August 09, 2016

Romanian real estate investment volumes increase 80 percent in the first half of 2016

Romanian real estate investment volumes increase 80 percent in the first half of 2016

Romanian real estate investment volumes in the first half of 2016 are estimated at €340 million, a value 80 percent higher than that registered in the same period of 2015 (€187 million).

The first six months of the year, however, witnessed a number of portfolio deals and owners strengthening their positions in projects.

Bucharest accounted for close to 48 percent of the total investment volume but we have also witnessed the first significant transaction outside of Bucharest, in Sibiu (29 percent of the total volume), since 2008. Market volumes were balanced between retail transactions (45 percent) and office (38 percent) while industrial accounted for close to 17 percent. It is worth mentioning that 8 percent of the total transaction volume is represented by a bank repossession of an office building.

The largest transaction registered in H1 2016 was the acquisition of Sibiu Shopping City by NEPI from ARGO for a total of €100 million, which represents the largest single asset deal outside of Bucharest since the economic crisis. The most notable office transaction was the consolidation of GTC’s position in City Gate through the acquisition of Bluehouse’s 40 percent stake.

Andrei Drosu, Consultant Research Department JLL Romania, commented: “The macro-economic forecast for Romania looks positive, with GDP growth still holding at healthy 4.2 percent even following the results of the UK referendum. This should make the country one of Europe’s top performers in 2016. Given the availability of quality product (especially offices) coming to the market in the next 12 months and the still significant yield spread between Romania on one side and Poland or the Czech Republic on the other, investors should take advantage of the current conditions and shift their attention to Romania and towards more core product within our market.”

The most active buyers in the first half of 2016 were NEPI (€124 million) and GTC (€80 million), each of the two investors concluding two transactions. GTC, one of the most experienced players, with a Romanian market presence since the late 1990s, is shifting its local strategy and after a 7 year hiatus is starting to acquire income producing assets.

Prime office yields are at 7.5 percent just 25bps away from retail yields (currently at 7.25 percent), while prime industrial yields are at 9.00 percent. Yields have compressed between 25 and 50 bps in the last 12 months, but no significant further compression is expected in the second half of 2016.

Silviana Badea, Head of Capital Markets JLL Romania, commented: “Brexit should have little short to medium term impact on the Romanian economy as long as the entire EU economy will not suffer any other unexpected shocks. Investors looking for distressed property in Romania will struggle to find any that can be worked out. Financing conditions having improved significantly over the past 18 months and increased appetites from banks for good product and serious sponsors is encouraging this flow of capital. It is quite true that the Brexit effect might take a few months to settle in before a clear trend will emerge.”

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