Bucharest, Romania – Real estate Market overview H1 2018

Romanian investment market update

With transactions of EUR 386m in the H1 2018, Romanian real estate market was the third largest in CEE, and more active than those of Hungary and Slovakia. In addition, there are a substantial number of transactions in different stages of negotiations that will be concluded during the remainder of 2018 and will push the market to a level of transactions at least comparable to that achieved in 2017, of approx. EUR 1 billion. The average deal size increased, standing at approximately €40 million. Bucharest accounted for over 90% of the total investment volume, and a number of transactions being also recorded in regional cities such as Cluj-Napoca and Brasov. The market was dominated by office transactions – 66% of the total volume, followed by the retail sector – 29%, and hospitality and industrial accounted for the rest. The largest office transaction registered in H1 2018 was the acquisition of Oregon Park.

Selected investment transactions

Office space

Q2 2018, Oregon Park – 46,081 sqm – Lion’s Head Investments

Q2 2018, Campus 6 – Skanska/ CA Immo – 22,000 sqm

Q2 2018, UTI Building (Lascar 31) – UTI (Local developer)/ Forevest Capital Partners – 9,250 sqm

Q2 2018, Maestro Office Building, Cluj-Napoca – First Property Group PLC – 10,000 sqm

Q3 2018, The Bridge – Forte Partners/Dedeman – 77,190 sqm

Q3/Q4 2018, The Landmark – Piraeus Bank/ Revetas- 23,644 sqm

Retail space

Q3 2018, Militari Shopping Center – Atrium/ MAS Real Estate – 56,416 sqm

Hospitality

Q1 2018, Radisson Blu – Elbit Imaging/Cerberus Capital and Revetas Capital – 200 rooms

Downward pressure on yields in each segment has been noticed, with prime office going down to 7%, prime shopping center – to 6.5%, and prime industrial yields – to 8.5%.

Bucharest office market update

New office delivery H1 2018 – Globalworth Campus Ph2/ Dimitrie Pompeiu- Pipera / 28,000 sqm/ Globalworth Developer

Development Pipeline (175,000 sqm office class A)

Orhideea Towers/ West / 37,000 sqm/ CA Immo

The Mark/ CBD / 25,500 sqm / S Immo

Campus 6 Ph 1/ West / 20,000 sqm / Skanska

Globalworth ph 3 / Dimitrie Pompeiu-Pipera / 20,000 sqm / Globalworth

AFI tech Park 1/ West / 22,000 sqm/ AFI Europe

Day Tower/ Central East / 11,753 sqm / DayGroup

Unirii View/ Central / 18,000 sqm / C&I

D’Or / Centre / 5,521 sqm / Primavera Development

Sema Park 5 / West / 15,700 sqm/ sqm River Invest Development

Leasing Transactions Volume – 149,000 sqm office space transacted in H1 2018

Leasing Trends

• New shared office space tenants are taking an increasing share in the leasing activity
• New entrances in Romania- London Stock Exchange

Vacancy – reached 8% – lowest in recent years

Total Stock – 2.79 million sqm

Bucharest office submarket trends

Bucharest office market is divided in 12 sub-markets out of which the largest are: Floreasca Barbu Vacarescu (16.8% of the total stock), North (13%) and Dimitrie Pompeiu (13%). Bucharest office market landscape is very dynamic, with new clusters under development in the next 3 to 5 years. Besides the traditionally attractive Barbu-Vacarescu and North, Center West, Expozitiei Area and Central Area are emerging as attractive new areas of the office market.

Center-West has all the prerequisites to become the next office hub in Bucharest after Floreasca -Barbu Vacarescu. There are a lot of similarities between these two areas: good access to the airport, excellent public transportation, proximity to a shopping center.

Expozitiei Area – The lands bought in the Piata Presei- Expozitiei area in the last 2 years allows the development of ca. 200,000 sqm of office space. Developers have announced their intention to deliver around 160,000 sqm of office space in the area over the next two years. We have seen already the first leasing contracts signed in this area.

The Center Area – after Nepi’s success to devleop and refurbish a historical Villa at Aviatorilor 8, other developers followed the same steps. Atenor Group bought last year a historical villa and land for Dacia 1 office development. The historical building will be renovated and integrated into the new office project, which will have an area of nearly 12,500 sqm. The company’s representatives have scheduled the completion date for 2020.

Forte Partners acquired “Palatul Telefonelor” (The telecommunication HQ)  from Telekom and 1,700 sqm plot of land to transform the site in to a new modern office building (9,000 sqm of prime office). Israeli Developer Hagag purchased two historical buildings on Calea Victoriei for refurbishment into modern offices as well.