Real estate market sees

Rental levels in retail parks remained essentially flat

In total, new commercial spaces with a cumulative area of about 31,000 square metres were delivered until the end of September throughout the country, as the modern retail stock in Romania reached 4.04 million sqm, reflecting an average density of 209 sqm per 1,000 inhabitants.

Only one new retail scheme was delivered in Q3 2021, namely Funshop Park Rosiorii de Vede (6,500 sqm GLA), the first retail park developed by the Polish group Scallier in Romania.

In addition, two other retail schemes were launched in H1 2021: Sepsi Value Center, with 16,300 sqm GLA developed by Prime Kapital and MAS Real Estate, and the first phase of Fashion House Pallady, with 8,500 sqm GLA, owned by Liebrecht & Wood.

On the other hand, we have also seen new names entering the market during first nine months of the year. Cosmetics retailer My-K opened their first physical store in Timisoara, while Anson’s, a multi-brand men's clothing company, member of the Peek & Cloppenburg Dusseldorf group, opened their first Central and Eastern Europe store in Bucharest. Access to cinemas and indoor F&B units is only allowed for customers who present the Digital Covid Certificate, as new restrictions were imposed in Q4 to mitigate the effects of the most challenging wave of the pandemic in Romania so far.

NEW SCHEMES OR EXTENSIONS

New schemes or extensions to existing projects totalling around 120,000 sqm are under construction and expected to be delivered by the end of 2022, while other important projects amounting to more than 460,000 sqm are in different planning stages.

The most significant projects under construction are the Prahova Value Centre in Ploiesti, the extension of Colosseum Mall in Bucharest or the Barlad Value Centre in the Moldova region. In terms of developers, Prime Kapital (in a joint venture with MAS Real Estate), Scallier, and Mitiska still have the most consistent pipelines, all aiming to Development activity on the Romanian retail market was modest in the first nine months of 2021, with only three small projects delivered, but this year also saw new retailers and developers entering the market, according to real estate consulting firm Cushman & Wakefield Echinox.

By Aurel Constantin

grow their presence in Romania. Prime rents remain stable for the moment, even if the 90-day suspension of operations during the state of emergency from March to June 2020 had a strong impact on a number of tenants, which resulted in renegotiations that slightly decreased headline rents in several locations.

However, rental levels in retail parks remained essentially flat, as these types of assets continued to produce positive results in spite of the governmental restrictions. The headline rent achieved for 100 sqm units in dominant shopping centres in Bucharest was of around EUR 75/sqm/month at the end of Q3 2021, while in secondary cities, such as Cluj-Napoca, Timisoara, Iasi or Constanta, headline rents in dominant shopping centres ranged between EUR 40-50/sqm/month. In tertiary cities, the level falls between EUR 2732/sqm/month.

“In line with our predictions at the beginning of the year, retail development has slowed down in 2021, with developers adapting their expansion strategies to the current market conditions. However, there are developers such as Scallier, Prime Kapital or Mitiska who have been betting on Romania even during this period. The covid-19 crisis came at a time when developers on the retail market were in the process of shifting their

focus to convenience projects and to other areas that had been unexploited before. The low density of modern retail in most major, secondary, and even some tertiary cities is opening the way for developers to move into new uncharted areas that can particularly support small-scale schemes to complete the existing offer,” said Bogdan Marcu, Partner, Retail Agency, Cushman & Wakefield Echinox.

OFFICE SPACES – NEW DELIVERIES IN BUCHAREST

In the third quarter of 2021, new deliveries of office spaces totalling 132,200 sqm were completed in Bucharest, making it the best quarter yet in terms of supply and bringing the total new supply in the first 9 months of the year to approximately 178,000 square meters.

The new supply of office spaces during January-September 2021 was even higher than the level recorded over the whole of 2020, when new supply accounted for 155,000 sqm.

The most relevant new office deliveries were J8 Office Park (46,000 sqm GLA) in the Expozitiei area, U-Center I (32,800 sqm GLA) in the Centre submarket, Globalworth Square (29,100 sqm GLA) in Floreasca – Barbu Vacarescu and Dacia One (16,300 sqm GLA) in CBD.

As such, Bucharest’s office stock has reached 3.13 million sqm (excluding owneroccupier buildings), while the vacancy rate recorded an increase up to 14.8 percent, a new record for the last 5 years. A significant gap remains in terms of the vacancy rates for A and B class office buildings, with A-class properties recording a vacancy level of 12.1 percent, compared to 23.4 percent for B-class buildings.

Leasing activity significantly picked up pace during summer, with 93,900 sqm contracted in Q3 2021, thus bringing the total for the first 9 months of the year to 212,900 sqm, an 33 percent increase when compared to the same period of last year. Net take-up (excluding renewals) had a share of 56 percent, a level mostly consistent with previous quarters.

At the moment, there are new office buildings under construction and expected to be delivered in the following 18-24 months totalling around 280,000 sqm GLA. However, the new supply will gradually reduce, since the pipeline for 2022 (138,000 sqm) is only slightly higher than the Q3 2021 completions.

The office market remains attractive both for developers, who will remain committed to the construction of new buildings in the coming period, as well as for investors, as they acquired office projects totalling almost EUR 340 million in the first nine months.

“Office attendance is slowly starting to rise, with almost 50 percent of employees having worked mainly from the office in the first half of the year, compared to just 36 percent in May-December 2020. Moreover, a higher number of employees want to return to the office for at least two days a week. In this context, more and more companies have configured their strategies pertaining to how employees will work and therefore how they will use the office space, which creates more predictability on the office market,” said Madalina Cojocaru, Partner, Office Agency, Cushman & Wakefield Echinox.

Prime headline rents in Bucharest remained stable, ranging between EUR 18.0018.50/sqm/month in the CBD area, while the Centre and Floreasca – Barbu Vacarescu submarkets recorded values of EUR 17.50-18.00/ sqm/month. of 2020. The leasing activity was mostly driven by new demand, which accounted for 86 percent of the transacted volume. Renewals accounted for only 14 percent of the transacted volume, so the vacancy rate in Bucharest continued to decrease, reaching 5.6 percent, with an overall level of 4.7 percent across Romania. Bucharest remains the preferred destination for companies in search of industrial and logistics spaces, having a share of 65 percent of the Q1-Q3 transacted volume, while Timisoara, Brasov, and Cluj have been the most active regional markets. Construc-

LOGISTICS AND INDUSTRIAL SPACES

The demand for logistics and industrial spaces reached 562,000 sqm during the first 9 months of this year, a slight decrease of only 3 percent compared with the same period tions went ahead at full speed on several sites during the summer, as developers managed to deliver new buildings with a total area of over 130,000 sqm. The most significant deliveries were represented by LPP’s 22,000 sqm expansion of their distribution centre within WDP Park Stefanesti, while CTP completed the second phase of CTPark Bucharest North. In total, the new supply reached 338,600 sqm in the first 9 months of the year, while premises of over 260,000 sqm are under construction and expected to be delivered by the end of this year. As such, the new supply for 2021 should exceed the 600,000 sqm threshold, setting the scene for a positive 2022.

“Encouraged by the positive evolution of both consumption and industrial production, developers are determined to expand their portfolios through new land or asset acquisitions. Their optimism has been backed up by the strong demand recorded over the last 18 months, which has materialised in a volume of over 1.5 million sqm industrial and logistics spaces being leased in this period,” said Rodica Tarcavu, Partner, Industrial Agency, Cushman & Wakefield Echinox.