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Tag: colliers

  • Investors are interested in new real estate projects even in the Covid-19 context

    Investors are interested in new real estate projects even in the Covid-19 context

    Real estate investors still show interest for acquisitions of new projects in Romania, even in the context of the Covid-19 epidemics, shows a study conducted by Colliers International on the investment market among more than 60 real estate companies representing investment funds, developers, asset managers and banks.

    At the same time, almost 70% of the investors active in the land segment claim that they plan to conclude all or at least some of the transactions already on-going, according to a study dedicated to the land market conducted among 115 professionals active in this real estate segment.

    Bucharest remains the epicenter of investments this year

    Most real estate market players are seeking to better understand the current situation before making investment decisions (64%).

    However, almost a quarter of participants to Colliers study declare that, should an opportunity with favorable transaction conditions arise, they would invest even considering the uncertainties of the current context.

    Bucharest remains the preferred location for new investments for about 57% of respondents while over 25% are open to new investment opportunities in regional cities, which could boost the regional real estate market especially as only 5% of them currently hold properties outside Bucharest. Both Bucharest and regional cities remain venues for a buy-and-hold strategy, as most of the respondents owning properties either in Bucharest or regional cities prefer to keep them over the long term.

    74% of investors expect tighter financing terms

    However, investors expect tighter financing conditions and appreciate that the crisis could have long lasting effects on the real estate market, with complex implications both for future rental income as well as prices, Colliers International’s study in the investment market shows.

    Two thirds expect a decrease in financing availability, while 59% believe that financing costs will increase. Consequently, it is expected that good quality projects and relationship track record with the bank will matter increasingly more in the credit analysis process.

    Almost 70% of the investors active in land transactions intend to move ahead with the on-going deals

    In the land market, almost 70% of the active transaction players intend to progress with all or some of the on-going deals in 2020, with 43% of respondents to Colliers International’s study in the land segment expecting to close a transaction in the next 3 months, highlighting the fact that the market is active.

    Furthermore, the majority of the investors who do not foresee the close of a transaction on the short-term expect to complete a deal by the end of the year. Thus, only 16% of the total interviewed do not expect to close any land deal in 2020.

    In terms of the evolution of land prices, 44% of the investors interviewed expect them to decrease in the near future, while a similar share does not have a clear-cut expectation at the moment. The study also reveals that the market sector the investor is acting in (be it residential, office, retail or mixed use) as well as the position in terms of seller or buyer have very little influence on the current perception of land price evolution.

    Covid-19 is expected to have long lasting effects

    More than 67% of investors expect that the implications of the current Covid-19 epidemics on the Romanian economy will last longer than a year, shows the Colliers International study on the investment market.

    However, there is a bit more optimism regarding the real estate market, with 35% counting on a recovery in less than a year, while investors forecasting implications for the real estate market for over a year are fewer (52%) than those expecting effects on the overall economy for a longer timeframe (67%).

    Investors are even more optimistic when it comes to their own company, with 27% expecting to recover in less than 6 months and 38% in less than a year, which can be seen as a sign of trust in their business’ viability.

  • Bucharest service-driven economy among most insulated in Europe

    Bucharest service-driven economy among most insulated in Europe

    The Bucharest economy stands as one of the most insulated service centers in Europe to the negative fallout related to the COVID-19 outbreak, according to Colliers International consultants, who analysed scenarios for various segments of the real estate market.

    This is largely due to Bucharest’s heavy reliance on IT&C activities as well as scientific and professional services, on par with European capitals like Dublin, Paris and London.  That said, Romania’s high integration in global value chains means that it will face significant headwinds given negative developments in the global economy.

    On the other hand, Romania’s status of a fairly small and quite open economy means that real estate markets will not remain immune to global trends. Given that manufacturing has been quite significantly impaired by the Chinese factory shutdown in recent weeks and also taking into account Romania’s heavy reliance on the automotive sector, it means that the impact for the warehouse market should be more significant, but a lot depends on how long this situation will extend.

    While the full impact of COVID-19 regarding the broader economy and the real estate market is highly uncertain, a certainty is that retail and leisure sectors are among the most impacted over the short-term, as per Colliers’ analysis.

    Globally, a best-case scenario would see neutral economic growth over the year following a negative dip in Q2/Q3, with real estate shocks limited primarily to hotels/hospitality, discretionary/experience-led retail assets and logistics/production dependent on non-essential goods, or the China supply-chain.

    A mid-case scenario will not see a recovery until Q1 2021, with broader impacts felt in office markets dependent on the most exposed firms (e.g.  airlines, tour/ events operators, banks/ insurance/ investors and energy companies).

    Capital markets will see a hiatus in activity, but long-term core players continue to make moves in safe-haven markets, especially around more defensive retail, industrial and logistics, office and residential assets.

    Depending on whether it will be a best or mid-case scenario, value-add and opportunistic players will take a ‘wait and see’ approach until pricing and availability/cost of capital becomes clearer. For cross-border investors, Q2/3 FX rate volatility and inability to physically visit/check assets will lead to a push-back on activity.

  • Bucharest is pivoting towards a tenant market for office buildings

    Bucharest is pivoting towards a tenant market for office buildings

    • The stock of modern office spaces in Bucharest reached nearly 2.7 million square meters last year, up 12% compared to the previous year.
    • An additional 700,000 square meters could be delivered over the next two years, which means a 25% increase in the current office stock, which will increase competition for attracting new tenants, shows the annual report released by Colliers International.
    • The tenants will thus be in a position of strength in negotiations, and vacancy is expected to climb upwards to 12%, maybe even towards 13%, by year-end.

    Over 365,000 square meters were rented in 2019, up c.12% compared to the previous year, representing expansions of existing leases, new tenants entering the Romanian market and relocations from the stock of modern buildings. At the same time, lease agreements for 144,000 square meters were signed for office spaces to be delivered in 2020 or in subsequent years.

    New office space delivered in 2019 reached about 286,000 square meters, nearly double compared to the 150,000 square meters delivered the previous year, but under the initial estimates of Colliers consultants of  360,000 square meters, as two large projects were postponed for 2020.

    Bucharest Center West submarket was the star

    The Center West submarket was, by far, the most active, generating close to 100,000 sqm of new leasable office spaces in 2019, so a bit over one third of overall deliveries, with other spaces spread around various submarkets in central locations, the CBD, but also Floreasca – Barbu Vacarescu.

    The biggest project to come online was the Globalworth-built Renault HQ in the West submarket (47,000 sqm), followed by Vastint’s Business Garden Bucharest (over 41,000 sqm) and Portland Trust’s Expo Business Park (over 38,000 sqm) in the Piata Presei-Expozitiei submarket.

    Outside Bucharest, projects totaling 94,000 square meters were delivered in 2019, three quarters being buildings built in Cluj-Napoca (37,000 sqm) and in Timisoara (35,000 sqm), followed by Brasov (15,000 sqm) and Iași (7,000 sqm). This year the stock of office space is estimated to increase by 150,000 square meters in these four cities representing major office hubs.

    2020 is set to be a good year for the Bucharest office market, with Colliers consultants predicting demand for around 320,000 square meters, of which 120,000 square meters net office space. As in previous years, IT and financial services companies will be the main drivers of demand in 2020.

    ”The wave of deliveries from 2019 is reduced this year to 200,000 square meters, but with a spectacular return in 2021, when developers anticipate a potential of around 500,000 square meters, a new historical record. Thus, competition is on the rise between developers, but with the owners of existing modern buildings, which lost via relocations, just last year, tenants occupying 140,000 square meters. The tenants will be the ones who will enjoy opportunities, because Bucharest is starting to become a tenant market for office buildings. There will be increased competition for attracting new tenants, including from older buildings, some in very good locations, but which were built by inexperienced developers or which have not been investing in technical upgrades. The vacancy rate could reach 12-13%, up from 10.5% in 2019”, explains Sebastian Dragomir, Partner & Head of Office Advisory Colliers.

    The rents for offices remain relatively stable, with prime headline still around 18 euros per square meter in Bucharest (and an average in the region of 14 euros per square meter), respectively between 11 – 14.5 euros per square meter in other centers in the country. Romania has an investment yield of 7% for the best office buildings (likely to come down further in 2020), while in the countries of the region the yields are even 3 percentage points below: 4% in Prague, 4.5% in Warsaw and 5 % in Budapest.

    From the landlord’s perspective, this normalization of activity is coming at a moment when deliveries are slowing down as well, with 2020 having some 200,000 sqm in new GLA planned; 2021 is looking more crowded, with around half a million sqm in new leasable areas promised by developers. Given the realities of the market, Colliers consultants would expect that a significant amount of this pipeline for 2021 to be pushed back, as not all developers may score a major anchor tenant.

  • The office market will be the star of the Romanian real estate investment market

    The office market will be the star of the Romanian real estate investment market

    2020 is expected to be the best year in the post-crisis cycle for the real estate investment market in Romania, after total investments worth 644 million euro in 2019.

    Deals worth at least 600 million euro could be finalized this year only in the office segment, which will be the star of the real estate investment market, supported by more attractive yields than in other countries in the region and a good macroeconomic performance, shows the annual report released by Colliers International.

    The 600 million figure for office deals refers just to investments in very advanced stages, so it could print well higher by year end; it also includes the NEPI Rockcastle portfolio sold to AFI Europe for in excess of 300 million euro, a deal signed late 2019, but expected to formally close in the subsequent months.

    The office market attracted more than 60% of real estate investments in 2019

    Last year, the office market attracted more than 60% of real estate investments, with Bucharest and Cluj-Napoca being the most dynamic cities. The year’s biggest deal was for The Office sold by NEPI Rockastle and local developer Ovidiu Sandor to the Romanian-owned DIY chain Dedeman, for roughly 130 million euro.

    Other major office deals included the purchase of America House in Bucharest for over 70 million euro by Morgan Stanley and ADD Value Management, advised by Colliers, from AEW, the acquisition of Phase III of Oregon Park by Lion’s Head Investments, for an estimated 57 million euro.

    Two other important deals involved the sale of Liberty Technology Park from Cluj-Napoca by White Star alongside the endowment fund of one of the top universities in the US, also brokered by Colliers International, as well as the transaction signed by Corporate Finance House Group, an investor with headquarters in Lebanon, that bought the Day Tower office building in Bucharest, developed by Day Group.

    Retail transactions represented 24% of total volumes

    Retail transactions represented nearly 24% of total volumes in 2019. The largest transaction, worth 113 million euro, was made by MAS Real Estate for 8 retail projects it had developed together with Prime Kapital.

    Another important deal was closed by Indotek Group, which purchased Promenada Targu Mures for an estimated 40 million euro.

    Industrial sector had modest impact

    The industrial sector showed more modest performance in 2019, accounting for under 10% of the preliminary figures, with CTP’s purchase of A1 Bucharest Park for around 40 million euro as the year’s biggest transaction.

    In fact, the local market of industrial and logistic spaces has the highest yields in the region, up to 8.25%, compared to 6.50% in Warsaw, 7% in Budapest or 5.25% in Prague.

    Poland remains region leader

    At Central and Eastern Europe (CEE) level, the local market attracted last year almost 7% of the total investment volume of about 13.4 billion euro.

    Poland remained leader in the region, where investment volumes accounted for 55% of the overall CEE6 total with a record-breaking ca. 7.4 billion euro, followed by the Czech Republic with a 24% share and Hungary with 13%.

    The office sector has dominated the 2019 activity, accounting for more than half of all volumes (51%), followed at quite a distance by retail (23%), while the sector of industrial and logistic spaces had a share of 13%.

  • Logistics and industrial market in Romania can reach 8 million sqm

    Logistics and industrial market in Romania can reach 8 million sqm

    • Modern industrial and logistic facilities reached 4.6 million square meters, up by approximately 10% compared to the previous year;
    • Nearly 9% of the total stock was delivered just in 2019;
    • The market has potential to almost double to 8 million square meters in the next years.

    Romania’s stock of modern industrial & Logistic spaces posted a record increase of 50% over the last three years, but there is still significant room for growth compared to other CEE countries, Money Buzz! learned from an Colliers International report.

    In the Czech Republic, modern I&L surfaces are at roughly 9 million square meters, while in Poland are around 19 million square meters.

    “We see a lot of potential for expansion for the industrial and logistic real estate submarket, especially if major infrastructure works are to be delivered in the coming years, with automotive and retail being the most active drivers of demand. New and more restrictive EU rules regarding transportation are also likely to change the industrial and logistics landscape in Romania over the next years, increasing the need for regional storage hubs”, says Laurențiu Duică, Partner & Head of Industrial Agency at Colliers International.

    Modern leaseble industrial and logistics spaces delivered in 2019 amounted to over 400.000 sqm, which means that 1 in 11 leasable stock was delivered last year. Bucharest accounted for 62% or a total of 284,000 square meters of all deliveries. Another 500,000 square meters are expected to be delivered in 2020, with risks to this call tilted rather to the upside.

    New surfaces delivered last year are already leased

    However, new surfaces delivered last year are already leased, with vacancy rates remaining in the low: around 5% in Bucharest, while in other parts of the country, they can be as low as 3%, due to the high demand and the small area available in the completed projects. Next, the market remains dominated by projects built according to the specifications of the tenants, type Build-to-Suit.

    Rents for prime warehouse spaces remained broadly stable in 2019, between 3.9 – 4.0 euro per square meter in the Bucharest area and 3.8 – 3.9 euro per square meter in other hubs around the country. For comparison, in the area of ​​Warsaw the rents amount to 5 euro per square meter and in Budapest they reach 6 euro per square meter.

    Pirelli, most important industrial development in 2019

    In 2019, automotive was the biggest driver on the demand side, generating close to one third of the deals, or 141.000 square meters, followed by retail. Pirelli’s new logistic facility in Slatina was the most important development, covering 62,000 square meters.

    In the retail sector, a relevant trend is e-tailers looking to improve logistics in order to fasten deliveries to the final customers, which creates traction for last mile logistics.

    In fact, Bucharest – especially the North and West areas, which provide good connection with the ring road and highways – and Slatina concentrated most of the demand for industrial and logistics spaces last year, followed by Timisoara and Sibiu. In general, developments are concentrated near the Pan-European Transport Corridor IV.

  • Top 10 predictions for the Romanian real estate market in 2020 from Colliers

    Top 10 predictions for the Romanian real estate market in 2020 from Colliers

    The Romanian real estate market is expected to continue displaying robust growth in 2020, but slower than record-setting paces seen in recent years, Colliers International consultants predict.

    With good potential to generate steady, long-term income, capital appreciation and significant diversification benefits, the real estate segment still offers attractive investment opportunities, especially for investors that can cope with lower liquidity.

    Last year, constructions and real estate transactions contributed with almost one percentage point to Romania’s 4% economic growth achieved in the first three quarters of the year. However, slower economic growth expected in Romania this year, although estimated to outperform most European economies, will influence the evolution of the real estate market.

    Romania still features one of the best potential growth rates in Europe, although slower compared to previous years. Major structural reforms in areas like workforce mobility or education could unlock significant growth down the road with fairly little effort, though 2020 does not look like the magic year amid elections, Colliers International consultants predict.

    How will the evolution of external markets impact the local market?

    There are plenty of areas to be worried across the board, like Brexit, shifts in US trade policies, geopolitical tensions, longstanding Eurozone issues and Chinese slowdown. Still, the external backdrop is expected to have a neutral to mildly positive impact regarding the growth forecast for Romania in 2020, says Colliers International consultants.

    2020 may actually be the best year in the post-crisis cycle for the real estate investment market in Romania

    There are already in excess of EUR 0.6bn in deals related to several office projects that could close soon, including the EUR 0.3bn from the NEPI Rockcastle portfolio, signed, but not closed in 2019, with several buildings on the market that are asking yields below 7%.

    The industrial and retail submarkets are also doing fairly well, though there are some supply-side limitations here.

    Going forward, Colliers International consultants talk about the deepening of various submarkets, from pure class A office buildings to those with a value-add angle or reconversions. Investments in retail spaces reached high levels of maturity and main differentiator today is the quality, both in the industrial segment, where competition is high, as well as in the office buildings, where more and more investors are interested in obtaining “green” certifications.

    Bucharest is gradually becoming a tenant market for office buildings

    This will probably be more visible in 2020 – vacancy could near 12-13%. Some 0.7 million sqm in new offices are announced for the next couple of years – around a quarter of the current modern office stock.

    The increased construction costs are somewhat of a novelty, with a direct influence of whether companies relocate or not, since fit-out costs have increased some 25-30%, Colliers International consultants predict.

    2020 could also bring room for growth for industrial and logistics spaces

    Given Romania’s extremely low modern industrial and logistics stock of around 4.6 million sqm, half of Czechia’s level and more than 4 times below Poland’s.

    Some 0.5 million sqm in new storage spaces could come online in 2020, with an increasing share of deliveries coming from developers until recently active on other segments, like offices, residential or retail. This means that 5 million square meters of modern warehouse spaces should be reached this year.

    Services and private consumption are still in fairly good shape, but below 2017-2018.  For this year, Colliers International consultants are predicting slower, but healthier consumption growth.

    Landlords will continue to focus on enhancing the customer experience, with a special focus on the leisure segment. Developers will look for synergies: new malls will strive to be attached to an established office area or to add their own office/residential components; including shared office spaces in shopping centres looks attractive as well. The fast expansion of retail schemes in small and medium sized cities still holds.

    Regarding the residential property prices, 2019 was a record year for the number of new residential units, but this year is unlikely to keep up. There are signs that construction works are slowing a bit at the turn of the year.

    As long as the economy manages to squeeze a decent growth rate, Colliers International consultants are expected prices to accelerate a bit compared to the year before, but remain below the expansion rate of wages. Still, some areas, like parts of northern Bucharest may have a bit too much supply.

    A gradual cooldown we will see also for the land market

    The pipeline in advanced stages is not as generous as in previous years while, at the same time, Colliers International consultants are not seeing as many big deals on the horizon at this current junction.

    Overall, 2020 is shaping up to be a decent year, but unlikely to rival what we have seen in the 2017-2019 period in terms of transaction volumes.

    More and more Romanians living abroad have a high interest in returning home

    Romania’s external migration balance could be evened out as soon as 2020, with more and more return migrants, Colliers International consultants predict. Another positive trend is that Romania’s major regional cities are still in the fast-track convergence lane.

    And looking beyond 2020, the over 3 years election free gap in Romania will be a somewhat unique opportunity to promote major structural reforms, ranging from enhancing the public health and education systems to big progress in major infrastructure projects.

  • Colliers will provide property management services for Equilibrium

    Colliers will provide property management services for Equilibrium

    • Colliers International Romania has been assigned to provide property management services for the first building of the Equilibrium office project, developed by Skanska in the Capital.
    • This is the 2nd mandate won by Colliers from Skanska, bringing the total portfolio managed by the company to almost 530,000 sqm of industrial and office spaces.

    The Equilibrium project is located in an established office hub in Bucharest – the Floreasca-Barbu Vacarescu area. The first building has a GLA of 20,800 sqm, and with the second phase of the project, the entire complex will have a GLA of 40,700 sqm.

    LEED Platinum certified, the building is equipped with high-efficiency HVAC systems partnered with smart controls that further reduce the building’s energy use, while offering various facilities that make the time spent here pleasant for both tenants and guests.

    Equilibrium offers a special mix of recreational green spaces, modern exterior furniture and meeting hubs. There is wireless connection in all areas and innovative sustainability features such as carbon footprint calculation, dashboard showing energy consumption, high speed chargers for electrical cars.

    As part of the property management mandate, the Colliers team will manage the relationship between landlord, suppliers and current or potential tenants, by providing integrated services from operational monitoring to financial services and ownership reporting, as well as consultancy services for creating communities at project level.

    The portfolio managed by Colliers International in Romania also includes: Business Garden Bucharest, The Office in Cluj-Napoca, The Bridge, Hermes Business Campus, Stefan cel Mare Building, Art Business Center, the Adam America office portfolio, Allianz Office Building Brasov and Vox Technology Park Timisoara, as well as three industrial parks in Timisoara, Brasov and Arad and the logistics park ELI Park 1 developed by Element Industrial north of Bucharest.

  • Romanians spend EUR 8.7 a month for culture and recreation

    Romanians spend EUR 8.7 a month for culture and recreation

    Czech consumers spend the most on cultural and recreational activities – EUR 38.2 per month – while Romania ranks 8th out of the 13 countries, with average monthly expenses of EUR 8.7, according to the latest report from the real estate consultancy company Colliers International.

    The analysis of 13 countries shows that the leisure segment in shopping centers is dominated by multiplex cinemas (over 452) and fitness clubs.

    “In Romania, the average purchasing power has doubled in the last decade and has led to a significant growth in consumption, increasingly focused on entertainment. As a result, some of the newest shopping centers offer more than 20% of the gross leasable area for food court and entertainment areas, more than double compared to 10 years ago, and the trend is to keep growing, closing in on 30%. In large or mixed-use projects, this percentage may increase”, Venera Munjev, Senior Associate Retail Agency at Colliers International Romania, said.

    Out of the 13 CEE countries, Czech consumers spend the most on cultural and recreational activities – EUR 38.2 per month. The Czech Republic is followed by Latvia (EUR 35.6), Slovakia (EUR 22.5) and Poland (EUR 17.9). Romania ranks 8th out of the 13 countries, with average monthly expenses of EUR 8.7.

    “There are two explanations for this relatively small average of spending on recreation and culture: 1) Romania has the second lowest urbanization rate in the European Union (54% of Romanians live in the city versus circa 80% in Western Europe) and 2) the average includes some of the most developed cities in this area of Europe – Bucharest, Cluj-Napoca – alongside some of the poorest in the EU. In other words, the difference between Bucharest and Warsaw or Budapest is significantly smaller than these figures suggest”, Silviu Pop, Head of Research at Colliers International Romania, added.

    Cinemas and fitness clubs dominate the entertainment market in shopping centers in the CEE region

    According to the Colliers report, there are over 452 cinemas and multiplexes in shopping centers in the 13 CEE countries. Poland and Romania lead the ranks, with 125 and 93 of such spaces, respectively. Based on population figures, in Poland there is a modern cinema for almost 370,000 inhabitants, while in Romania, the ratio is for 210,000 inhabitants.

    Also, calculations based on the average gross salary show that, to buy a ticket to the cinema, Romanians have to work around 48 minutes. This duration is among the smallest, compared to the other 12 countries: for example, for the same purpose, the Polish work one hour and three minutes, the Czechs, one hour and five minutes, while the Albanians work the most – one hour and 48 minutes.

    Romania ranks second in terms of fitness clubs (42), after Poland (115), and third in number of playgrounds for children in shopping centers (60), after Poland (128) and Ukraine (71).

    “In Romania, the indoor entertainment schemes remain the most targeted and most profitable ones, while outdoor leisure schemes can only be implemented in exceptional cases. The main explanation is the temperate continental climate which exposes an outdoor project to an extremely high risk,offering a maximum of 4 to 6 months per year for effective operation. Moreover, the purchasing power in Romania has not yet reached a level that can support large projects, the incidence of accessing theme parks being reduced locally, at a frequency of two or three times a year. The lack of sustained tourism is the third reason why entertainment centers operators need the partnership of shopping centers: cities such as Bucharest, Cluj, Iasi, Brasov or Constanta are partly targeted by young people who visit only during weekends, festivals or summer / winter season for specific activities”, Venera Munjev concluded.

  • Colliers has valuated real estate assets worth a total of 40 billion euro in Romania

    Colliers has valuated real estate assets worth a total of 40 billion euro in Romania

    Colliers International has valuated, in the past five years, a total of over 500,000 commercial and residential properties worth 40 billion euro. The most complex and comprehensive appraising process in Colliers International’s portfolio was for BCR Palace from University Square.

    Owned by BCR, the historical building located in the heart of Bucharest was finalized in 1906, based on Oscar Maughsch’s architectural plans, and before becoming BCR’s property it was the headquarters of “Generala” Insurance Society.

    Today, BCR Palace occupies 4,000 square meters of land, including the former garden of the Sutu Palace, currently the Bucharest Municipality Museum, and has 12,000 useful square meters distributed in two buildings with five levels each, of which one is underground, and an attic on only one of the buildings.

    The valuation of the property was carried out in stages throughout a period of four months, which is atypical considering that a classic valuation process for a building, based on ANEVAR standards, generally requires no more than two weeks.

    “Such a unique building required specialists with experience and expertise in similar properties, in areas including architecture, valuation of artistical components, engineering and reconstruction cost estimates. Once the team was formed, the next step was collecting all the data about the property’s history, construction and renovation works, measurements and cadastral layouts and structure surveys, all requiring extensive efforts which took several weeks”, explains Raluca Buciuc, Head of Valuation and Hospitality Advisory Services within Colliers International.

    The most complex part of BCR’s historical building appraisal was to complete the highest and best use analysis of the property, considering the perspectives of a potential investor: physical possibility of transformation, legal limitations from urbanistic point of view and economic feasibility.

    The valuation team worked with two scenarios for the building’s reconversion, either into office spaces or a hotel.

    The analysis of the potential income, occupancy and exit value lead to the conclusion that transforming the building into a luxury hotel is more feasible, with final calculations showing that this scenario would be 15% more profitable for an investor comparing with the office scenario.

    In order to accommodate an international chain affiliated luxury hotel, a building must offer at least 100 rooms, while BCR Palace could accommodate around 150 rooms.

    BCR Palace is not the first historical building valuated by Colliers International. The real estate consultancy company has been involved in the valuation of buildings such as the one now hosting the Hilton Garden Inn hotel in Bucharest’s city center, the old Marmorosch Blank building, which is currently being reconverted in the Autograph by Marriott hotel or Unirea Hotel from Iasi.

    All valuations were conducted strictly for determining the economic potential of those buildings.

  • The Romanian industrial market could feel major effects from a hard Brexit

    The Romanian industrial market could feel major effects from a hard Brexit

    The UK is the 5th or 6th biggest export destination for both Romania and the country’s major trading partners – Germany, Italy and France. Thus, a negative Brexit scenario would have significant second round effects via Romania’s other trading partners which do a significant amount of business with the UK.

    According to estimates from the real estate consultancy company Colliers International, we still expect the stock of modern industrial spaces to grow considerably in the next three years (by 2023).

    Romania’s goods exports to the UK are nearly two thirds bigger in terms of absolute value than the service exports, but the latter likely have more value embedded as British demand generates around 12% of external demand for domestic IT services, for instance.

    Strictly on the goods side, the UK is a major destination for various manufacturing sectors (including automobile industry), the textile sector and agriculture. Around 9% of the Romania’s car exports head to the UK, with a hefty export demand also coming from various car parts; in the women’s apparel segment, the UK attracts over one quarter of the exports.

    “A negative Brexit scenario could lead to a significant short-term impact, but it would also lead to longer-lasting effects as global value chains have become closer integrated and Romania’s biggest export partners do a considerable amount of business with the UK. Over a longer term, it is quite difficult to say how things will settle, though Romania’s relatively low wages, healthy productivity gap to labor costs and good connectivity to Western European markets would offer some advantages”, Laurentiu Duica, Partner, Head of Industrial Agency at Colliers, said.

    Overall, industrial and logistics take-up increased some 40% in the first three quarters of 2019, to 306,300 sqm, but this figure is nearly 27% below 2017’s same period. 2019 still looks like a solid year overall (including the fourth quarter).

    Domestic industry is already contracting amid less than favorable indicators coming from Romania’s major trading partners (Germany especially). One of the staples of Romania’s industry – its auto sector, is likely to feel the pinch of global trends, with the auto manufacturing sector seeing its first decline in a decade.

    Private consumption remains quite decent in Romania amid (still) double-digit wage growth in year-on-year terms, meaning that the need for industrial and logistics spaces assigned to the expanding retail sector throughout Romania should remain a driver in 2020; so will the expansion of e-commerce, which is growing quite fast alongside traditional brick-and-mortar operations.

    The industrial and logistics stock will grow considerably in the next three years (by 2023), if infrastructure projects really start to become visible and fiscal policies will not experience major changes designed to discourage investments in this segment.

  • Colliers manages the first logistics park developed by Element Industrial

    Colliers manages the first logistics park developed by Element Industrial

    Colliers International Romania has been assigned to offer property management services for the first phase of the industrial park ELI Park 1, with a total area of 20,000 sqm.

    This is the first project built by Element Industrial, a Romanian developer of industrial and logistics spaces, and the fourth logistics park managed by Colliers. Thus, the total industrial portfolio managed by Colliers in Bucharest and in the big regional cities reaches 130,000 sqm, out of a total of over 500,000 sqm that includes office buildings as well.

    „In Romania, the property management services market for industrial and logistics spaces is still in its inception. As a result, it is encouraging to see an owner of such spaces, at his first development, outsourcing these services to ensure a better performance of the project”, Oana Adjudeanu, Director Property Management, Real Estate Management Services at Colliers International, said.

    „The Colliers property management team has developed a long-term collaboration with owners of industrial spaces and now manages a fourth logistics project, becoming a leader in this niche. Out of the total portfolio of over 500,000 sqm, which includes office buildings, 130,000 sqm represent industrial spaces”, Oana Adjudeanu concluded.

    The total area of ELI Park 1 will be 50,000 sqm of industrial space and offices, as the second phase will be delivered next year. The entire project will be developed in compliance with international class A standards, and the total investment will amount to over EUR 25 million.

    „Developing to international class A standards is part of the Element Industrial identity and the subsequent efficient and professional portfolio management helps us provide our clients with a complete, high quality experience”, Muler Onofrei, CEO & Co-Founder Element Industrial, explained.

    As part of the property management mandate for the 20,000 sqm of industrial space at ELI Park 1, the Real Estate Management Services at Colliers will manage the relationship between landlord, suppliers and current or potential tenants, by providing integrated services from operational monitoring to financial services and ownership reporting.

    The portfolio managed by Colliers International also includes: Business Garden Bucharest, The Office in Cluj-Napoca, The Bridge, Hermes Business Campus, Stefan cel Mare Building, Art Business Center, the office portfolio owned by Adam America, Allianz Office Building Brasov and Vox Technology Park in Timisoara, and three industrial parks in Timisoara, Brasov and Arad.

  • In case of a hard Brexit, there could be pressures on office buildings in Bucharest

    In case of a hard Brexit, there could be pressures on office buildings in Bucharest

    In case of a hard Brexit, just a modest 10% decrease in trade flows with the UK would shave around 0.1% of Romania’s GDP and bring potential pressures on good office buildings, as among companies tied to the UK economy are blue-chip tenants, according to data from the real estate consultancy company Colliers International Romania.

    The UK is Romania’s 4th biggest service export destination, after Germany, Italy and France, with around 8% of total, though it also generates nearly 12% of the IT service exports, underscoring the deep ties to the office market in Bucharest and other parts of the country.

    A “business-as-usual” context remains the main scenario for economic life after Brexit, but it is important to understand the deep economic ties between CEE and the UK, particularly if the worse comes to pass. Furthermore, global value chains have only gotten closer intertwined in recent years.

    Brexit process would risk disrupting CEE’s high value-add services exports

    Under an adverse scenario, the Brexit process would risk disrupting one of the CEE’s main economic staples: its high value-add services exports. Romania has seen export services to the UK more than double in the recovery phase after the crisis, outpacing by a wide margin the average growth rate. Several significant British companies operate service centers out of Bucharest (like the London Stock Exchange or British American Tobacco’s global service center), while other big international names dedicate a large part of their activity to UK partners.

    “The longer the Brexit process drags on, the longer uncertainties will linger, so companies on both sides of the table – continental Europe and the UK – may want to hedge a bit their future. We believe that it is unlikely that companies in the UK will move a huge chunk of their workforce, particularly after Brexit, in the EU or Romania (several hundreds or above), rather they may want to establish a small foothold in Europe, with CEE economies potentially serving as prime destinations due to their good mix of labour costs and skills, as well as cheaper office spaces”, Sebastian Dragomir, Head of Office Advisory at Colliers, said.

    The UK is in the top destinations for service exports for CEE countries, including very high value-added services in business services or IT&C. This suggest that a negative effect on such trade flows may be more than what seems at face value for Eastern European countries.

    (countries’ exports to the UK, share of total) Romania CEE-6 EU-27
    Total services 8.2% 7.3% 9.1%
    Travel services 17.0% 4.9% 9.3%
    IT&C services 11.5% 12.1% 10.2%
    Other business services 8.2% 10.1% 9.2%

    Source: Eurostat, Colliers International Romania

    “A simple estimation suggests that just a 10% decrease in Romania-UK trade flows would knock off some 0.1% of the GDP over the short term. Still, effects may be stronger than this suggests, as the country is the biggest overall source of external surplus via the trade channel (so quite negative for the RON); for real estate, companies tied to the UK economy are among the blue-chip tenants in Romania’s office buildings, meaning potential pressures on good buildings”, Silviu Pop, Head of Research at Colliers, concluded.

    Overall, Romania’s modern office market remains robust and could set a record this year based on gross take-up; after increasing some 18% in the first three quarters of 2019, total demand on the Bucharest office market reached around 263,000 sqm, which means the full year figure could print above the previous all-time high of c.350,000 sqm, reached in 2016. That said, new demand is cooling and is set to print in line with the average for this cycle, rather than its highs.