Estate Romania
• Started operations in 2001 under another international name
• January 2008 acquired by BNP Paribas Real Estate
• Total headcount: 30
• Two RICS members in the management team
• No. of clients: Approx. 2,000 companies – Landlords, Investors, End Users
• Total commercial leasing activity: 115,000 sq m
• 60 office deals of 500 sq m minimum size
• Over 1,500 valuation and consulting instructions
• 2008 – BNP Paribas Real Estate Romania is founding member of Romania Green Building Council
39
INTERNATIONAL
COVERAGE
Canada and USA
India
Japan
Canary Islands
LOCATIONS
BAHRAIN
Al Rosais Tower, floor 16
P.O. Box 5253
Manama
Tel: +971-505 573 055
Fax: +973-17-536 506
BELGIUM
IT Tower
Av Louise 480
B17 Louizalaan
1050 Brussels
Tel: +32-2-646 49 49
Fax: +32-2-646 46 50
DUBAI
Burj Dubai Square
Building No.1, Level 7
Office # 701
P.O. Box 7233
Dubai
Tel: +971-505 573 055
Fax: +971-44 257 817
FRANCE
13, boulevard du Fort de Vaux
75017 Paris
Tel: +33-1-55 65 20 04
Fax: +33-1-55 65 20 00
GERMANY
Goetheplatz 4
60311 Frankfurt am Main
Tel: +49-69-2 98 99 0
Fax: +49-69-29 29 14
INDIA
403, The Estate
121, Dickenson Road
Bangalore - 560042
Tel: +91-80-40 508 888
Fax: +91-80-40 508 899
IRELAND
40 Fitzwilliam Place
Dublin 2
Tel: +353-1-66 11 233
Fax: +353-1-67 89 981
ALLIANCES
ITALY
Corso Italia, 15/A
20122 Milan
Tel: +39-02 5833 141
Fax: +39-58 33 1439
JERSEY
4th Floor, Conway House
Conway Street
St Helier
Jersey JE2 3NT
Tel: +44-15 34-62 90 01
Fax: +44-15 34-62 90 11
LUXEMBOURG
EBBC, Route de Trèves 6 Bloc D
2633 Senningerberg
Tel: +352-34 94 84
Fax: +352-34 94 73
ROMANIA
Union International Center
11 Ion Campineanu Street Sector 1
Bucharest 010031
Tel: +40-21-312 7000
Fax: +40-21-312 7001
SPAIN
María de Molina, 54
28006 Madrid
Tel: +34-91-454 96 00
Fax: +34-91-454 97 65
UNITED KINGDOM
90 Chancery Lane
London WC2A 1EU
Tel: +44-20-7338 4000
Fax: +44-20-7430 2628
USA
787 Seventh Avenue
31st Floor
New York City, NY 10019
Tel: +1-917-472 4970
Fax: +1-212-471 8100
AUSTRIA
Dr. Max Huber & Partner
Dr. Karl-Lueger-Platz 5
1010 Wien
Tel: +43-1-513 29 39 0
Fax: +43-1-513 29 39 14
NORTHERN IRELAND
Whelan Property Consultants
44 Upper Arthur Street
Belfast BT1 4GJ
Tel: +44-28-9044 1000
Fax: +44-28-9033 2266
CANADA
Cresa Partners
Tel: +1-212-758 3131
Fax: +1-212-980 1977
POLAND
Kancelaria Brochocki
Krakowskie Przedmiescie 14
00325 Warsaw
Tel: +48-22-826 14 14
Fax: +48-22-828 15 45
YPRUS
Danos
35, I. Hatziosif
Av. 2027, Nicosia
Tel: +357-22 31 70 31
Fax: +357-22 31 70 11
GREECE
Danos
1, Eratosthenous Str.
11635 Athens
Tel: +30-210 7 567 567
Fax: +30-210 7 567 267
JAPAN
RISA Partners
5F Akasaka Intercity 1-11-44
Akasaka, Minato-ku
107-0052 Tokyo
Tel: +81-3-5573 8011
Fax: +81-3-5573 8012
NETHERLANDS
Holland Realty Partners
J.J. Viottastraat 33, 1071 JP
Amsterdam,
Postbus 9669
1006 GD Amsterdam
Tel: +31-20-305 97 20
Fax: +31-20-305 97 21
PORTUGAL
Fenalu
Av. Eng. Duarte Pacheco
Torre 2
Piso 10, Sala 6/7
1070-102 Lisboa
Tel: +351-21-3833106
Fax: +351-21-3833107
RUSSIA
Astera
10, b.2 Nikolskaya Str.
Moscow, 109012
Tel/Fax: +7-495-925 00 05
UKRAINE
Astera
2a Konstantinovskaya Street
04071, Kiev
Tel: +38-44-501 50 10
Fax: +38-44-501 50 11
USA
Cresa Partners
100 Park Avenue, 24th Floor
New York, NY 10017
Tel: +1-212-758 3131
Fax: +1-212-980 1977
March 2009 – BNP PARIBAS REAL ESTATE ROMANIA. THE BUCHAREST PROPERTY BROCHURE IS NOT AN OFFER AND HAS A PURELY INFORMATIVE ROLE.
Our Implantations
Our Alliances

bucharest property, year end 2008

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