The industrial, logistics and office sectors in Bucharest were the drivers of the real estate development market in the first nine months of the year, while the retail sector recorded the lowest growth rate in terms of projects delivered in this period of time.
According to the latest market report published by JLL, Bucharest City Report, over 215,000 sqm were delivered in the Romanian industrial market between January and September, of which 187,000 sqm only in Bucharest. The remaining 28,100 sqm are located in the central area of Romania. The total stock in Romania exceeded 2.9 million sqm at the end of September. By the end of the year, were announced projects totaling 120,500 sqm in Bucharest, Timisoara and Roman, with the modern stock in Romania exceeding the 3 million sqm.
On the office market, in the analyzed period, the developers delivered projects with a total area of 114,200 sqm in Bucharest.
The Center-West area benefited from the largest office area delivered this year, with 64,200 sqm in two projects, and by completing the first phase of New Times Square (33,000 sqm), the southern area is second receiver of the new stock in the first 9 months. The office stock in Bucharest increased to 2.5 million sqm. In the last quarter of this year a single large-scale project will be delivered in Bucharest, of 29,000 sqm, Globalworth Campus Phase 1, in the Dimitrie Pompeiu area. The first nine months of 2017 were very poor in deliveries of retail projects, with only 11,000 sqm, represented the expansion of Sun Plaza Shopping Center.
However, by the end of the year, the modern retail stock will grow by 60,000 square meters in three projects, all developed by NEPI. One of them is a new project, Ramnicu Valcea Mall (28,000 sqm), and two extensions of existing shopping centers in Galati and Sibiu. The stock of modern commercial spaces in Romania is estimated at 3.05 million sqm, of which 1.11 million sqm is in Bucharest.
The retail sector cumulated 60 percent of the investment volumes
On the property investment market, the retail sector was the star, cumulating 60 percent of the volume traded in the first nine months. The sector was driven by the acquisition of 50 percent of the retail and office portfolio of Iulius Group (Iulius Mall Cluj-Napoca, Iulius Mall Iasi, Iulius Mall Timisoara and Iulius Mall Suceava and three office buildings) by the South African Atterbury Group . This is the first investment of the South African fund in Romania.
The first 9 months of 2017 the property investment volume for Romania is estimated at €610 million, a value almost 44 percent higher than the one registered in the same period in 2016 (€423 million). The number of transactions increased, with the average deal size standing at approximately €25.3 million.
Deals involving office buildings reached close to 25 percent, the rest being represented by industrial and hotel assets.
The most notable office transaction was the acquisition of Coresi Business Park by Immochan from Ascenta Management for around €50 million. This marked the entrance on the office market of the investor/developer which previously was focusing on retail projects.
In industrial, the largest deal in the first half of the year was the acquisition Renault Warehouse Oarja by Globalworth, for approximately €42 million.
Prime office yields are at 7.5 percent, prime retail yields at 7.25 percent, while prime industrial yields are at 8.5 percent. Yields for office and retail are at the same level as 12 months ago, while industrial yields have compressed by 50 bps over the year. There is soft downward pressure on yields and in 2017 we might witness further compression in case prime assets will transact.
”According to investment plans announced by real estate developers, 2018 is announcing a richer year in new deliveries than 2017, especially in the office and retail sector. If all the announced projects are completed, the office stock in Bucharest will grow by over 300,000 sqm and the retail store in Romania will be richer by 200,000 sqm. In the industrial segment, the duration of construction is much lower than in the case of an office building or a shopping center, so that although around 120,000 sqm are announced, we estimate that in reality the new offer will be much higher,” commented Andrei Drosu, consultant Research Department JLL Romania.