BRICKS & MORTAR: Infrastructure investments create new real estate hubs in Bucharest

BRICKS & MORTAR: Infrastructure investments create new real estate hubs in Bucharest
Construction of the Basarab overpass helped open up the Center-West district for development. / adrianstanica.ro
By Clare Nuttall in Bucharest April 24, 2018

Since before the collapse of communism, northern Bucharest has been the most popular area of the Romanian capital for developers, but as the city becomes increasingly congested, rival hubs are springing up in districts opened up by the construction of new metro lines and other infrastructure investments. 

Demand for new office, retail and residential space is growing fast as Romania’s economy booms — it outstripped China with 6.9% growth last year and while this is set to moderate, Romania is forecast by the International Monetary Fund to expand by a still healthy 5.1% this year. 

Leading the charge for quality office space are the multinationals that have flocked to the city in recent years. Aside from those in the fast growing IT sector, there are also a mixed bag including Amazon, fast food chain Taco Bell, packaging company DS Smith and fashion retailer Forever 21, says Despina Ponomarenco, executive director of the Romanian Real Estate Club which represents developers. She says no less than 200 large international companies entered Romania in the last two years alone, and anticipates that “more are expected to follow into a very dynamic local real estate market”. 

Northern metropolitan Bucharest remains the prime location for developers, with no less than €1bn worth of investments currently being made in the area, according to the Romanian Real Estate Club. These include office projects by NEPI Rockcastle, One United and Skanska, numerous residential projects adding up to over 5,000 apartments, as well as the new Metropolitan Hospital and a Courtyard by Marriott hotel. 

“This is the first area that began modern development after the fall of communism in Romania — partly because of its positioning near Primaverii, Herastrau and Aviatieie residential neighbourhoods, well known since before 1989 as high-end areas where most of the elites of the previous regime lived and where most of the former embassies and diplomatic missions had headquarters,” Ponomarenco tells bne IntelliNews.

“Another reason for which the area was preferred by the investors was the extended surface of free land, accessible at low prices after the 1990s, suitable for large office and retail developments.” 

Office blocks and cranes are visible from north Bucharest's Herestrau park. 

New hubs emerge 

While the northern metropolitan area is “still preferred by AAA tenants”, according to Ponomarenco, several new hubs have emerged in recent years. Verdant north Bucharest is not currently well served by the country’s metro lines, meaning streets within the district and (even more so) those leading to and from the city centre, tend to be highly congested in rush hour. This has led to the emergence of new hubs typically close to newly opened — or imminent — transport infrastructure. 

The Mark emerges among ramshackle housing near Bucharest's main railway station. The class A office building is under construction on Uranus Boulevard, which was completed in 2014. 

“Large institutional investors have not made major shifts in marking their areas of interest. NEPI and Globalworth, the largest asset owners in Romania, are mainly active in the northern part of Bucharest,” says Ponomarenco. However, she adds that, “Shifts have been indeed registered in area preferences though, because of workforce preferences in the last two to three years.” 

These have boosted the Centre-West district, which was opened up by the construction of the Basarab overpass, and is also close to the technical universities and several high-density residential areas meaning there is a substantial workforce on the doorstep of companies that set up there. AFI opened its AFI Cotroceni mall there and is completing its AFI Park office space, and now Forte Partners, CA IMMO, Ikea’s real estate arm Vastint and Skanska are all building offices in the area. 

Meanwhile the Centre-South area, conveniently close to the Timpuri Noi metro station, is the site of Vastint’s giant mixed use development, which when completed will deliver no less than 100,000 square metres (sqm) of offices and a further 50,000 sqm of residential space. 

Developers are also looking to the future, specifically the long-awaited completion of the new M6 metro line. Indeed several new lines are under construction, and are progressing despite various corruption scandals, but of most interest to developers is M6 which will run from Bucharest’s main railway station the Gara de Nord through the northern part of the city to Henri Coanda Airport. This will, for example, make the area around the event centre Romexpo - Expozitiei much more accessible, and it is already becoming the next development hub. Portland Trust, GTC, Atenor and local businessman George Copos all have new office business parks under development in the area, while Impact is building a premium residential compound with 630 units. 

Map of the Bucharest metro; solid lines represent existing lines, broken lines are under development. 

Past and future 

Another incipient trend is the redevelopment of historic buildings. Until recently — with the exception of a few projects like The Ark events and office space in the former commodities exchange and the commercial centre at the old Cartea Romaneasca printing press — Romania’s architectural heritage has largely been neglected, with some of the city’s notable historic buildings allowed to fall into disrepair. However, a couple of recent announcements indicate this could be changing. 

One United Properties and France-based retailer Auchan plan to invest €100mn in a new mixed-use development at the former Ford factory where the US automaker used to manufacture luxury cars in downtown Bucharest. The One Floreasca City project will see the factory, built in 1935, restored and turned into a contemporary retail space, which will be flanked by an office town and three apartment blocks. 

The developers stressed that the project “gives back to the city and its community an area abandoned in the last 20 years”. “To respect the heritage of the property, the investor will use for the interior design vintage Ford models, some of them produced in the inter-war years at Bucharest,” they added. 

 

 

Earlier this year Lithuania-based Hanner started work at the former Grivita brewery plant near the Basarab overpass, where for the first time an industrial space will be converted into lofts. The firm also plans to build a 6,000 sqm co-working space for local entrepreneurs. 

Ponomarenco anticipates a “natural phenomenon of gentrification” in the coming years, where old, out-dated developments will be replaced by modern, class A buildings, though she notes that for the time being locations like One Floreasca City are the exception; “Brownfield developments are possible, only if investors are willing to take the risk of a major urban redevelopment.” 

And if the interest in redevelopment does gather pace, all eyes will be on Bucharest’s oldest industrial building, the Assan Mill, which is still standing — just about. Fires partially destroyed the mill and its roof has fallen in, but its owners – two Cyprus registered companies – are not allowed to raze it and take advantage of rising land values. Instead, nature is being left to take its course. But despite what Ponomarenco describes as “severe degradation and destruction”, the mill stands on a 4.7 ha plot and is “ideally placed in a central position”.

 

Assan Mill. (HoriaStan, shared under Creative Commons Licence.)

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