Romania's largest mixed-use property developer, One United Properties, is capitalising on the burgeoning demand for both residential and office space in a market that has long been underserved. In an interview with bne IntelliNews, the company's co-founder and CEO, Victor Capitanu, describes Romania as a "hidden gem" attracting increased investor interest as its capital market evolves.
Founded 15 years ago, One United is known for new Bucharest landmarks such as One Cotroceni Park, One Herastrau Plaza and One North Gate. Initially focusing on high-end residential projects, the company has strategically expanded into office and commercial real estate, including mixed-use developments.
According to Capitanu, Romania has followed a somewhat different development trajectory compared to other countries in Central and Eastern Europe (CEE). “Romania is a country in the development stage. It is different from most of Central and Eastern Europe in that the market is less developed and started later. If you look at the stock of apartments, most were built during communism or in the years [immediately] afterwards, also without too much expertise,” he says.
"The real estate industry started to form and grow only in the last 20 years. Although we are a young company we started more or less at the beginning of this sector in this market."
These days, says Capitanu, there is strong demand for residential real estate, yet supply lags behind. Summing up the market, he says: “People just want to have a better life, live in a better apartment, with some facilities, better quality, with a nice design.”
One United reported in a trading update on February 6 that it achieved residential sales and pre-sales of €274.9mn in 2023, a 63% increase compared to the previous year. In total it sold and pre-sold 953 apartments plus 1,584 parking spaces and other units during the year.
Pent up demand means the market is expected to continue its strong growth in the coming years. "Looking ahead, I think the next ten to 20 years will good for the development of real estate in this country," Capitanu tells bne IntelliNews.
There’s a similar situation in the office segment, where he also points to a shortage of quality space, combined with strong demand. The commercial division of One United leased and pre-leased 34,200 sqm of office and retail spaces last year, versus 31,700 sqm in 2022.
"I know some markets in Western Europe and especially the US are suffering in the office sector because of oversupply. But in Romania there is no oversupply, there is undersupply, especially of quality stock. There are many companies that are moving operations from other parts of Europe to Romania, and they need quality buildings — so we need to build them," he says.
One United recently signed a €57mn contract to build a 20,000 square metre campus for Germany's largest chip manufacturer, Infineon Technologies. Its existing buildings such as One Cotroceni Place and One Tower also have international tenants, among them Siemens Energy, automaker Ford, British American Tobacco (BAT), financial services company Stripe and law firm CMS.
"A lot of international companies are moving to Romania, and we see every year demand is growing for high quality office space in good locations, with very good [environmental, social and governance] ESG ratings. We are supplying to this demand," Capitanu says.
According to the executive, ESG is "really a priority for our company", reflected in its ranking on the Romania Corporate Sustainability & Transparency Index 2023. He lists steps such as the inclusion of heat exchange pumps in all One United’s new properties, a novelty in Romania, and plans to eliminate all gas use from its properties, as well as the company’s focus on governance, and its efforts to get involved in all the communities where it operates.
In addition to its new-build projects, One United has taken on the more technically challenging task of overhauling historic buildings to give them a new life in the 21st century. Among these is Ford Hall, the US car manufacturer's first factory built in the CEE region in the 1930s. Capitanu comments that such projects are "extremely good for the development of the city".
Focus on Bucharest
To date, One United has focussed exclusively on Romania’s capital Bucharest, eschewing second-tier cities. Capitanu points to Bucharest's population of around 3mn — making it one of the biggest cities in Europe — and GDP of approximately €100bn, which is larger than the entire GDP of several of Romania’s neighbours.
In future, One United would consider moving into other major cities in the region, but for now, Capitanu says, Romania presents sufficient opportunities. Not only is there still pent up demand for residential property, he also expects the arrival of more international companies in search of talent. "We see demand continuing because of the workforce, which is highly skilled and very competitively priced."
More broadly, robust growth is expected for the economy as a whole, according to both Romania’s government and international financial institutions (IFIs). This year, the country is expected to be one of the fastest-growing economies in the EU.
Despite some concerns about the budget deficit and public debt (though this remains lower than most European countries as a share of GDP), Romania remains an attractive investment destination, according to Capitanu. Moreover, he says, there has been relatively little impact on the economy from the war in neighbouring Ukraine.
Developing capital market
Capitanu is confident in the development of the local capital market. One United listed on the Bucharest Stock Exchange (BVB) in July 2021. The IPO was the largest in Romania in the previous four years, and immediately placed One United among the biggest companies on the exchange by market capitalisation. It has been included in all major indices following Romania such as FTSE Russel, MSCI and ROTX.
The company has since raised €105mn in a secondary placement in August 2022, following on from three capital increases as a private company between 2016 and 2021.
"Now we are the largest entrepreneurial company by market cap on the stock exchange and the 10th largest overall by market cap," says Capitanu. "We are also one of most liquid on the capital market."
He tells bne IntelliNews that One United’s management did not consider alternatives to Bucharest for its listing because of the company’s high profile and brand recognition within Romania.
"Here is where everybody knows us, so our value is much bigger if we are listed on the local stock exchange," he says. However, if One United expands into other countries in future, it might consider a dual listing.
For now, however, One United is "very happy about how it's going on the Bucharest exchange", says Capitanu. Two years before its IPO, in 2019, FTSE Russell raised Romania from Frontier to Emerging Market status. This was followed in 2023 by another important event for the local capital market, the IPO of hydropower major Hidroelectrica.
"I think why we listed in first place was also because we saw growth potential in the market, and the potential upgrade to an Emerging Market by MSCI," Capitanu says.
"The market improved dramatically after the listing of Hidroelectrica. A lot of companies want to follow the successful example of Hidroelectrica, which was one of the largest IPOs in the world last year … There is a positive momentum for the stock exchange."
Overall, Capitanu says, Romania has strong prospects because of its underdeveloped potential. "We think Romania is the largest Emerging Market opportunity in Europe, where most countries are already very developed, so there is less opportunity," he says. "Romania, in a way, is a hidden gem because it’s the largest undeveloped opportunity in Europe."