Real estate prices still high, transactions postponed as workers

Prices have been rising slightly both for logistics area as well as for offices The value of transactions on the Romanian real estate market in the first 9 months of 2021 declined by 29 percent compared to the same period of 2020, to EUR 570 million. Transactions closed in the third quarter reached a total value of EUR 260 million. The impact of the covid-19 pandemic on the liquidity of the commercial real estate market was more pronounced in 2021 than in 2020. Last year saw a series of largescale transactions for which negotiations began before the pandemic broke out.

By Aurel Constantin

“Although several negotiation processes are likely to close in the fourth quarter, it is hard to believe that this year’s transactions will be able to reach the nearly EUR 900 million recorded in 2020. This situation is largely generated by a lack of supply – many owners are not interested in selling in the current market conditions,” said Andrei Vacaru, Head of Capital Markets at JLL Romania.

Bucharest remained the top destination preferred by investors in the first nine months of 2021, with 70 percent of the total traded volume – about EUR 400 million. Just like in 2020, office buildings attracted the most investments, with about EUR 350 million or almost 60 percent of the total value.

The largest office space transaction recorded in the first three quarters of this year was the sale of the Hermes Business Campus office complex in the Dimitrie Pompeiu area of the capital city, with a total area of about 75,000 sqm, which was purchased from Atenor by Hungarian Adventum Group. However, the most representative transaction on this market segment so far this year, both in terms of the competitive sales process and the price, was the sale of the Campus 6.2 and 6.3 office buildings in the center-west area of Bucharest, where JLL represented the seller, Skanska. The buildings, with a total leasable area of about 38,000 square meters, were purchased for EUR 97 million by S IMMO. This move marked the reactivation of the Austrian company on the Romanian investment transaction market.

INDUSTRIAL AND LOGISTICS SPACES

In second place among investors’ preferences were industrial and logistics spaces, which attracted investments of over EUR 170 million in the first nine months, or 30 percent of the total traded volume. Interest in this segment is very high right now, but the record level of concentration – with the two largest owners controlling over 50 percent of the market – is starting to discourage potential new investors. There have been no significant transactions on the retail market so far in 2021, but the segment has largely absorbed the shock caused by the pandemic and the quarantine period of 2020. However, it is starting to provide very interesting opportunities for investors.

Prices have been rising slightly both for logistics areas, where prime yields shrunk in the third quarter from 8 percent to 7.75 percent, as well as for offices, where yields have fallen over the same period from 7 percent to 6.9 percent. This trend is generated by the regional evolution and the considerable capital available for quality products.

GOING BACK TO OFFICES

Prices remain high on all real estate markets, and that is one of the reasons why investors are keeping away. But as employees are returning to offices, employers will have to find adequate working spaces for them. A study conducted by Cushman & Wakefield Echi-

nox titled “Back to the Office” showed that Romanian employees who have had to work more from home in the last 18 months due to the covid-19 pandemic wanted to return to the office, given that more than half of them associated going back to the office with “a return to normality” and were affected by not being able to socialise with their colleagues.

The report is based on a survey conducted in Bucharest and large regional cities in July among almost 500 employees from more than 10 industries, including IT, finance, manufacturing, professional or public services. The data was collected by independent research firm MKOR Consulting.

According to the survey, the first half of the year had already marked the return to the office of a large number of employees across Romania, with 43 percent of respondents stating that they were mainly working from the office, compared to 36 percent between May and December 2020 and 29 percent during March-May 2020 (the lockdown period).

“The opening of schools and kindergartens has allowed more employees to return to the office, especially among those aged over 30 who could not go to the office while their children were taking online classes, because they had no one who could look after them. Moreover, people younger than 27 preferred going to the office in the absence of a proper workspace at home,” said Madalina Cojocaru, Office Agency Partner at Cushman & Wakefield Echinox.

THE NEED FOR OFFICES

The need for offices remains high, with only 10 percent of surveyed employees saying they would want to work exclusively from home. The importance of the office is even more pronounced in Bucharest, where 96 percent of respondents want to work from the office at least one day per week, while in regional cities their share is 87 percent.

Over a quarter of survey respondents would like to have three days per week at the office and two at home, while 17 percent would like to only work from the office. Preferences for different work models are on one hand based on the benefits of working from home – the most important being time and money savings – and on the other on the disadvantages of leaving the office space, with employees pointing to the lack of socialisation and the difficulty of separating work from their personal lives. 83 percent of respondents cited the fact that they no longer wasted time in traffic as the main advantage of working from home, while 78 percent were dissatisfied with the lack of socialisation with colleagues involved in this way of working. Commuting time is a problem both for employees living

in Bucharest (73 percent were satisfied with the fact that they no longer spent time in traffic), as well as for those living in the main regional cities, where the corresponding share is 61 percent. The lack of socialisation is a more acute problem in Bucharest than it is in regional cities, confirmed by 82 percent versus 77 percent respectively.

Other benefits of working from home are financial savings (53 percent), improved work-life balance (39 percent), more freedom to manage working hours (35 percent) or more time for rest (34 percent).

As for the disadvantages of working from home, the difficulty of separating professional and personal lives is in second place, accounting for 50 percent of responses, while the lack of a proper workspace was indicated by 32 percent of respondents. Furthermore, the diminished capacity to focus and the difficulty of managing relationships with clients, partners, and collaborators were each selected by 21 percent of survey participants.

In line with global trends

Globally, in September 2021, about 40 percent of employees were working from offices, according to Cushman & Wakefield’s “Return to the office” report, which means that Romania is in line with the global trend. China ranks first, with over 90 percent of employees having returned to office spaces, while office attendance in the other analysed regions varies between 27 percent and 40 percent.

In Europe, 40 percent of employees were working from the office in September, with

Prague being the region’s top country, with approximately 80 percent of employees, followed by Hamburg (60 percent) and Warsaw (45 percent). Returning to the office in these cities is directly linked to the high vaccination and low infection rates.