Realty Forum 2022 – Challenges and opportunities in the real estate industry

Mihai-Alexandru Cristea 03/08/2022 | 13:49

Business Review once again turned the spotlight on Romania’s major real estate players at Realty Forum 2022, an event that provided a glimpse into the plans of the most important developers, investors, builders, and service providers on the office, residential, and logistics markets. Realty Forum also hosted the launch of the 2022 Real Estate Guided Premium edition, celebrating the 21 years over the course of which it has established itself as the voice of the Romanian real estate industry.

By Aurel Constantin

 

The current economic conditions are not ideal, as the pandemic lingers, the war in Ukraine continues, the energy market is in crisis, and inflation is hitting every pocket. But life goes on, and we have to find solutions for everything that comes on our way. The real estate sector was hit badly by the rising prices of construction materials and energy, which started last fall, bringing many public projects to a standstill. But the private sector has managed to keep going and even though we won’t see as many deliveries this year as we did last year, the demand for new office, residential, and industrial spaces remains high. Vlad Damian, Head of the Investor Leasing Office at CBRE Romania, said that “deliveries this year will be half of those of last year, so we’re already seeing the effects of the freeze in permits. Construction is on a declining trend that’s so significant that we cannot make a valid estimation for this year.”

But investments will continue, thinks Andreea Cotiga, Senior Leasing Manager at Immofinanz Romania. “In today’s conditions, I think that we are going to see more investments. At Immmofinanz, we’ve had an intense period since the beginning of the year, as we’ve continued to develop and implement the myhive office concept in other buildings in our portfolio. Towards the end of the year, we will launch myhive Victoria Park in north Bucharest. We’ve upgraded all the areas of the building and have already secured tenants for the offices. I am proud to say that the 6,500-sqm leased area will host the country’s first dermatology and oncological surgery hospital in the private healthcare system. We’ve also managed to secure over 30,000 sqm in our office portfolio with new lease extensions. We are also continuing our investments in our latest purchase on Calea Victoriei, Bucharest Financial Plaza. This property will undergo a major remodelling scheme, which will transform the entire area. Our aim is to be able to accommodate any request from our tenants.”

AFI Europe, another important industry player operating on three segments of the market—retail, office, and residential—will launch new projects as well as continue developing its existing properties. “Our strategy is to make further investments and launch new projects in all 3 segments. This year, we will finalise the second phase of AFI Tech Park, which is a 25,000-sqm office project. Its construction started during the pandemic period and it is now complete. The second office project that will start in August is AFI Loft, an extension of the AFI Cotroceni Mall, a very interesting project in terms of architecture. The offices will be built on top of the mall, to be finalised in 2025. On the residential side, we will build the AFI Home project on Dimitrie Pompeiu Boulevard, where we bought land last year, with 400 apartments delivered in two phases, creating a home for our office tenants in north Bucharest. We will offer special packages for our office tenants. We are also getting ready to begin construction in Arad, where we will build 30,000 sqm of retail spaces,” said Emma Toma, Head of the Office Division at AFI Europe.

Another important project is Vastint Romania’s MIRO Offices, the building located on the DN1 road, with a total area of 25,000 sqm. “The building is 89 percent finalised and we are very happy with that. The Triama project is in the last phase, in the east of Bucharest, where the first two blocks are completely sold out. We also have a project in Timisoara, where we will begin construction in a few months, combining 50,000 sqm of offices with retail spaces and a residential component of 230 apartments. Last but not least, we have bought a very big lot in Bucharest: Griro on Calea Grivitei. It is a very challenging project, a mixed development with things that make me happy as an architect. We are waiting for the construction permits,” said Antoniu Panait, Managing Director at Vastint Romania.

Maria Tudorica, Commercial Real Estate Manager at Genesis Property, noted that the projects the company manages meet all the needs of today’s employees, since coming to the office has become a choice for most of them. “Flexibility has become the new currency, and on the same note we have the co-living element, which is somehow made for digital nomads. The experience area will feature a huge food court, a space for residents and other people in Bucharest to enjoy. What we’re trying to do there is invite people to enjoy life at the office while having access to all the facilities they need to enhance their professional and personal lives, letting them enrich each other.”

 

Permitting problems

The situation in the real estate industry is made worse by the construction permit freeze. Developers are having to wait months and even years to get the papers required to start a project. The worst case is in Bucharest, where since city plans (PUG and PUZ) have been suspended. “Permits are an ongoing nightmare. Teams have been working on the General Urbanism Plan for the last 15 years and they have arrived nowhere. On top of that, the PUZ is suspended. I can’t see any way out, not for Bucharest at least, since there is no political will to move things in the right direction,” said Serban Patriciu, Head of the Romania Real Estate Practice at Noerr. “The permits situation used to be the elephant in the room, and now it’s even worse. Nothing is moving, we are just waiting, and we’re discussing with the authorities, but to no avail. Everything is at a standstill and it is hurting the local economy. We need to get all the people involved together and see what we can do to get things started,” said Antoniu Panait.

 

Office market trends

After so many changes in the last two years, it is difficult for the office market to predict what companies and employees will want or need in the future. But flexibility will surely play an important role for employees, while companies will search for quality offices to offer them the best conditions. “Speaking of trends, there are some clear directions we’ve seen in the last 2 years. First of all, most of the companies that want to rent an office space or expand their operations are looking at new office buildings. The decline in the stock of new projects and buildings is raising interest in existing projects. This is a good thing, because it will put more pressure on developers to improve the quality of their buildings and even refurbish the ones they own. But we’ve learned that there are activities that can be better done from home, so not all companies have returned to the office. The lowest office return rate is in the IT&C industry, where many employees have decided to continue working from home,” said Emma Toma.

 

Industrial and logistics

The second panel of Realty Forum was dedicated to industrial and logistics spaces—particularly on planned investments, but also on the challenges the sector is facing today. “The first six months of the year were very promising, with approximately 500,000 sqm traded nationwide, representing 52 percent of the total demand traded in 2020, the record year for the industrial and logistics segment,” said Daniela Gavril, Head of Research at CBRE Romania.

“In the first six months of the year, we continued all the projects we have previously started; we currently have projects in Bucharest, Targu Mures, and Constanta, and we’ve had deliveries in Pitesti and Timisoara. I think that by the end of the year we will be able to deliver almost 100,000 sqm which are now under construction. Some of it has already been delivered. From this point of view, we’ve not experienced any deviation from our plan,” said Sorin Preda, CEO & Founder at Global Vision. However, he pointed out that things could be going even better. Today’s context is complicated, with a health crisis that continues even after two years and with a military conflict happening very close to our borders. These have forced companies to make big changes. For example, e-commerce, a sector that grew rapidly during the pandemic, had rising demand for storage spaces, but it also had a lot of difficulties due to supply chain problems.

The same context has required changes in infrastructure, with a need for storage facilities located next to highways and railroads. One of these projects was developed by ILD Romania at Decea, near the centre of the country. “There is high demand for spaces in the Decea project due to the nature of the project. At Decea, halfway between Turda and Sebes, the two main nodes on the area’s highway system, ILD started a project featuring industrial and logistics halls. Our idea was to anchor a project in the centre of the country that would serve the region and create the opportunity of an industrial platform for complementary activities,” said Laurentiu-Catalin Hanu, Country Manager at ILD Romania.

“First of all, we saw a market that needed the services provided by the Decea intermodal terminal. Intermodal transport means an additional communication path for the region and it means connectivity for the transport of goods both to and from the port. It creates predictability, which is vital for logisticians. Retailers, in turn, are also looking at a smaller carbon footprint, which we achieve by using rail and electric trains,” Laurentiu Hanu added.

The quality of logistics services is very important since they are a part of the support offered to businesses. And in order to offer quality, logistics companies must overcome any challenge that may emerge, such as the workforce shortage. As pointed out by Gabriel Tomescu, CEO at BMF Group, a solution to this problem may be to import workers from Asia, but it is not simple as it takes a long time, and time is not something developers can spare. “In terms of support services, a project without high quality services cannot be successful, regardless of how big the investment is. The first six months of the year have been much better than I had predicted. We’re now facing many difficult situations; the geopolitical context has completely changed our supply chain. But we have managed to find solutions so far, as we must deliver good services to customers,” he concluded.

 

Realty Awards

The event ended with Business Review’s Readers’ Choice Realty Awards. By looking at the best performing companies in the Romanian real estate sector through this lens, based on the metrics generated by news articles, stories, analyses, profiles or interviews over the past 12 months, Business Review was able to identify the most remarkable accomplishments in the industry as well as the people behind them!

 

Speaker Quotes

”We think that deliveries this year will be half of those of last year, so we’re already seeing the effects of the freeze in permits. Construction is on a declining trend so significant that we cannot make a valid estimation for this year,” Vlad Damian, Head of the Investor Leasing Office, CBRE Romania

 

”I am proud to say that the 6,500-sqm leased area will host the country’s first dermatology and oncological surgery hospital in the private healthcare system. We’ve also managed to secure over 30,000 sqm in our office portfolio with new lease extensions,” Andreea Cotiga, Senior Leasing Manager, IMMOFINANZ Romania

 

”The decline in the stock of new projects and buildings is raising interest in existing projects. This is a good thing, because it will put more pressure on developers to improve the quality of their buildings and even refurbish the ones they own,” Emma Toma, Head of the Office Division, AFI Europe

 

”The permits situation used to be the elephant in the room, and now it’s even worse. Nothing is moving, we are just waiting, and we’re discussing with the authorities, but to no avail. Everything is at a standstill, and it is hurting the local economy,” Jan Demeyere, Co-Founder & Partner, Speedwell

 

”The first six months of the year were very promising, with approximately 500,000 sqm traded nationwide, representing 52 percent of the total demand traded in 2020, the record year for the industrial and logistics segment. We therefore expect 2022 to be a good year for transactions,” Daniela Gavril, Head of Research, CBRE Romania

 

”Many of our clients told us that they wanted to have green spaces in and around the offices. This is a consequence of the pandemic and the confinement that came with it. Green spaces, green features, and fun facilities that make people feel happy—these are the things our tenants are looking for,” Maria Tudorica, Commercial Real Estate Manager, Genesis Property

 

”In my opinion, the trend of remote and hybrid work is not taken seriously, but it is going to be a very important topic for the future. Companies will have representative offices as well as satellite offices for hybrid work. The repurposing of existing office buildings is also important,” Serban Patriciu, Head of the Romania Real Estate Practice, Noerr

 

”At Decea, halfway between Turda and Sebes, the two main nodes on the area’s highway system, ILD started a project featuring industrial and logistics halls. Our idea was to anchor a project in the centre of the country that would serve the region and create the opportunity of an industrial platform for complementary activities,” Laurentiu-Catalin Hanu, Country Manager, ILD Romania

 

”By the end of the year, I think we will be able to deliver almost 100,000 sqm which are now under construction. Some of it has already been delivered. From this point of view, we’ve not experienced any deviation from our plan,” Sorin Preda, CEO & Founder, Global Vision

 

”The first six months of the year have been much better than I had predicted. We’re now facing many difficult situations; the geopolitical context has completely changed our supply chain. But we have managed to find solutions so far, as we must deliver good services to customers,” Gabriel Tomescu, CEO, BMF Group

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