City Report - officefinder.ro City Report Q3 2019.pdf · COPYRIGHT © JONES LANG LASALLE IP, INC. 2019 Bucharest City Report Q1 2019 Investment Market Unemployment rate September

Bucharest City Report Q1 2019COPYRIGHT © JONES LANG LASALLE IP, INC. 2019

City ReportQ3 2019

The Office, Cluj-Napoca


Investment Market

Unemployment rateSeptember 2019

GDP Growth

2019 y-o-y

Net average wage

August 2019

Retail Sales, August 2019 y-o-y

Industrial production, Jan. – August. 2019 y-o-y

4.5%

InflationJune 2019 y-o-y

3.8% 3.9%

€644 8.0% -1.9%

The Q3 2019 property investment volume for Romania is estimated at approximately €241.3 million, a value almost 31% lower

than the one registered in the same period in 2018 (€349.4 million). However, there are a number of large transactions in different

stages of negotiations that will most likely be concluded by the end of 2019. In comparison with Q1-Q3 2018, the number of

transactions in Q1-Q3 2019 increased by 7.6%. Moreover, the average deal size increased slightly from €24.8 million to approx.

€29.4 million. In Q3 Bucharest accounted for approx. 61.6% of the total investment volume, mainly due to two very large office

transactions (America House and Oregon Park C). Overall, market volumes in Q3 were dominated by office transactions (almost

72%), while retail accounted for 19.5% and the rest were industrial and hotel transactions.

The largest transaction registered in Q3 2019 was the acquisition of the America House office building in Bucharest, with a GLA of

roughly 28,000 m² , by Morgan Stanley Real Estate Investing (MSREI) in a joint venture with David Hay, from AEW Europe.

The macro-economic forecast for Romania continues to be strong. Considering that several important transactions are pending

completion in Q4, total volume for 2019 is estimated to reach €1.1 billion.

Both prime office and retail yields at the end of Q3 stood at 7.00%, while prime industrial yields at 8.00%. Yields for retail andindustrial remained unchanged when compared with the previous quarter, while office yields compressed by 25 bps. In line withthe recent evolution, it is likely that yields will further compress in 2020, albeit at a slow pace, due to a number of prime producttransactions that are currently ongoing.

Bucharest City Report Q3 2019


Prime Yields

Romania Investment Volumes (€ million)

Key Investment Transactions in Q3 2019

IndustrialShopping Centre Office

7.00% 7.00% 8.00%

Sector Property Market Est. Price (€ million) Seller Buyer

Office America House Bucharest 70-75 AEW EuropeMorgan Stanley and ADD

Value Management

Office Oregon Park C Bucharest 60 Portland Trust Lion’s Head

RetailPromenada Mall Targu

MuresTargu Mures 45-50 AEW Europe Indotek

Office Liberty Technology Park Cluj Napoca 40 Fribourg CapitalWhite Star Real Estate

and a private US university

0

500

1,000

1,500

2,000

2,500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F

Office Retail Industrial Mixed Residential Hotels


Evolution of Gross Take-up (m²), 2009-2019F

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F

CBD

Others

Baneasa

West + Center West

Pipera North

Dimitrie Pompeiu

Floreasca Barbu Vacarescu

Center North

Demand

After the strong first two quarters, Q3 2019 experienced a decrease in the demand of office space inBucharest. Total gross transaction volume reached 62,800 m², marking a 42% drop when comparedwith the previous quarter, and approximately a 16% decrease when compared with Q3 2018. Theaverage transaction size was 1,100 m².

Net take up accounted for 42,200 m², roughly 50% of gross take up during the period.

However, if we consider the first nine months of the year, almost 281,300 m² were let in total inBucharest, representing a 33% increase in comparison to the same period last year (Q1-Q3 2018),when only 211,300 m² were let.

Assuming that Q4 will record a transaction volume comparable to the median of the previous threequarters, by the end of the year there could be transactions of up to 375,000 m² for Bucharest alone.

Q3 experienced a slight increase in the vacancy rate, from 7.5% in Q2, to 8.2%, after strong new officedeliveries during the first 9 months of the year.


Deliveries in Q3 2019

Prime rents (€/m²/month)

€18.5

Gross take-up Q3 2019 (m²)

62,800

Net take-up Q3 2019 (m²)

42,200

Q3 2019 Vacancy

8.2%

Pipeline for Q4 2019

Property Submarket Size (sq m) Developer

Equilibrium, phase 1Floreasca

BarbuVacarescu

20,600 Skanska

Key Leasing Transactions in Q3 2019

Property Occupier Contract type Deal size

(m²)

Iride Park 19Rhode &

Schwarz TopexConsolidation 8,000

OrhideeaTowers

Thales Expansion 2,500

West Gate Business Park

Accenture New Demand 2,500

Timpuri NoiSquare

Playtika Expansion 2,250

The Bridge III Molson Coors Pre-lease 2,015

AFI Park Microchip Expansion 1,200

Property Submarket Size (m²) Developer

Expo Business ParkNorth -

Expozitiei38,000

Portland Trust

The Light Center - West 21,600River

Development

Sema Office Berlin Center - West 14,900River

Development

Office 1Floreasca

BarbuVacarescu

7,800 Conarg


Bucharest Office Sub-markets

*The updated stock include buildings Class A&B, built after 2000

Sub-marketStock

(m²)

Average rent

(Euro/m²/mth)

Vacancy

%

1. CBD 274,622 16 – 18.5 3.75

2. Center – North 127,303 15 – 17 0

3. Floreasca – BV 523,415 15 – 16 2.8

4. Dimitrie Pompeiu 427,567 12 – 14 2.7

5. Center – West 416,641 14 – 16 14.0

6. West 150,900 10 – 13 1

7. Center 200,504 15 – 17 2.3

8. East 88,283 12 – 14 17.0

9. Center - South 173,803 10 – 12 16.6

10. North - Expozitiei 229,190 15 – 17 4.1

11. Baneasa - Otopeni 147,182 11 – 13 8.8

12. Pipera North 177,600 7 – 10 40.8

TOTAL 2,937,010 8.2

Deliveries

New office deliveries of 82,300 m² were concluded in Bucharest in Q3 2019. Over the first 9 months of theyear, the office stock in the city increased by 262,000 sq m. Another 20,600 m² are expected to bedelivered in Q4, bringing the total deliveries volume for 2019 to 282,600 m². That represents twice theoffice stock delivered in 2018, of 141,800 m².

Pipeline

The most important delivery awaited for Q4 2019 is the first phase of the Equilibrium project, developedby Skanska in the Floreasca – Barbu Vacarescu submarket. The building will have an area of 20,600 m² ofGLA.

Considering the rapid expansion of the office stock during the first 3 quarters, the vacancy rate mightslightly increase up to 8.5% during Q4.


Retail Projects in Bucharest by Size

8%

21%

35%

36%

Small (5,000 - 19,999 m²) Medium (20,000 - 39,999 m²) Large (40,000 - 59,999 m²) Very Large (>60,000 m²)

*Including all retail formats

Total Stock

1,119,238 m²

For three consecutive quarters in 2019, no new major retail unit or expansion of existing ones wereregistered in Bucharest, therefore the total retail stock remained the same, at approximately 1.1 mil. sqm.

However, during the period there were two major retail schemes delivered in secondary cities. Thelargest was Iulius Town Timisoara, with a GLA of 47,000 sq m, opened in September by Iulius andAtterbury Europe. The second was the extension of Shopping City Buzau by 6,000 sq m GLA, delivered byNEPI Rockcastle.

In total, during the first 9 months of 2019, only 63,000 m² of GLA were delivered in major retail schemes,all of which were located in secondary cities, bringing the total stock in Romania to almost 3.27 millionm².


Shopping Centre Density (m²) per 1,000 Inhabitants*

Deliveries / Pipeline Romania (m²)

2018

*Including all retail formats

2019

207,2000

100

200

300

400

500

600

700

130,300

Pipeline for Q4

Most new retail projects for 2019 are awaiting delivery in Q4, when over 140,000 m² are expected to beadded to the modern stock.

The largest new project, expected to be opened by the end of this year, is Festival Shopping Center in Sibiu.The 42,200 m² of GLA shopping center is being developed by NEPI Rockcastle, who also owns the othermajor scheme in the city, Shopping City Sibiu.

Two new retail parks are to be delivered by the end of the year by Prime Kapital and MAS REI in Zalau, the19,000 m² GLA Zalau Value Center and, close to Bucharest, the DN1 Value Center in Balotesti, with 28,500m².

In Bucharest, the extension of Veranda Mall in Obor neighborhood is pending completion. The developer,Professional Imo Partners, is adding another 6,000 m², including a large cinema.

Next to Bucharest, Doraly Retail Park is also expected to be completed in Q4, bringing another 8,200 m² tothe market.

Outside of Bucharest, two new retail parks are expected to be delivered. They include the 9,000 m²Aushopping Satu Mare, being developed by Ceetrus and the 7,400 m² Shopping Park Braila, by Square 7Properties and Mitiska REIM.


Schemes Announced for 2019 – 2020 in Romania (>10,000 m²)

Largest Owners of Retail Space in Romania Prime rents (€/m²/month)

Shopping centres

75

Retail Parks

8.5

High street

60

*Prime rents relate to a well located 100 m² unit shop from the fashion and accessories category. The unit is part of leading retail assets in the capital city (for retail parks –2,000 m² units).

Property Format Developer Size (m²)

Iulius Town Timisoara New Project IULIUS and Atterbury Europe 47,000

AFI Palace Brasov New Project AFI Europe 45,000

Festival Shopping Center Sibiu New Project NEPI Rockcastle 42,000

Shopping City Targu Mures New Project NEPI Rockcastle 33,000

Dambovita Mall New Project Prime Kapital 33,000

Mall Moldova Extension Prime Kapital 30,000

DN1 Balotesti Extension Prime Kapital 28,300

Colosseum Center* Extension Colosseum Mall 16,500

Total Stock

3,267,254 sq m

*Colosseum Center includes Colosseum Retail Park and the new 16,500 m² development Colosseum Mall

NEPI Rockcastle 22.7%

Iulius & Atterbury Europe 10.4%

Immofinanz5%

Others 62%

Total Stock3,267,254 m²


Demand in Q3 2019

Net take-up (m²)

65,200 m²

In Q3, total rental demand for modern industrial and logisticsspaces in Romania was lower when compared with the previoustwo quarters, totalling approx. 76,700 m².

Bucharest attracted most of the demand for industrial andlogistics spaces in Q3, respectively 89% of the total (approx. 68,200m²), followed by Cluj (3,500 m²) and Bacau (2,500 m²).

The most active tenants in Q3 came from the logistics andpharmaceutical sectors.

In Q3 2019 there were 10 transactions reported of at least 3,000m², of which two transactions of over 10,000 m².

During the first 9 months of 2019, transaction volumes reachedapproximately 337,000 m², representing almost 78% increase incomparison with the same period in 2018, when total take-upreached 189,300 m².

Key Transactions in Q3 2019

Project Location Size (m²) Type

CTPark Bucharest West Bucharest 167,000 Extension

WDP Stefanesti Bucharest 59,500New

Project

Southern Industrial Park

Craiova 30,000New

Project

Eli Park 1 Chitila Bucharest 20,000New

Project

WDP Buzau Buzau 20,000New

Project

MLP Chitila Bucharest 20,000New

Project

Global Vision Timisoara

Timisoara 17,500New

Project

Demand

Tenant PropertySize (m²)

Deal Type

Sector

Urgent CargusP3

Bucharest A1

16,000 New lease Distribution

FildasLOG.IQ

Mogosoaia11,500 Renewal Pharma

Fine StoreTriton

Logistics4,420 New lease Distribution

WebtradeMarketing

P3 Bucharest

A14,000 Relocation Distribution

Coca ColaP3

Bucharest A1

3,500 Relocation Distribution

Pehart Tec Group

TRC Park Cluj

3,500 New lease Production

TellurOtter

Logistic Park3,000 New lease IT&C


Deliveries and stock in Q3 2019 in Romania:

Deliveries

The deliveries of new industrial and logistic spaces accelerated during Q3reaching 171,000 m². Bucharest represented the largest share, with over40% of total deliveries. It was followed by the Center region, with almost26% of deliveries. Thus, modern stock in Romania totaled 4.19 million m² atthe end of Q3.

In total, during the first 9 months of 2019, approx. 370,000 m² of modernindustrial and logistics halls were delivered nationwide.If the pace of the previous quarters is maintained in Q4, by the end of theyear total deliveries might reach up to 493,000 m².

At the end of Q3 2019, over 307,000 m² of industrial and logistics halls wereunder construction, most of the units expected to be delivered in 2020.


Rents by Region

West & North-WestRents: 3.2 – 4.0 €/m²/month

South-WestRent: 3.0 – 3.7 €/m²/month

CenterRents: 3.5 – 4.1 €/m²/ month

East Rents: 3.3 – 3.6 €/m²/month

SouthRents: 3.2 – 4.0 €/m²/month

Bucharest & Ilfov County Rents: 3.6 – 4.1 €/m²/month

South – EastRents: 3.3 – 3.6 €/m²/month

Total Stock Evolution - Romania (m²)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

2011 2012 2013 2014 2015 2016 2017 2018 2019F

Rents remained stable during thefirst 9 months of 2019, between€3.6 and €4.1 per m² per month inBucharest and its vicinity andbetween €3 and €4.1 in otherregions of Romania.No significant changes in rents areexpected until the end of the year.

Vacancy is also projected to remainstable at the national level until theend of the year, to around 5.5-6%.Bucharest could experience slightlyhigher vacancy rates.

Rents & vacancy


Jones Lang LaSalle Services SRLVictoria Center145 Calea Victoriei, 10th FloorBucharest, RomaniaTel: +40 (0) 21 302 3400

_________________________www.jll.rowww.jll.comwww.officefinder.rowww.cautabirouri.ro

Meet the teamManaging Director

Silviana [email protected]

Capital Markets

Andrei VăcaruHead of Capital [email protected]

Office Department & TenantRepresentation

Marius Șcuta, MRICSHead of Office Department & Tenant [email protected]

Maria FloreaKey Client [email protected]

Industrial Agency

Costin BănicăHead of Industrial [email protected]

Living

Andreea HamzaSenior Director [email protected]

Retail Agency

Corina StamateCenter [email protected]

Property Management

Mariana StamateHead of Property [email protected]

Development & Land

Attila PeliHead of Development & [email protected]

Business Development

Viorel OpaițBusiness Development [email protected]

Valuation

Alina Cojocaru, MRICSHead of Valuation [email protected]

Project & Development Services

Cezar FloreaLEED Green Associate & BREEM International AssessorHead of Project&Development [email protected]

Research & Consultancy

Alexandru DavidResearch [email protected]

© 2019 Jones Lang LaSalle IP, Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.

Documents

City Report - officefinder.ro City Report Q3 2019.pdf · COPYRIGHT © JONES LANG LASALLE IP, INC. 2019 Bucharest City Report Q1 2019 Investment Market Unemployment rate September