Increasing activity on the residential market, says Crosspoint

The real estate market had a more dynamic start in 2015, compared to the activity recorded in previous years, mainly in terms of transactions with land and apartments in new residential buildings, shows a Crosspoint Investment Banking & Real Estate analysis.

Thus, the overall real estate market has bottomed–out as compared to the previous year and is set to enter a new growth cycle assuming sustained GDP growth and increasing FDI inflows (that increased by 55 percent in Q1 2015 as compared to Q1 2014) coupled with planned absorption of EU structural funds.

During 2014 the total value of transactions of institutional grade real estate traded in Romania exceeded EUR 700 million for the first time since 2008.

There will be at least the same sum in real estate transactions during 2015, Crosspoint forecasts.

The prime investment yield is currently at 7.5 – 8 percent for prime office investments and the average market yield for all office investments remains 8.5 percent. Yields are likely to remain constant during 2015 due to limited re-financing structures in the short term.

Crosspoint Investment Banking & Real Estate analysis points out an increased appetite from the investors, who are now more actively prospecting the market to invest in fully occupied buildings, well positioned and with a good tenants mix.

The supply and demand of both A & B Class office accommodation shall remain in relative equilibrium during 2015. During 2014, over 200.000 sqm of modern office accommodation was let and 2015 to date has already registered more than 60.000 sqm of take-up. As a result, the vacancy rate has decreased to about 13 percent – its lowest level since 2008. The current prime office rent is EUR 18.25 / sqm / month.

The total supply of modern office stock in Bucharest currently exceeds 2.2 million sqm. There will be approximately 180.000 sqm of new stock delivered in 2015. From 2016, the stock will begin to grow annually at more than 250.000 sqm. per annum based upon market information about recent building starts.

From the demand point of view, more than 80 percent of the future tenants are requesting above standard facilities: a flexible and efficient layout of the spaces, buildings with distinct architecture, with personality or built-to-suit options.

Regarding the retail segment, the current stock of international class shopping malls in Bucharest is 950.000 sqm. Q2 2015 will see the addition of the 110.000 sqm Mega Mall. Several other shopping malls including Victoria Centre, to be built in Bucurestii Noi and Titan are set to be delivered in the coming years.

At the present time vacancy rates in Bucharest shopping centers are negligible and rents are likely to begin to appreciate. Prime rents in Bucharest’s shopping centers are now EUR 60 / sqm / month.

In 2014, food retail was dominated by Mega Image and Profi, with more than 70 percent of the total number of store inaugurations and Crosspoint Investment Banking & Real Estate estimates the two chains to remain the most active players on this segment in the next 12 months.

On the residential segment, Crosspoint analysis points out a situation that was not even present on the local market in the period of 2006-2008: increasing trend of apartments contracting in new residential buildings, in stages even before the construction authorizations are released. In Q1 2015, the residential department of Crosspoint Real Estate has brokered packages of such apartments in total value of more than EUR 2.5 million, in Northern Bucharest – in projects whose start of construction will be announced in the upcoming period.

There is also observed a migration of developers with a certain notoriety in the Southern area (who previously developed projects in areas like Popesti Leordeni, Berceni, Militari) to the Northern area – where they purchased lands and started new developments. This is correlated with an increasing demand for apartments in the Northern area (Barbu Vacarescu, Aviatiei, Floreasca, etc.).

An effervescent situation is registered also on the land segment, where demand has accelerated in Q1 2015.

In the conditions of a very attractive offer, in terms of urban planning indicators but mostly of the asking price, a series of investors in the market have recently bought several land plots in a short period of time – as to ensure their development infrastructure in the following period.

This activity is mostly registered on the segment of properties that are feasible for office or residential developments, most of the investors / developers scouting for 800-2.000 sqm size land plots.

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