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Real estate: Real estate investment market in Romania, the least affected by sanitary crisis
The real estate investment market in Romania is the least affected by the sanitary crisis, performing better in the first three quarters of the year than in the entire 2019, with a total investment volume of over 738 million euros, a specialized study shows.
According to the mentioned source, crisis effects will not be substantially reflected in the real estate investment market at least until the end of the year. The overall investment volume in the first 9 months of 2020 exceeded 738 million euros, on the rise by 31%, compared to the same period of 2019.
Investors concentrated, almost exclusively, on office projects (93% of the total investment volume) and were active especially in Bucharest (85% of total investment volume).
“Investment profits have preserved high values from the time before the crisis (7% for offices, 6.75% for retail and 8% for industrial) and, most probable, will not suffer short and medium term amendments,” the analysis shows.
Although office buildings remain the investors' favorite option, the sector is undergoing important changes. There is a high degree of uncertainty about the return of the segment to the pre-pandemic level, considering the intention of many companies to choose the home work variant for an undetermined period of time.
As for Bucharest, the present stock of modern office buildings reached over 3.3 million sq.m., with 7 buildings, which total over 120,000 sq.m commissioned in the first 9 months and about 40,000 sq.m planned to be commissioned until the end of the year.
“Over 160,000 sq.m office area were rented in Bucharest in the first 9 months of the year, a drop of 40% compared to 2019. Moreover, most contracts signed represented renewals and negotiations. This can be a sign of the fact that, although contract rents did not duffer significant changes, rents are negotiated more at present than in the pre – Covid period (longer free rent , higher contributions to the fit-on budget from landowners)”, the study mentions. More companies, especially those in industrial IT&C – the main generator of office area demand – still adopt work from home and will continue to do so, at least until the end of the year. Moreover, some companies planned the return to office in the first half of next year.
According to the study quoted, it is expected, with over 250,000 new industrial areas commissioned until now this year, that until the end of 2020, the industrial stock in Romania could reach 5 million sq.m. On the background of the Covid 19 crisis, the industrial and logistic area market recorded an important increase, with a demand level of 388,000 sq.m, 50% higher than in 2019.
“The development of e-commerce and strategic industries, such as the manufacture of medical devices, as well as the obvious need for logistic urban centers, have contributed to the increase of demand of industrial areas. This year they registered high demand from local companies for smaller areas. Although the impact of sanitary crisis on the industrial sector was a positive one, the growth rate will have a slight slowdown in the following period, while preserving the ascending trend,”the Crosspoint Real Estate study shows.
As for the residential market in Bucharest, although the emergency state blocked real estate transactions, including the residential market, the segment rapidly recovered in May, the total number of transactions had only an 8% drop in the first 9 months of 2020, against the same period of 2019. Similar to previous years, the average price of new residential units recorded a 4% increase, in the first 9 months of the year.
The impact of Covid 19 pandemic became visible in the second half of the year, when prices recorded drops, the average price per square meter reaching 1,400 euro/sq.m for new apartments in September. In the last months the prices of old Bucharest apartments appreciated with an average difference of 60 euros/sq.m between old and new apartments.
“For products meant for customers with average incomes, who want for instance, a new two-room apartment, their purchase is restricted exclusively by the high VAT share, in conditions when the average price of such a product is over 100,000 euros. A single VAT share of 5% for new lodgings would have a positive effect on the residential market, both in point of developments and from the perspective of customer satisfaction,” says Oana Popescu, Associate Director, Residential Capital Markets, Crosspoint Real Estate.
Areas with the highest prices are still those in the center-north area (Floreasca, Aviatorilor, Primaverii), while the peripheral areas in the west and south continue to be the cheapest.
Founded in 2005, Crosspoint Real Estate company offers both transaction and consulting services for real estate and financial solutions needed by big investors, for all types of property: offices, retail, industrial, lands, hotels and residential.