Romanian real estate

Romanian real estate investment drops 29% in H1 2021 yet prospects remain promising

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The total value of real estate investment in Romania stood at 290 million euro in the first six months of 2021 (H1 2021), a drop of 29% compared to 409 million euro in same period a year ago, Colliers revealed in a new report. The transactions in the office space segment represented nearly 66% of volumes.

Colliers believe that Romania’s market fundamentals remain strong, with healthy transaction levels and confidence in the banks’ ability to increase lending to the economy this year, encouraging existing or new potential interested investors to prospect the Southeastern European country.

Overall, H1 2021 was marked by office transactions involving Class A office buildings in prominent locations in Bucharest, with a predominantly international tenant mix. Three office deals in Bucharest accounted for half of the transaction value in H1: the sale of the Campus 6.2 and 6.3 office buildings located in the Center-West area of the capital, by Sweden’s Skanska to Austria’s S IMMO for 97 million euro, the acquisition of the Light One office building by Austrian investor Uniqua Real Estate for 54 million euro and Vienna-based Immofinanz’s purchase of the Bucharest Financial Plaza for EUR 36 mln.

Campus 6.2 and 6.3 office buildings have a leasable area of nearly 38,000 square meters and 463 parking spaces. The Light One office building building has a gross leasable area of 21,653
Bucharest Financial Plaza has a gross leasable area of 26,300 sq m GLA. The property was completed in 1998 and refurbished in 2012.

After the end of the first semester, Adventum Group, a Malta-based fund manager focused on CEE Real Estate Investments, took over Hermes Business Campus from Belgian developer Atenor for about EUR 150 mln, the largest transaction registered so far this year.

Meanwhile, investment in the industrial sector has accounted for 24% of total volume recorded in the period under review, with significant transactions in regional cities. The remaining 10% was directed towards the retail and the hotel sector, marking a return of interest in these markets.

“2021 may look like a somewhat soft year in terms of overall volumes compared to some of the previous years, but as they say, one must not judge a book by its cover and a period solely by the deals closed. In terms of investor interest and favourable moves to core asset prices, it is not at all a bad year, on the contrary. There are also quite a few large deals in various stages presently,” said Anca Merdescu, Associate Director Investment Services at Colliers.

Romanian real estate
(Source: Colliers)

Looking at the Central and Eastern Europe (CEE) real estate scene in H1 2021, investment flows were down by ca. 22% y-o-y, with a total value of investment transactions worth about 4.9 billion euro.
Poland captured more than half of all invested capital in the first of the year. Colliers estimate that year end volumes will remain between €10.0 and 11.0 billion for 2021.

Western and Northern European funds have dominated the first quarter of 2021, accounting for 50% of volumes, with capital coming mainly from the UK and Germany.

“With higher inflation rearing its head again, global markets are still unsure whether or not it is here to stay. Major central banks, like the Fed or ECB, are still arguing that the increased CPI is transitory and once supply constrains ease, it will drop back down to more normal levels; but if higher inflation does prove sticky and that it is here to stay for many years (in the US, core CPI stood recently hit its highest level since the early 1990s, of 4.5%), this means there may be quite a lot of growth in store for real estate values in general, since this asset category is viewed as a good hedge against higher inflation. And since CEE commercial real estate yields maintain a quite healthy gap to those in more developed countries, we could anticipate a renewed downward trend for yields in the region” the Colliers report concluded.