NOVEMBER 2011 - Commercial Market Report

Research
Department
November
Commercial
Market Report
2011
R
O
M
A
N
I
A
• Most of the economic macro indicators have started to recover in
Romania, showing signs of early growth. It is expected that the property
market will be positively influenced by the overall economic situation.
POLAND
UKRAINE
ROMANIA
SERBIA
BULGARIA
• The office market is characterized by reserved optimism; demand on
the office market is slowly recovering, triggering a potential response
from developers' part, more active compared with the 2010.
• The retail market is showing signs of early revival being once again
flooded with news about new developments. Many international
retailers, especially food discounters, are restarting their aggressive
development plans.
•
GREECE
The present advertising brochure
«Romanian Real Estate Market» has been issued by
EFG Eurobank Property Services S.A.
Editor in charge:
DIMITRA MARINI MRICS
Research Group:
DRAGOS DIACONU MRICS
Date
November 1, 2011
The logistics sector is depending mainly on the evolution of the exports
and internal consumption. The two indicators had divergent evolution;
consequently the logistics market was characterized by stability during
2011.
Disclaimer
This report has been issued for advertising purposes by EFG Eurobank Property Services S.A., a member of the EFG
Group, and may not be reproduced in any manner or provided to any other person. Each person that receives a copy by
acceptance thereof represents and agrees that it will not distribute or provide it to any other person. This report is not an
offer to buy or sell or a solicitation of an offer to buy or sell the real estate mentioned herein. EFG Eurobank Property
Services S.A. and others associated with it may have positions in, and may effect transactions in the real estate mentioned
herein, and may also provide or seek to provide services (investment banking, brokerage or other) for those companies.
The investments discussed in this report may be unsuitable for investors, depending on the specific investment objectives
and financial situation. The information contained herein has been obtained from sources believed to be reliable but it has
not been verified by EFG Eurobank Property Services S.A. The opinions expressed herein may not necessarily coincide
with those of any member of the EFG Group. No representation or warranty (express or implied) is made as to the
accuracy, completeness, correctness, timeliness or fairness of the information or opinions herein, all of which are subject
to change without notice. No responsibility or liability, whatsoever and howsoever arising is accepted in relation to the
contents hereof by EFG Eurobank Property Services S.A. or any of its directors, officers or employees. This is an
advertising report and is distributed free of charge.
Economy
O
verall the Romanian economy has stabilized in
2011, showing some signs of recovery. The export
activities have showed a slowdown compared with
the unexpected growth that was seen during 2010. In the
same time, construction works continued their downward
trend, while the recovery in the consumption (retail industry)
was only marginal. However, good signs were produced by
the agriculture and the industrial production overall, which
registered improvements every quarter in the last year.
After the ripple effects from the austerity program
adopted in the summer of 2010 have been absorb by the
market, the main indicators started to recover at an intense
pace. The registered inflation rate was in August 2011 of
only 4.25% y-o-y, after an increase of the prices with 2% for
the first 8 months of the year. High inflation rate were
registered in the service sector, while most of the food
products were on a decreasing trend. Under normal
conditions, in 2012, it is expected that the inflation rate to
increase even at a slower pace, possible making the target
of 3.5%.
Romanian National Institute of Statistics (INS)
announced that in first half of 2010 the construction sector
was still on a decreasing trend; however the differences are
much narrower in 2011 vs. 2010 compare with the previous
2 years. If in the first 6 months of 2010 a 16% decrease was
registered, while in the same period of 2011 the decrease
was of only of 2.2%. Some of the months were registering
even a slight increase; this was however mainly due to the
weak performances recorded with 12 months prior to the
reporting month. Such a situation was recorded in July 2011
when an increase of 12% was reported.
The exchange rate is on an increasing trend, mainly due
to the pressure from the exporters and the deteriorating
conditions of the European environment. However it is not
expected that the exchange rate over 4.3 RON for 1 Euro to
maintain for a long period of time, more likely it will vary
slightly below and above this threshold.
It is also expected that the industry will compensate the
decrease in demand from EU countries, which will affect the
export levels, mainly by expanding into the new markets in
Asia. Otherwise the effect on the economy might be severe in
long term, from a slowdown in the industrial and export levels.
During 2011 the biggest achievement, for Romania's
economic environment, was the return in the category of
investment grade countries. Currently Romania has a rating of
BBB- in the Fitch classification, since early July 2011, and a
stable outlook. In the view of the rating agency, the upgrade
reflects Romania's progress in recovering from the effects of the
financial crisis, including a return to economic growth, narrowing
the current-account deficit and reducing the budget deficit.
Romania: Key Macroeconomic Indicators
2009
2012f
-1.3
6.1
6.9
-4.1
13.1
1.7
6.5
7.0
-4.5
8.0
3.0
3.5
6.5
-5.0
6.5
current 3M
5.75
6.00
6M
5.50
12M
5.50
-7.1
Real GDP (yoy%)
5.6
CPI (annual average yoy%)
Unemployment Rate (% of labor force) 7.8
Current Account (%GDP)
-4.2
Exports (%yoy)
-5.3
Policy Rates
2010 2011f
Surce: Eurobank EFG Research & Forecasting Division
ROMANIA • November 2011
2
Property News
T
he current situation on the Romanian real estate
market can be characterized by reserved optimism.
Although an enthusiasm similar to the one recorded
during 2007-2008 is not present in the market, most of the
key players have already started to discuss new projects, or
revamping the old ones.
At the same time, the actual construction works are at a
minimum level, although players are much more optimistic
towards their plans compared with the 2009-2010 period.
The new reality is becoming the norm on the market and
everybody is willing to commit to lower profit margin as long
as the numbers are sustainable in the current conditions.
Important transactions involving unrelated players are
again on the market, such as the sale of Astoria Business
Centre (office building in central Bucharest) or the Auchan
Gallery in Pitesti. NEPI, an investment fund active on the
London AIM stock exchange, was for a second year in a row
the busiest buyer on the market, with Bluehouse,
investment fund based in Greece, in close second position.
Several other transactions involved share exchange or
takeover of an investor by its partner, such as the Adama
developer, fully owned by Immofinanz after a take-over
transaction. Counting even this type of transactions, the total
investment value is under 250 million euro for the first six
months of 2011, significantly lower than the amounts recorded
during 2007-2008, far behind the potential of the market.
However, the most impressive news is that the acquisition of
plots of land suitable for greenfield developments is again in top
transactions, a fact that is mirroring some of the optimism
characterizing the developers. Also it shows that some of the
sellers are willing to close a deal at the market price if the proper
due-diligence is undertaken and the buyer is committed
towards the transaction
Some of such transaction are in fact joint-venture with the
purpose of future development, however, other are proper
transaction such as the Chimopar property sold for 18 mil euro
+ VAT (51 Euro / sq m) or even plots of land sold outside of
Bucharest, such as the 5,000 sq m plot of land in Brasov that
was recently bought by NEPI.
ROMANIA • November 2011
3
Infrastructure
T
he central administration is committed to keep the
investment rolling in the infrastructure sector.
However, the current pace is rather slow and only few
major projects have been cleared in terms of use. During
2011, about 25 km of motorway have been delivered in
Constanta County and several road overpasses in
Bucharest or on the Ring Road of the capital city.
The largest urban developments in 2011 were done in
the entertainment sector. Three modern sport arenas have
been delivered in Cluj-Napoca, Ploiesti and Bucharest,
within 3 months period in the fall of 2011. The largest one –
National Arena in Bucharest has been a long awaited
project with a great impact not only in the area but also for
the entire city, in need of such a modern facility.
Several projects have been launched in execution during
2011, such as about 350 km on A1 Motorway, the final 35 km
on A2 Motorway, M5 Subway line in Bucharest and others.
However, the timing of deliveries of such infrastructure
projects was surpassed over and over again by successive
governments and the confidence in meeting the deadlines
is low at the moment.
Moreover, the absorption rate of EU funds, especially on
infrastructure, remains very low despite the overwhelming
pressure on the responsible departments. For instance from
the initial amount of ~4.5 billion euro for the current budget
execution (2007-2013), only about 2.5% were effectively
paid, the lowest amount in EU. The government is tackling
the issue with concern and a new Minister of European
Affairs was established in early September with the main
task of speeding the EU funds absorption rate.
ROMANIA • November 2011
4
SUBMARKETS
Office
Market
Due to the low supply levels during
2009-2010, the office market is more
stable at the moment. The demand for
quality space has increased slowly and
the vacancy rate is lower than in 2010.
However, overall the market is not a
balanced one and the supply is
significant higher than the demand. The
few new buildings delivered on the
market during 2011 have a satisfactory
occupancy rate both due to the top
facilities offered, but also due to the
financial incentives available for
committed tenants.
The rent levels are stable compared
with the same period of 2010,
especially in the areas with good
accessibility, both by public transport
and by individual vehicles.
As an effect of relatively low
transaction level in the investment
sector, the yields are not expected to
increase over a short period of time.
The tenants prefer to rent in existing
buildings and not pre-lease in off-plan
developments. Flexibility of the
contracts as well as the incentives
offered are key deciding points in
selecting the future space from the
tenant point of view.
As an effect of the slow economic
recovery and the lack of incentives, the
equilibrium of the market between the
demand and the supply is in fact close
to a standstill. The potential clients are
reluctant to make long term planning
usually needed in making a relocation
decision
BUCHAREST is still attracting most of
the investors in the office sector, despite
the fact that it remains, by far, the most
expensive office location in Romania.
The office sub-market definition is still
not completely defined in a universally
accepted manner. Bucharest has a main
submarket and several secondary ones.
Beside the well establish Central
Business District of Victoriei Sq. –
Charles de Gaulle Sq., several
secondary sub-markets have emerged
starting with 2007, such as Central area
(Unirii Sq. – Universitatii Sq.), north part
(Presei Libere Sq.) and Pipera area.
In addition a new submarket
emerged in the area of Aurel Vlaicu
metro station and Barbu Vacarescu
Blvd. is establishing itself distinct from
the Pipera submarket. However, proper
business buildings have been erected in
all parts of the city; some of them have
the highest standards in terms of
facilities although situated in secondary
locations.
Other large cities outside Bucharest
have established office submarkets,
such as: Brasov (Centrul Civic),
Timisoara (Cetate), Cluj-Napoca (1st
December 1918 Blvd – Dorobantilor
Blvd.) and Constanta (Mamaia Blvd.).
The secondary office markets are
represented by cities such as: Iasi,
Bacau, Craiova and Ploiesti, their
evolution depending on national and
regional economy, as well as the
exports' trend.
Most of the purposed built office
developments are concentrated in
Bucharest; the other local submarkets have few new and modern
office buildings. Office sub-markets
from major Romanian cities are
offering lower rental levels (up to
15– 25% on average), lower
maintenance fees (between 15%
and 25%), as well as parking places
at lower costs compared to the
capital city. However there are very
few developments which rise to the
level of quality and technical
standards required by their class.
Some tenants have been
recorded to relocate call centre and
back offices in lower cost
submarkets such as Cluj Napoca
and Timisoara. Both submarkets
provide the advantage of cheaper
and qualified labor force and lower
running costs; however, such
movements are far from becoming a
trend.
ROMANIA • November 2011
5
Office Market
PROPERTY NEWS
THE MAJOR OFFICE schemes
delivered in the past 12 months sums
up to circa 150,000 sq m, however, the
figure was higher due to rounded by
smaller buildings.
Since the number of new office
building delivered on the market during
the second half of 2010 and the first half
of 2011 was considerable lower
compared with the previous 12 months,
the vacancy rate was also influenced in
a positive way. As an average the
current vacancy rate for Bucharest
market is ~17%, slightly lower than the
all time record of 20% reached in 2010.
However, between several submarkets the difference in vacancy rate
is still high. For instance some of the
new office building delivered on the
market starting with 2008, most of them
outside the CBD, still have 50%
vacancy rate or higher.
According to the developers' plans,
most of the tenant contracts will expire
during 2013-2014, making 2011 and
early 2012 the perfect time to start
raising new developments. Some of the
developers with long track records on
the Romanian market have announced
the initial works on new projects.
Delivered major schemes in H2 2010 – H1 2011 in Bucharest
Property
Size (sq m)
Location
Delivery
65,000
North
2010
8,800
Center North
2010
Sun Offices
10,000
South
2010
Platinum Business &
Convention Center
37,000
North
2011
Swan Office Park
28,700
North
2011
Petrom City
Polona 68
Main Pipeline Office Projects in Bucharest (in construction)
Rentable
area (sq m)
Location
Expected
Delivery
Crystal Tower
18,000
CBD
2011
UniCredit BC
15,000
North
2012
AFI Business 1
11,000
West
2012
Hermes BC 1
17,000
North
2012
Sky Tower
37,100
North
2012
Property
PROJECT UNDER
CONSTRUCTION
UNLIKE 2011 when announcement of
new office buildings were rather rare, in
2011 developers are showing sings of
caution optimism, by announcing
several large projects in Bucharest.
Some of the projects are in fact delayed
ones form 2009-2010, for which the
construction works have currently
started, such as Sky Tower developed
by Raiffeisen Evolution.
Other projects are brand new
d ev e l o p m e n t s , fo r w h i c h t h e
construction works are expected to
start in the next months, such as Ana
Tower, developed by a joint venture of
GTC and Ana Group, or the Floreasca
Park, the next project of an active
developer – Portland Trust.
ROMANIA • November 2011
6
Office Market
DEMAND - SUPPLY
THE DEMAND IS acknowledged to be
affected by poor economic conditions
and mixed news from European Union
countries and United States, factors
that negatively influenced the evolution
of the market starting with 2008-2009.
Bucharest is leading the market also
in the demand for office space category.
Most of the tenants either newly
entered on the market or in need of
relocating the activity are primarily
interested in Bucharest office market.
Pre-leasing activity is continuing to
be at a low level, due to the uncertainty
and unpredictability of the economy on
medium term, however compared with
2010 there is a significant
improvement. Although there still is an
important market share made of
renewal of existing contracts, the
majority of contracts are again involving
relocation of tenants.
Some of the tenants are relocating
to new office space, sometimes with
larger areas. However, there are not
many new companies entering the
Romanian market or launching new
lines of business in Bucharest. Small
and medium enterprises are preferring
villa spaces compared with the modern
office buildings more so then in the
previous 2-3 years; where they can find
l ow e r c o s t s a n d i n d e p e n d e n t
accommodation.
The trend for bank headquarters is
to move towards a northern area,
mostly in Aurel Vlaicu – Barbu
Vacarescu triangle, as opposed to the
former downtown location. In the last 24
months, Volksbank, Bancpost, Banca
Romaneasca, Garanti Bank, added to
the already present UniCredit and
Banco Italo-Romena, all of them within
1-1.5 km away from each other.
Raiffeisen Bank is due to follow as soon
as the Sky Tower will be delivered on
the market. The banking sector is
currently challenging an area
dominated so far by tenants with
activities in the IT & Telecommunication
sector.
O f f i c e bu i l d i n g s l o c a t e d i n
secondary sub-markets, and especially
the ones delivered on the market during
2011 are suffering from lack of demand.
Main office leasing transaction in Bucharest in H2 2010 - H1 2011
Size (sq m)
Building
Location
PremiQa Med (pre-lease)
27,500
North Point
North
UniCredit Business
Partner (pre-lease)
10,000
Novo Park G
North
Volksbank
8,000
Centre North
Realitatea Media
7,000
Nusco Tower
Platinum Business &
Convection Center
eMag & Flanco
Intel
Med-life
Honeywell
S&T (renewal)
4,000
3,500
3,000
Swan Business Park
BOC Tower
Rompetrol HQ
North
North
CBD
3,000
3,000
BOC Tower
America House
North
CBD
The Group
E.on
Tuca, Zbarcea & asoc
(renewal)
2,800
2,600
2,200
The Group HQ
City Gate
America House
CBD
Centre North
CBD
Pfizer
2,000
Platinum Business &
Convection Center
North
Alcatel-Lucent
2,000
City Gate
Centre North
Tenant
The developers are trying to
attract potential clients by fulfilling the
same high standards expected from
A-class buildings, while at the same
time, they offer incentives. However
the vacancy rate is considerably
higher than the average one for the
market, for some buildings lying close
to 50%. The lack of demand is
influenced mainly by lack of transport
facilities and the limited infrastructure
North
is affecting the access overall.
The vacancy rate in the CBD is below
10%, considerable lower than the market
average. The owners of office building
located in the prime sub-market of
Bucharest are benefiting from the good
and varied means of transportation
available as well as from the tenants
looking for landmark buildings for their
main Romanian headquarter.
ROMANIA • November 2011
7
Office Market
PRICES – RENTS – YIELDS
DURING 2011, the rent trend can be
considered relatively stable for most of
the office buildings. Although, in the
same time, the incentives offered to the
new tenants are at the same level or
higher for periphery locations versus
the levels reached in 2010.
Even if the new office spaces have
lower rent levels, in order to attract
potential clients, relatively high
relocation costs are forcing some
companies to renegotiate an extension
in the same space at a lower rent.
However, other are interested in
occupying larger surfaces than the
current ones, with the expectation of an
increase in the economic activity and
consequently are in search of new
spaces.
Some of the office buildings
delivered on the market in late 2010,
have only recently started to find
tenants and signed contracts. In the
same time, the buildings located in poor
location still maintain a high vacancy
rate.
Achieved rents on the prime
submarket of Bucharest (CBD) are on a
stable trend ranging between €17 and
€18/sq m/month in most office buildings,
although for some asking rents range is
even above €20/sq m/month. In most
secondary locations a similar stable
trend of the rent is noticeable. While
secondary markets from Bucharest are
g e n e r a l l y a c h i e v i n g €1 0 t o
€12/sqm/month, prime cities outside the
capital with €7-€12/sqm/month and
secondary submarkets have rental
levels between €5 and €10/sqm/month,
depending on the quality and location
of the office buildings.
Investment transactions of office
buildings are rare; consequently the
market yield is based mainly on
estimations, and less on the actual
City
Yields variation
Bucharest office market
12%
Prime market
8%
Secondary market
4%
0%
2008
2009
2010
2011e
achieved rates. The estimated yields
for prime office buildings in CBD of
Bucharest are at the same levels with
the one recorded with 12 months prior,
between 8.50% and 9.50%. The yield
for secondary markets is estimated to
be with 1-1.50% higher than in the
prime market, also a stable trend
compared with 2010.
An important factor distorting the
market is also represented by the bank
behavior towards non-perfor ming
loans (NPL). Most of the local bank
subsidiaries are reluctant in tackling
directly the issues related to NPL.
Usually, the preferred solution is to
slowly releasing the assets to the
market by means of several controlled
Yields variation
Year Prime market
2008
6.25%
2009
2010
2011e
2012f
7.00%
9.00%
8.50%
8.50%
2012f
transactions prior to be offered on the
open market. Most of such assets have
issues regarding the quality of the
building itself or tenants with cash flow
problems. Such a situation is not
encounter for reliable assets, with a
consolidate income, that are not
experiencing issues related to the
cash-flow.
TRENDS – FORECASTS
THERE ARE FEW projects under
construction, therefore it is expected
that the supply of quality office space
will decrease during the next 2 years.
However it is hard to estimate that the
rent level will increase significantly
without an economic improvement.
The demand is driven by the overall
economic situation and consequently it
Secondary market is unlikely that it will exercise a
significant pressure on the rental level
8.00%
trend. However it is likely that the
9.00%
vacancy rate will decrease constantly
10.50%
albeit slowly in the next 12 months.
10.50%
10.50%
Prime rent Trend
(Euro/sq m) 12M
Bucharest - CBD
Bucharest - secondary market
Timisoara
Constanta
Cluj - Napoca
Brasov
Iasi
Bacau
Craiova
Ploiesti
17 - 18
10 - 12
8 - 12
8 - 12
8 - 12
7-9
7-9
5 - 10
5 - 10
5 - 10
ROMANIA • November 2011
8
Key existing Shopping Malls in Romania (openings H2 2010 - H1 2011)
Project name
Location/city Rentable Area
(sq m)
30,000
Baia Mare
Gold Plaza
Severin Shopping Centre
Drobeta Turnu
Severin
European Park Braila(extension)
Galleria Arad
Braila
Arad
Opening
Year
2010
20,000
7,000
33,000
2010
2011
2011
SHOPPING MALLS
Retail
Market
The retail market is showing signs of
revival. After 12 months of few openings
and even fewer on-going projects, mid2011 is witnessing a new wave of
announced projects and an increase in
the construction activity on the
postponed projects.
Good signs include the opening of a
shopping mall in late 2011, which was a
case of bankruptcy 12 months before.
Other retail scheme in a precarious
financial condition will probably find a
new owner after the creditors agreed to
a lower selling price than initially
estimated.
Although the consumption is not
increasing compared with 2010, some
of the retailers have decided to expand
in order to take advantage of the
bottoming land prices, as well as the
construction costs, which have
decreased significantly as well.
With regards to new openings, only the
international retailers have the financial
power to expand in a weak economic
situation, now taking advantage of the
distressed landlords.
MOST OF THE the shopping centers
have managed to balance their accounts
after the important difficulties encounter
during 2009-2010. Replacing some of
the weak tenants, lowering rents or
offering incentives for others, overall the
shopping centres have managed to keep
a vacancy rate relatively low and to have
a consistent mix of tenants. Some of the
owners of shopping centre have also
announcing expansion plans,
diversification of portfolio or even brand
new schemes, picturing a situation hard
to imagine during summer-fall of 2010.
Moreover the closed or bankrupt
retail schemes in 2010 are experience a
new revival. Tiago Mall, re-branded as
Oradea Shopping City, is due to be
opened in early 2012, while City Mall will
probably have a second change after the
initial owner was forced to relinquish the
assets to its creditors and is expecting
public auction until the end of 2011.
There still are issues with some of the
shopping centres with poor choice of
location. For instance, Armonia Braila is
still closed after less than 1 year of
a c t i v i t y, w h i l e G ra n d A r e n a i s
experiencing major problems with its
tenants and has a vacancy rate around
50%, to mention some of the retail
schemes confronting with weak
performances.
Major Retail Projects Pipeline in Romania
Project name
Location Surface (sq m) Developer
48,000
Immofinanz
Constanta
Maritimo
Baneasa Shopping
Bucharest
City (extension)
Oradea Shopping City Oradea
European Retail Park Botosani
Electroputere Parc
Craiova
ERA Oradea
(extension)
Colosseum
Palas
Corall Constanta
15,000
Baneasa Investment
30,000
15,000
Baneasa Group
71,000
K&S Developments
Oradea
25,000
Argo Real Estate
Bucharest
Iasi
Constanta
53,000
48,000
40,000
Nova Imobiliare
Iulius Group
Cora Development
Belrom
ROMANIA • November 2011
9
Retail Market
STREET RETAIL
USUALLY high street retail is
concentrated in downtown areas of the
major cities. However the Romanian
cities have the particularity of few retail
spaces located in boroughs with high
density of apartments blocks. As a
consequence, despite the hard
economic conditions, the high street
spaces located in high pedestrian
traffic areas, usually around major
connection points of public
transpor tation (metro station in
Bucharest) are still in demand and
record low vacancy rate.
Another deciding factor in the low
availability of spaces in such locations
was the willingness of owners in
lowering the rent levels early in the
economic downturn. A completely
different situation is noticed in the areas
with low footfall traffic.
The main high street areas are
continuing to be the traditional ones
both in Bucharest as well as in major
cities in Romania. For Bucharest Victoriei St., while for Constanta –
Stefan cel Mare, Piata Unirii in
Timisoara, Republicii in Brasov and the
St. Mihail Cathedral Area represent the
central retail zone in Cluj Napoca.
The high street retail is lacking the
presence of major brands, since most
of them prefer the safe situation of
being active in shopping malls and
avoid the ambiguous situation of street
retail for which there are not reliable
predictability models.
It is also worth noticing that, after the
severe increase of the vacancy rates for
the main high-street arteries, Magheru
and Victoriei during 2009-2010, the
o c c u p a n c y h a s p i cke d u p t o
significantly better levels.
However, starting with 2011 this
situation can change since Zara, in a
daring move decided to open its second
high street space in Romania renting an
o u t l e t i n S i b i u , fo l l ow i n g t h e
inauguration of the one in Pitesti done
in the booming years. Zara is the first
international fashion brand with
presence in Romania to take such an
action, probably other retails, among
them H&M or C&A, will follow in a short
while.
In a different situation are the bank
networks, which try to limit the
operational cost by closing the nonperfor ming branches. The
pharmaceutical retail networks on the
other hand are also showing signs of
revival with a new wave of openings
during 2011.
BIG BOX – OUTLET–
HYPERMARKETS
DURING 2009-2010 most of the large
hypermarket network had a limited
expansion, opening few new stores.
Except for Kaufland, the other
operators were concern with the drop
in purchase power and the lack of
consumption from the clients' part.
However, the plans for 2011-2012 are
different and all major operators are
announcing several openings per year.
There are no new brands on the
hypermarket sector, however older
networks with frozen expansion for
several years, now are anxious to reenter the race to win market share. For
instance Cora, did not opened outlets
for 3 years in Romania and had only 1
opening in 2010, while in 2011 they
already have 2 openings, another one
close to inauguration date and several
in construction stage with opening
announced during 2012.
The large hypermarket operators
prefer to open outlets in major cities.
After a slowdown of the expansion in
Bucharest, during 2007-2008, as an
effect of the prices for land considered
too high for a big box development, the
capital city is once again interesting for
retail developers. Cities with over
200,000 inhabitants are maintaining
the attractiveness for retailers. For the
first time, the same operator is opening
two stores in the same city outside the
capital; albeit the second store is
medium size one – around 5,000 sq m,
compare to the normal size of 10,000
sq m. Beside the major cities, the
hypermarkets also recently grow an
interested in smaller cities, with a
number of inhabits between 100,000
and 200,000.
A fierce competition is in the sector
of do-it-yourself networks. Beside the
older chains of Praktiker and
Bricostore, some new players have
entered the market. The newest entry is
Leroy Merlin with an announced
opening in Chitila area of Bucharest.
They choose to open a flagship store
(over 17,000 sq m) in the capital city, in
spite of the fact that all major networks
from Romania, six in total, are already
present in the city.
The faster growth was registered by
Dedeman, a local owned network,
which managed to become the new
number 1 in the industry during 2010,
mainly due to the large network they
own. On the other hand, Obi chose a
completely different strategy
announcing that during 2011 they will
not open any new store in Romania.
ROMANIA • November 2011
10
Retail Market
Big Box projects Pipeline
Retailer
Dedeman
Cora Galleria
Cora
Auchan Coresi
Auchan Pallady
Carrefour Colosseum
Cora Alexandriei
Leroy Merlin
Kaufland Mihai Bravu
Carrefour Botosani
Auchan Maritimo
Baumax
Cora City Park
Auchan
Carrefour Deva
Auchan Palas
Baumax
Cora
Dedeman
Location
Alba Iulia
Arad
Bacau
Brasov
Bucharest
Bucharest
Bucharest
Bucharest
Bucharest
Botosani
Constanta
Constanta
Constanta
Craiova
Deva
Iasi
Pitesti
Slobozia
Tulcea
Surface (sq m)
9,000
9,000
9,000
10,500
20,000
16,000
10,000
15,000
5,000
9,500
12,000
10,000
5,000
10,000
8,000
5,000
15,000
8,000
10,500
DEMAND - SUPPLY
UNLIKE 2010, the demand for good
retail space is growing. Although there
is no real demand for retail space
placed in areas with low footfall traffic,
the retail units located on streets with
high traffic, either located on prime
areas or secondary ones are in high
demand and with low vacancy rate.
The demand is generated either by
convenience store or by fashion outlets.
The locally owned Mic.ro brand is
expanding rapidly and it already has
more than 600 stores, most of them in
B u c h a r e s t . A l t h o u g h t h ey a r e
requesting only small surfaces of up to
100 sq m, they are targeting all areas of
Bucharest, mainly residential ones.
The fashion brands had different
approach. The first comer on the
market, C&A developed several stores
during the booming years, and reduced
their expansion plans. Recently H&M
also entered the market and expanded
aggressively, triggering a new wave of
expansion for C&A starting with mid2011. Zara entered in the market also in
the booming years but they kept a slow
albeit steady expanding pace, and
recently decided to enter the high
street sector as well.
Other retailers are also interested
in a steady expansion, such as New
Yorker, Deichmann, Intersport, New
Look, no matter if they are directly
operated or through a franchise
system. Most of them continue to
concentrate on the shopping
galleries, disregarding the high street
sector for the moment.
The sector with the highest pace
of expansion was however the
discount food operators. Three
brands have surpassed a network
size of 100 units in Romania: Lidl
(after the acquisition of Plus), Penny
Market and Profi. In total there are
over 550 medium size discount stores
in Romania, most of them being
opened after 2008, compared with
the period until 2008. And the
expansion plans are going to
continue at a high rate, the discount
networks targeting cities of over
30,000 inhabitants including
Bucharest, with outlets of up to 2,000 sq m.
Some supermarket operators also
announced important plans of extending
the network. The most aggressive ones
are Mega Image and Carrefour Express,
clearly establishing the role of food units in
the local demand of retail space.
ROMANIA • November 2011
11
Retail Market
PRICE – RENTS-YIELDS
Main retail Secondary
street retail locations
Bucharest
Cluj-Napoca
Iasi
Timisoara
Constanta
Brasov
€€50 - 70
€€25 - 35
€€20 - 25
€€25 - 30
€€25 - 35
€€25 - 35
Malls Hypermarkets
€€25 - 40
€€15 - 25
€€10 - 20
€€15 - 20
€€15 - 25
€€10 - 20
ON AVERAGE, the high street rent
level was stable during 2011 compared
with 2010. However, there are
important variation, based on the
location, mix of tenants in the area and
the willingness of the owners to
negotiate. Good location with high
footfall traffic and high visibility were the
most stable ones in terms of rent level,
for some isolated spaces even a slight
increase in the asking rent per sq m can
be noticed.
In the commercial centres the rent
can also be considered to have a stable
trend; however, the owners are more
proactive in assessing each situation a
tenant may experience. There are o
longer situations in which the tenant
may linger on in a shopping mall without
paying the rent on the basis of poor
income revenues. In 2011, landlords
are paying close attention to the cash
flow of the tenants, and at the first sign
of distress they will either help by
offering rent free period or evicted the
troubling tenant.
High-street units are not easily sold.
The sellers are expecting higher prices
than most of the buyers are willing to
offer. Retail units, small in surface and
centrally located are the main target for
an investor, generating a higher selling
price per sq m compared with similar
units situated in secondary locations
and suffering by lower footfall traffic and
therefore by less demand.
€€35 -60
€€25 - 30
€€25 - 30
€€25 - 30
€€25 - 35
€€25 - 30
€ €8 - 9
€ €7 - 8
€ €7 - 8
€€7 - 8
€ €7 - 8
€ €7 - 8
DIY
Furniture
€€8 - 10 €€9 - 12
€€7
€€7
€€7
€€7
€€7
€€7
€€7
€€7
€€7
€€7
Their hope is to catch the first wave of
increase consumption which will
probably start in late 2012. However the
developers are flexible, easy to adapt to
the demand of anchor tenants,
meaning that they can either accelerate
the construction phase or delay it.
After the tenants with large
networks have concentrated in major
cities outside Bucharest, in the next
phase most of them will need to return
Main retail Secondary
street retail locations
Bucharest
to Bucharest, considered unfeasible
during the boom period.
Outside the capital city, it can be
noticed that Craiova will have the first
major retail development, the last city
with more than 200,000 to do so. After
the announced openings will be ready
in Oradea and Arad, the two cities will
have very competitive markets, similar
with the one in Suceava
Malls Hypermarkets
DIY
Furniture
9-10%
10-11%
8.50-10%
9-11%
10%
10%
Cluj-Napoca 10-11%
10-12%
9-10%
9-11%
10-11%
10-11%
Iasi
10-12%
10-12%
9-10%
9-11%
10-11%
10-11%
Timisoara
10-11%
10-12%
9-10%
9-11%
10-11%
10-11%
Constanta
10-11%
10-12%
9-10%
9-11%
10-11%
10-11%
TRENDS – FORECASTS
ALTHOUGH THE 2011 did not had a
high degree of consumption level,
some developers are caution optimistic
and started to developed new projects.
ROMANIA • November 2011
12
Logistics
Market
2010 it was a year of stability for the
logistics market. However, the new
situation, with the industrial production
and export showing mixed signs,
started to affect the logistics market as
well. This situation is probably only for
short period of time, mainly depending
on the GDP evolution of the EU
countries, the main trading partners of
Romania.
The development of large logistics
facilities in Romania was hampered by
the lack of industrial products. The
heavy industry was practically closedown in the turmoil of the 1990's and
only partially re-opened a decade later.
Some investments in the new
technologies were made. However, it
was in 2007 that the industry output
was equal with the one in 1989.
Consequently the logistics sector
experienced a difficult start.
Currently, despite the developments
of 2007-2009, the sector is still
undeveloped compared with the needs
of a 22 mil. inhabitants of Romania. In
the last two years, the market had
mixed feelings concerning the further
development of the sector. The few
developers active in the market had
announced satisfactory results and had
capitalized on the low competition of
new supply.
SUBMARKETS
MAIN MARKET of logistics in Bucharest
is developed around the A1 Motorway
Bucharest – Pitesti, part of the future
main connection with Western part of EU.
Secondary markets are also linked with
transport hubs, mainly Motorways or
future section of Motorways, such as
Ploiesti West, Constanta Ring Road,
Timisoara West, Brasov West, ClujNapoca East.
The prime market still has an
important role to play on the logistics
sector, Bucharest totaling more than
50% of the overall market. The
concentration of logistics spaces has two
main reasons: Bucharest gathers a
higher level of wealth compared with the
national average, while the logistics
serve mainly retail sector as opposed to
the production one and consequently it
needs to be close to the areas with high
density of population.
ROMANIA • November 2011
13
Logistics Market
PROPERTY NEWS
PLOIESTI WEST PARK, developed by
Alinso Group Belgium, is one of the
fastest growing logistics project in
Romania. During the summer, they
opened 18,000 sq m of new
warehouse, expanding the entire
project to almost 70,000 sq m and they
intend to continue the development.
The entire project will expand on 250 ha
of land.
A similar development, also of
18,000 sq m, was delivered in
Dambovita County by FM Logistic, a
developer and logistic operator also
very active in the last 2-3 years.
Other major developers of logistic
spaces are also interested on
Romanian market. For instance
Warehouses DePauw, also a Belgian
developer was very active in land
acquisition during 2008-2009.
However, until now they decided not to
build speculative warehouses. In late
2010, they manage to secure a tenant
in Pitesti project and consequently
announced on the market the start of
their first project in Romania during
2011.
situation is more balanced. However, it is
to be expected that the lack of supply
during 2011-2012 will be reflected on
the market.
Overall in 2010, the lease surfaces
were around 100,000 sq m, a similar
surface with the previous year,
considerable lower compared with
2008. In the second half of the year
several companies rented over 5,000
sqm each, such as Röchling, Geodis
Calberson or Terwa in various projects
all over the country. Yazaki expanded to
Caracal in order to cope with Ford
request, its main client in the area. The
largest contract, over 24,000 sq m, was
made by Valeo in Timisoara, occupying
a built-to-suit logistic centre constructed
by a local developer.
In 2011, the demand was in line with
the previous two years. However, the
supply of new spaces decreased,
triggering a lower vacancy rate. Overall
the vacancy rate is still at a level above
10%. Most of the contracts were in fact
renewal of expired contracts, such as
Tibbett Logistics.
DEMAND - SUPPLY
MOST OF THE developers continue
the policy of building build-to-suit
warehouses, only few of them are also
interested in speculative projects. This
effect is a consequence of the lack of
demand during 2010. In 2011, the
ROMANIA • November 2011
14
Logistics Market
PRICE – RENTS – YIELDS
OVERALL THE RENTS for logistic
spaces are on a stable trend,
comparable in value with the levels of
2010. In Bucharest most of the prime
location are 4 Euro/ sq m / month and
slightly higher, including the incentives
offer as part of the package, while the
secondary locations are slightly less
than 4 euro / sq m/ month.
The selling prices for logistics and
light industrial properties are also
comparable with the levels recorded in
2010. Modifications in the yields' levels
in the previous 12 months are not
noticeable.
TRENDS – FORECASTS
MOST OF THE expected demand will
be generated in fact by the current
tenants looking to renegotiate the
existing contracts, since many of them
were made for a period of 4-5 years on
projects delivered in 2007-2008.
However, some of the tenants will be
looking to relocate into other projects.
Since the expected supply will be lower
than the expected demand, it can be
assumed that some pressure will be
noticed in order to increase the rent
level.
A new logistic hub will probably
develop in the East part of Craiova as
the needs of Ford Factory for suppliers
will increase as a consequence of the
new production rate.
Location
Rent level
Euro/sq m
Sale price
for industrial land
Euro/sq m
Bucharest
€€3.25 – 4.00
20-35€€
10 – 11%
Constanta
€€3.50 - 4.00
25-50€€
10 – 12%
Brasov
€€3.50 - 4.00
15-30€€
10 – 12%
Timisoara
€€3.50 - 4.00
25-35€€
10 – 12%
Cluj-Napoca
€€3.75 - 4.25
20-35€€
10 – 12%
Yield %
ROMANIA • November 2011
15
Contact Information
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EFG Eurobank Property Services S.A.
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ROMANIA • November 2011
16