Colliers International: The Romanian real estate market set for new heights in 2015
The Romanian real estate market witnesses a lot of optimism at the debut of 2015, with remarkable increases registered especially on the core segments, such as office and investment, according to the Romania 2014 Real Estate Market Review recently published by Colliers International.
The transactional activity saw a 4-fold increase last year, investment volumes totalling 1.2 billion Euro in Romania, while on the leasing segment, the net take-up-the main indicator for a healthy market growth-increased with circa 30 per cent. Macroeconomic indicators support this positive vibe, as the 7 per cent increase in consumption translated into retail sales up to 20 per cent higher. There are increasing signs that 2015 will mark also the comeback of the industrial segment-a trend that was evident in last year's numerous landmark investment deals and is expected to grow, based on rising demand for industrial spaces in the countryside and significant interest for new developments.
"For the sixth consecutive year Colliers advised on more investment transactions than any other agency in Eastern Europe" commented Damian Harrington, Regional Director of Research for Colliers International, Eastern Europe. "Overall, 2014 closed with a healthy level of investment volumes across the CEE region, with the majority of countries posting a positive result. Romania is one of the CEE countries with the most notable growth rate in investment volumes and evidence of a shift in investor sentiment towards the country", he added.
With a strong possibility of another two to three years to run in the current investment cycle, the local market should continue to benefit from a combination of improving economic and property market conditions, as an increase in the wall of money seeking commercial real estate opportunities globally continues to materialise.
"How long will this new market cycle last? This is the main concern of virtually all market players, as we witness a market momentum that real estate can and must capitalize on. The premises for entering a long cycle of at least 10-12 years are better than last time around, considering the cautiousness of the banks and the very limited number of speculative developments. Strong demand coming from the business sector indicates further increase in domestic purchasing power, which will drive retail and residential markets all together. Industrial demand is back and we will see big extensions from logistics sector this year", stated Ilinca Paun, Managing Director Colliers International Romania.
The Romania Market Review report published by Colliers highlights several key-trends that sum-up the evolution of each market segment in the following period. Among the report highlights:
- Office market highlights: Now at its strongest point in its recovery, the Bucharest office market registered record post-crisis trading volumes, as well as a boost in new quality stock. Net take-up accounted for almost half of the entire activity, indicating a healthy growth of the market. Demand is expected to continue on an upward trend, given companies' interest to either enter or expand in Romania. Regional cities will become more competitive for BPOs and SSCs, demand for office spaces spilling over into tertiary cities as well. Close to 20,000 m2 of quality offices are expected to be occupied by new entrants to the market, both in Bucharest and in the countryside.
"In the next few years Romania will be moving up the complexity spectrum in terms of outsourcing processes. The local talent pool has been a main decision factor for evolving from a cost driven approach to a value driven one, Romanians proving to be very resourceful in operating more complex tasks", explains Andreea Paun, Associate Director within the Office Agency of Colliers International Romania.
- Retail market highlights: In 2014, encouraged by the country's economic performance, Romanians felt confident enough to start spending more. With a registered increase of 7 per cent in retail turnover volumes (Nov. 14), 2015 is looking at better prospects and further increase in sales. 2015 will bring approximately 200,000 sqm new shopping centres to the market. 15 per cent of this new stock is represented by extensions, marking older centres' need to become more competitive (Severin Shopping City, CityPark Constanta). In addition, the market will most likely witness other refurbishments, Mercur Craiova already announcing such an exercise for 2015.
"The opening of the new shopping centre in the Eastern part of the city will reshape the retail market in Bucharest. How much of Mega Mall's returns will come from competitors and how much will be subject of the recent increase in consumption and of traction from non-modern retail facilities, remains to be seen", considers Simina Niculita, Associate Director within the Retail Agency of Colliers International.
- Industrial market highlights: All eyes were on the industrial market in 2014, when investment transactions soared. More than 171 million Euro were channelled towards such properties, the total volume being surpassed only by that of 2008 (over 250 million Euro).
"Going forward into 2015, we welcome the return of the industrial speculative developments and an increase in stock of over 100,000 m2 in the next two years. Cautiousness still prevails, as almost all players looking to build have already secured, or are on the verge of securing prelease contracts for their projects", explains Costin Banica, Senior Associate within the Industrial Agency of Colliers International Romania.
- Land market highlights: 2014 marked the most prolific year after the financial crisis, with increased activity across all sectors of the market. The most significant upturn came from the residential segment, which experienced the best year following 2008.
"As a full economic cycle comes to a close, the question is "Will 2015 bring an increase in prices?" Downward pressure on values from distressed supply will most likely render this improbable. Nevertheless, isolated corrections might appear in areas with improving infrastructure", concludes Sinziana Oprea, Associate Director within the Land Agency of Colliers International.