Bucharestaa‚¬a„¢s real estate market sees tentative signs of recovery - Jones Lang LaSalle

Central and Eastern European real estate markets continue to be fragmented and to operate and different speeds, said John Duckworth, managing director of Jones Lang LaSalle, commenting on the company’s latest edition of quarterly market reports. Alongside Budapest and Bratislava, Bucharest is also witnessing tentative signs of recovery across investors, developers and occupiers, he thinks.

Romania should be able tor return to capital markets for financing following the upgrade of Romania’s sovereign rating by Fitch Ratings, reads Jones Lang LaSalle’s Bucharest report for the second quarter of this year.

For the office segment there are signs of market stabilization and prime rents have remained static for the past year. Although numerous new projects have been previously announced, only few are actually under construction. Leasing activity continues to pick up and additional large pre-leases should be signed by the end of 2011, according to the real estate adviser.

With no significant new openings in Romania ion the first semester, the modern retail stock in Bucharest stands at 570,000 sqm and it will grow by another 73,000 by yearend due to the opening of Colosseum Retail Park and the extension of Baneasa Shopping City. Countrywide, the retail stock it is estimated at 1.45 million sqm. Demand is mainly driven by foreign retailers who focus on the best performing shopping centers, say Jones Lang LaSalle representatives.

Four new shopping centers and two extensions should be completed this year. Retailers like H&M, Inditex and C&A continue to be among the most active players but new names should also enter the market, reads the report.

There is little demand on Bucharest’s primary residential market both in term of supply and demand, reads the report. The new housing supply is highly limited as developers continue to struggle to sell the already exiting projects. There were 2,735 dwellings in Bucharest, well below the city’s potential of the when looking at the housing shortage indicators. “On the other hand it was expected that the number of completions in 2010 will indicate much more the outcome of the crisis,” say LaSalle representatives arguing that the crisis is much more visible in the number of frozen projects as well as insolvencies and bankruptcies of local developers.

In the second quarter of 2011, Bucharest’s industrial stock remained relatively unchanged and reached approximately 1 million sqm. Countrywide, Belgian Alinso delivered a 17,800 sqm project in Ploiesti. “With some pre-lease contracts signed, we may witness new deliveries of industrial project along the A1 highway, closer to Pitesti, this year,” reads the report.

Looking at the hotels’ segment, Bucharest continues to be popular mostly with business travelers which made the capital’s hotel industry vulnerable to the companies’ budgetary cuts. In 2010 occupancy rates started to improve but hotelier further reduced rates by an estimated 10.7 percent. At year-to-date May 2011 occupancy went on 7.2 percent but operators had o reduce rates by 1.3 percent compared to first five months of 2010.

Simona Bazavan