Retail is the king of the Romanian R.E. market


* the article was first published on the 3rd of May 2012

The Romanian real estate market is in a transition period. The worst seems to be in the past, but better days have yet to come. The European economy will remain weak during 2012, blocking the evolution of the Romanian one as well. Once the Romanian economy enters steady growth, the real estate segment should pick up as well. This is expected to happen during 2014 -2015.

This was also the message we received at MIPIM, the No.1 real estate exhibition of Europe, which we attended. European real estate is ready to pick up, but any progress is subject to the status of European economies and banks, thus the situation is still unclear.

Still the market is quite active in specific sectors. Retail is very dynamic, with many new brands entering the Romanian market, in addition to a pipeline of new retail schemes worth some 2 billion euros. Also high street retail is attracting the interest of investors, especially in the old center of Bucharest. The residential sector will continue being driven by external factors, such as the “First Home” program initiated by the Romanian state. The trend of prices is negative and transactions are fewer in comparison to the past, but we also notice that the supply for new apartments in certain desired areas is limited.

There might be an opportunity hidden in this observation. The office market is considered stable. Some analysts predicted that prices will rise at the beginning of the year, but this does not seem possible. On the other hand, some new developments are in the pipeline, focusing on top locations and affordable leases.

Retail is the king of the local real estate market. The demand for properties continues to surpass the supply and aside from the rental market, Income generating assets (commercial spaces, big box retail etc.) continue to attract attention. They are the only ones that are easily “bankable” today. The industrial segment is picking up, but very slowly. Developers are few and very careful at present, but the demand is rising slightly due to new investments in retail and industry.

Romania is not the most attractive destination for investments today. The difference compared to the past is that it exited the status of “unwanted” and is now considered an option again. It mainly attracts investors who already know the market thus making it easy for them to evaluate properties and opportunities. The newcomers are still defensive, but this will change in the next 18 months.

Romania’s position in South East Europe has been well established for several years now. In the current climate, with Hungary having many problems in relation to the European Union and Greece fighting its own demons, this position is strengthened. Bulgaria and Serbia do not have the economic size to compare, so once Romania will pick up, it will clearly attract the majority of foreign investors.