Romania’s property market waiting for core German pension funds

More international capital could be attracted by the Romanian real estate sector in the coming period, and existing players are already looking to expand their current projects. Let’s take a look at the retail segment.

The Bucharest retail stock consists in 15 shopping centers with a total GLA of around 700,000 sqm, 10 retail parks comprising a GLA of 391,000 sqm, and six commercial galleries 106,000 sqm. The average density of modern retail space reached 635 sqm per 1,000 inhabitants.

Recently, the developer of Collosseum Retail Park said it will invest EUR 30 million in the expansion of the project by 16,500 sqm mall, named Colosseum as well. But, the market is close to be saturated for large retail projects, and maybe we’ll see in the future only proximity malls, like Vulcan Value Center or Veranda in Obor, and extension and refurbishment of older malls.

In fact, Sun Plaza, opened in 2010, just finished the extension, AFI Cotroceni (opened in 2009), as well, was extended, NEPI Rockastle expands Promenada Mall in Northern Bucharest with 24,000 sqm. Even, for the retail colossus in Baneasa there are plans for 127,000 sqm extension until 2026 as part of a EUR 300 million investment.

There is movement on the market, not necessary for developing new malls, but for extend and refurbish older ones, to adapt to the new market, offer other things than simply stores, keep people inside, using food courts, cinemas, leisure.

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The new investors

”“We are tracking a number of core funds who are considering to enter the market, both European and Asian. These investors are looking for strong, long term income flows from blue chip tenants. These funds tend to focus on steady income flows over acquiring assets that need a high level of asset management. When such funds enter the market, we will see another level of maturity and substance,” Tim Wilkinson, Capital Markets partner for Cushman & Wakefield Echinox, told BR.

But the market is still working on itself, it has to stabilize and mature to become interesting for big investors. As Wilkinson said, investors are coming for strong and secure income from strong and secure assets.

The partner believes that the real estate market generally has to evolve to having more transactions in a year.

“It is important for the market to have more substance, meaning more transactions from which to analyse trends and to price the market. In recent years, a single transaction can often set a perceived market yield, which can create confusion because every asset and transaction is different. More transactions and more accurate data from deals, will only help to enhance the maturity of the market. A more mature market, means less exposure to sharp fluctuations in liquidity at any given moment in the property cycle. It will also create a better foundation for attracting more conservative funds,” explains Wilkinson.

Razvan Zamfir