Income-producing properties are becoming an increasingly appreciated option for Romanian or foreign private investors who have previously been mainly active in the residential sector and who are now targeting “trophy” assets. Their focus is currently on all market segments – office, retail, industrial or hospitality, as the allocated budgets start from 2-3 million euros for a property, while they could also exceed 10-15 million euros, depending on the product, according to data from the Cushman & Wakefield Echinox real estate consulting company.
Premium and luxury residential assets have for a long time represented the only type of real estate investment which appealed to these investors due to the high yields they were able to generate. These returns have gradually compressed in the last few years, as prices rose more rapidly than rents, while the recent market developments have driven the emergence of more attractive assets.
Mihaela Pană, partner Residential Agency Cushman & Wakefield Echinox: “This category of buyers covers a market segment with limited exposure towards funds and institutional investors, as it does not fit their acquisition strategies. Therefore, whether we refer to entrepreneurs who have available liquidity resulting from other businesses, or to families who have already been investing in real estate, private investors are extremely active nowadays, as they have made acquisitions of more than 200 million euros in the last 3 years alone.”
These market players do not typically need external financing and they invest both in products which can generate immediate income and also in assets that, through further investment, would become income-producing ones as well. In this category there are retail spaces, a series of buildings which can be refurbished and then leased as offices, and also older office buildings located in ultra-central and central areas that can be upgraded to modern standards. Private investors either act individually or they join private investment funds in order to acquire more valuable products.
The local market offers a large number of such products that could attract private investors, especially in comparison with the number of assets available for sale to institutional investors. Therefore, we consider that we will see more transactions in the coming period, a fact which will undoubtedly contribute towards injecting extra liquidity in the property investment market.
The Cushman & Wakefield Echinox Capital Markets Department has in its portfolio properties that fit the criteria to become attractive targets for private investors, being mandated by an increasing number of such players to find the best investment opportunities.
Mihaela Pană, partner Residential Agency Cushman & Wakefield Echinox: “We have noticed a shift in the focus of private investors over time, their demands being increasingly diverse and having a strategy aimed at the diversification of their real estate portfolios. Moreover, our company has provided consultancy for transactions totaling almost 50 million euros during the last 2 years alone, the largest being a portfolio of retail spaces in Bucharest, worth around 20 million euros.”