Industrial strength gives way to office segment in Romanian property market

Industrial strength gives way to office segment in Romanian property market
GLL Real Estate Partners acquired two Class A office buildings in central Bucharest, one of them the Victoria Office Center.
By Clare Nuttall in Bucharest March 1, 2016

2015 was a standout year for Romania’s industrial property segment, with almost €300mn worth of investments. But the segment is small compared to Romania’s office market, which has grown steadily in recent years and has a very strong pipeline of new developments.

Two major deals closed by GLL Real Estate Partners in the last six months marked the return of institutional investors to the Romanian office market. The German investor acquired two Class A office buildings in central Bucharest – the Victoria Office Center and Floreasca Park.

Silviana Badea, head of capital markets at JLL Romania, which was an adviser on both deals, forecasts that given that yields are around 1.75% higher in Bucharest than in the Central and Eastern European cities of Prague or Warsaw, prime Romanian offices should remain attractive for investors. However, she notes that while the GLL deals are a positive sign, the company is already familiar with the Romanian market and knows how it works. “The GLL deals are not the start of a trend,” she acknowledges, pointing out that the cost of finance – an important factor especially for US funds – is still higher in Romania than in nearby markets such as Hungary.

Horatiu Florescu, head of Knight Frank’s Bucharest office, notes that the office sector remained strong in Romania throughout the recent crisis, and it is “good to see the investment sector back”. He forecasts that more deals could be struck at the MIPIM and Expo Real trade fairs later this year.

He also expects a gradual fall in yields for prime Bucharest properties, which are currently at 7.5%, compared with 5.75% in Prague and 6.0% in Warsaw. “Yields are higher in Bucharest even though these are essentially the same products. We expect yields in Bucharest will come slowly down by year end,” Florescu says.

Demand for office space is going strong not only in Bucharest, but in cities across the country, especially the university towns of Cluj and Iasi. This is largely driven by the fast growing IT and services sectors. International companies have flocked to Romania in recent years, attracted by relatively low labour costs and skilled personnel, ensuring that the sector continued to grow through the crisis.

Bucharest in particular has a very strong pipeline of new projects concentrated in three key areas – the central business district around Piata Victoriei, and districts in the north and centre west. Up to 300,000 square metres of new space is due to come on the market this year in Bucharest alone, but over half is estimated to be pre-leased so rents are not expected to suffer. Developers include AFI, Forte Partners, Skanska and Ikea’s property development arm Vastint.

Consumer spending

Despite the attractiveness of the office segment, overall property investment in Romania dropped to €675mn in 2015, down from €1.17bn the previous year, and was carried partly by the industrial segment, according to a JLL report. “Market volumes were dominated by industrial transactions (41%), making 2015 an all-time record year for this segment, followed by office (38%),” said the “Q4 2015 Bucharest City Report”.

Czech investor CTP was the most active in the industrial segment in 2015. A new entrant to the Romanian market, it acquired six properties in the country spending around €130mn. P3 also invested in Romania for the first time.

Laura Dumea-Bencze, head of research Romania & CEE at CBRE, forecasts that the volume of investment will be similar in 2016, as interest “is not slowing down”.

Costel Florea, managing partner of ACTIV Property Services, a member of the Cushman & Wakefield Alliance, agrees that “industrial was the star of 2015”, attributing the segment’s attractiveness to the growth of the retail sector (including online retail) and subsequent demand for logistics and warehouse space, in addition to demand from industrial companies.

Real estate professionals tell bne IntelliNews that they don’t expect a large volume of deals in Romania’s industrial segment this year, as virtually all of the properties for sale on the local market have already been snapped up. Volumes are relatively low; around 1mn sqm in Bucharest compared with over 3mn sqm of office space.

Despite this, demand for industrial and logistics space is expected to grow in the coming years, as tax breaks and rising incomes contribute to a consumer-spending bonanza in the country.

At 4.2%, Romania’s GDP growth in 2016 will be second only to Ireland’s across the EU, according to the European Commission’s winter forecast released on February 4. Pay rises in the state healthcare and education sectors have pushed up the average net wage, while VAT cuts are also encouraging consumption. This has resulted in higher spending power and a subsequent boost for the retail sector. Given the time taken for investment decisions to be made, this has not yet filtered through to higher demand for retail and logistics space, but according to Florescu the impact is expected to be seen by next year.

JLL business development director Viorel Opaiţ points out that strong growth in the retail sector in recent years has already resulted in growing demand for warehouse space. “More retail means more stock, so more need for warehousing,” says Opaiţ. He cites one local distributor as saying that its demand has grown so much its logistics system is “on the verge of collapse”.

According to JLL’s report, close to 160,000 sqm of competitive industrial/logistics space was launched on the market in 2015 in Romania, and almost 250,000 sqm are expected to be delivered by the end of this year. The largest new developments will include the extensions to the P3 Logistic Park and Logicor’s new Log IQ Mogosoaia.

Industrial space is particularly in demand in western Romania, where Timisoara and Cluj have emerged as industrial hubs given their proximity to the Hungarian border and good transport links to Germany and other CEE countries. Other manufacturing hubs have developed around the Ford plant in Craiova and Dacia in Pitesti, sending up demand for industrial space in both cities.



Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.