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Sunday | September 27 | 2020

The Romanian investment market grew in the first half of the year

The first half of the ”pandemic year” closed with a total value of investment transactions worth 408 million euro in Romania, around 18% above the first semester of 2019.

Office assets accounted at nearly 86% of volumes, according to Colliers International’s market report for the first semester of 2020.

Still, the outlook is uncertain since several large big-ticket items have either been frozen or fell through. On the opposite pole, the local land market continues to see deals closing and significant interest.

Similar to the CEE region, Romanian investment volume was up in the first half of the year, to 408 million euro, around 18% above the first semester of 2019.

Over one quarter of the volumes recorded in Romania was generated by the GTC portfolio sale to the Hungarian Optimum Private Equity Fund, which includes several office projects in Bucharest (deal estimated around 116 million euro for Romania).

Two similar-sized deals (in excess of 50 million euro) came from the closing of the third phase of The Bridge office project (purchased by the owners of the Romanian DIY chain Dedeman) and Global City Business Park offices (purchased by Greek-owned Arion Green).

In fact, nearly 86% of volumes were generated by office projects, mostly located in Bucharest.

There is potential to see some opportunistic or value-add transactions

Overall, 2020 may look like a sluggish year, with volumes in the 600-700 million euro range, though a lot will depend on if and how the deals which were frozen or fell through during the lockdown period may be recovered.

There is also potential to see some opportunistic or value-add transactions, though we would argue that it may take some time for the seller or his companies to hit trouble, requiring a fire sale approach to raise some cash quickly.

At the Central and Eastern Europe (CEE) level, almost all markets have seen an increase in yields compared to end-2019 for office and retail assets. Investment volumes in the CEE region printed at nearly 6.3b billion euro in the first semester of the year from just under 6 billion euro, which translates into a roughly 5% increase.

New plots are put up for sale with rather normal prices, as if the pandemic did not exist

In the land market, the activity is almost normal and some deals even went ahead during the lockdown period. Demand from retail players has arguably been the best in the first semester of the year.

Though demand for plots geared at big shopping centers/malls has indeed stagnated, retail park developers and big box owners all continued to look towards new projects in various parts of the country that have a subpar offering of modern retail spaces. We even have a new entry on this space that surfaced during the lockdown period.

Nevertheless, a few big deals, in excess of 10 million euro, that seemed likely to close in 2020 may not happen this year, rather next year. Residential developers are still holding on to a fairly robust demand for land, though not on par with 2018-2019 levels, which have seen record highs (hence, a lot of them have strong land banks); still, most remain on the lookout for any opportunities, including consolidating land around current projects.

Supply remains adequate, from various categories of sellers which have been present in the market in the last years. New plots are put up for sale even now and not necessarily at any discounted prices, but rather normal prices, regardless of the pandemic context, on account of continuing demand.

Furthermore, there have not been any distressed assets to begin with, though the economic woes are still only a few months old and time may bring out some financial weaknesses for some individuals or companies, forcing them to scale back prices for a quick sale.

On the price front, Colliers International consultants expect things to remain rather flat (with potential downward adjustments only on a case-by-case basis), unless things take a sharp turn for the worse. 

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