May 11, 2016

Romanian real estate investment volumes hit €180 million in Q1 2016

Romanian real estate investment volumes hit €180 million in Q1 2016

The property investment volume in the first quarter of 2016 is estimated at approximately €180 million, a very strong increase when compared to the very weak Q1 2015, when only two transactions of approximately €20 million were concluded.

The first three months of the year, however, witnessed a number of share deals, with owners securing their parts in different projects and a large number of portfolio transactions.

Bucharest accounted for close to 70 percent of the total investment volume. Market volumes were dominated by office transactions (52 percent), followed by industrial (32 percent) while retail accounted for close to 16 percent.

The largest buyer in Q1 2016 was GTC, which after a long period of inactivity, acquired 50 percent of City Gate, the 2 office towers in the north of Bucharest, from Greek developer Bluehouse, remaining the sole owner of the project.

In industrial, Logicor, Blackstone’s European platform, entered the local market by buying the Immofinanz Pan-European portfolio which, in Romania, included 4 existing industrial / logistic parks and several land plots in various cities around the country.

More core investors looking to secure properties with stable, long term income, in a steadily growing economy are coming to Romania as they see the opportunity to improve their returns.

With financing conditions having improved significantly over the past 12 months and increased appetite from banks for good product and serious sponsors, it is encouraging this flow of capital. We also see interest from foreign banks looking to finance in Romania again, which will put further pressure on margins offered locally.

Prospects for 2016 are positive given the projected economic growth of the country, one of the highest in Europe, but also the availability of quality product and the still significant yield spread between Romania and Poland or the Czech Republic.

Prime retail yields decreased by 25 bps over the quarter to 7.25 percent. Prime office yields are at 7.50 percent while for industrial are at 9.00 percent. Yields have compressed between 25 and 50 bps over the year, but no significant further compression is expected for the rest of 2016.

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