Romania’s real estate market will receive a strong infusion of new projects in 2016, as developers are expected to deliver over 700,000 sqm, reaching over EUR 800 million in investments, a study by JLL shows.
According to the study, office buildings will stay at the top of developers’ preferences, followed by retail and logistic.
Among the largest office projects programmed to be delivered in 2016 are Bucharest One (50,000 sqm GLA, a EUR 95 million investment by Globalworth), HBC 2&3 (45,700 sqm, by Atenor) and Oregon Park (45,000 sqm, a EUR 90 million investment by Portland Trust).
Pundits expect the strong wave of deliveries to exact pressure on office leasing prices, with the balance leaning towards tenants.
“After the office market vacancy rate declined to about 13.1 percent in 2015 and rents remained stable, the high level of new deliveries will result in a new increase in vacancy rates and consequently in a slightly decreasing trend for rents, given a constant demand in recent years,” said Marius Scuta, national director, head of office department and tenant representation JLL.
The retail sector will see the delivery of over 237,000 sqm, increasing the current stock, which is estimated at 2.8 million sqm, by about 10 percent. A majority of the deliveries are new projects and over half of them will be in Bucharest (125,000 sqm).
The study shows that prices will not be influenced by this space increase, as Romania’s consumption is expected to increase by 5 percent during the next two years and the investments are made in cities where the economic indicators sustain development.
Important retail projects to be delivered in 2016 include Park Lake Plaza Bucharest (a EUR 180 million investment by Sonae Sierra in a 67,000 sqm GLA) and Shopping City Timisoara (a EUR 81 million investment by NEPI in 55,700 sqm GLA).
The industrial stock, which is expected to reach 2 million by the end of the year, following a 15,000 sqm addition, will be increased by some 195,000 sqm in 2016. The largest investments in this sector will come from P3, with its 81,000 sqm P3 Logistic Park Bucharest, preleased by Carrefour (EUR 35 million), Immofinanz – Log Center Mogosoaia (40,000 sqm, EUR 32 million) and Tetarom – Tetarom 3 Cluj (36,000 sqm).
“Even if we see an increase in business development and logistics industrial projects, investors still remain cautious on the logistics so that most of the premises will be built under contract from pre-hire; most projects are extensions of existing major parks, which also shows an approach reserved for developers who prefer construction in phases. Regarding industrial production spaces, developers are choosing destinations according disponibiliatea investment and labor costs to companies that will rent spaces, “said Cristina Pop, Head of Industrial Agency JLL.
“Even if we see an increase in the development of logistics and industrial projects, investors still remain cautious in the logistics area so that most of the premises will be built under pre-lease contracts; most projects are extensions of existing major parks, which also shows a reserved approach for developers who prefer building in phases. Regarding industrial production spaces, developers are choosing destinations according to availability and labor costs tof companies that will rent spaces,” said Cristina Pop, head of industrial agency JLL.
The property investment volume registered in Q3 in Romania is estimated at approximately EUR 200 million. Several large transactions involving key office and industrial buildings are currently in advanced stages of negotiations. Therefore, the total investment volume in 2015 is expected to reach around EUR 800 million. The overall dynamic of the market during 2015 and the record deliveries programmed for next year show investors’ trust in the local market has returned, the study concludes.
JLL specializes in real estate investment management, posting a global turnover of USD 5.4 billion. The company is active in 230 branches in 80 countries, employing 58,000 worldwide. JLL has a portfolio of approximately 316 million sqm and a total investment of USD 118 billion from the sale, acquisition and financing globally in 2014. The Investment Management Division – LaSalle Investment Management – manages real estate assets worth USD 55.3 billion.