ABOUT THE EVENT
Context
The global office market, in particular, is experiencing an unprecedented decline in demand for new spaces, exacerbated by high financing costs and the slow return of employees to offices. For instance, the German market is facing the most severe crisis in decades.
In Bucharest, this year is expected to be the weakest in terms of new building deliveries in the past 20 years. The low interest from buyers for real estate investments during this period of price adjustment is the main characteristic of the market and a factor that could contribute to a decrease in property prices. The volume of transactions with commercial properties (offices, malls, warehouses, and hotels) could be as weak this year as in 2023, which saw the lowest investment level in the past 10 years.
Increased financing costs and investor reluctance towards the office sector, which was the preferred asset class in the past five years, have significantly impacted investment activity. Consequently, office project transactions accounted for only 19% of the volume traded in 2023, whereas this sector's contribution from 2018-2022 was over 60%.
At least in the first half of 2024, real estate consultants expect a continued weak period for investments in the Central and Eastern European region. However, in the second half of the year, we might see a modest revival, provided that interest rates decrease in the Eurozone and the USA starting from the second quarter of the year and economic activity remains at decent levels.
The office leasing market is experiencing a downturn, characterized by a reduction in available spaces by about 60% compared to three years ago. The average demand in the office leasing market has decreased from 2,000 square meters in the years 2015-2020 to 700-800 square meters. In the retail market, there is a renewed appetite from developers for large-scale projects like malls or mixed-use projects, which tend to have a higher investment footprint, following the dominance of retail parks in previous years.
The macroeconomic context and difficult urban planning regime have led to a reduction in housing supply, especially in Bucharest. In total, approximately 56,200 homes were sold in Bucharest and Ilfov in 2023, a 13.2% decrease compared to the previous year – it should be noted that the comparison base, 2022, represents a year with absolute records in residential unit sales.
Bucharest's hotel market seems increasingly attractive to foreign investors. The occupancy rate of Bucharest hotels rose to 66% last year.
Discussion Topics
- Negative signals from Europe’s largest economy could impact other continental economies, mainly through investor reluctance to place their money in this sector.
- Compared to Warsaw, Prague, Bratislava, and Budapest, the Bucharest market is the cheapest in the region in terms of offices, retail properties, logistics, and housing.
- Remote work, the downsizing of many companies with redundant spaces, and other factors have led to a reduction in the average office leasing transaction size.
- The fragmentation of spaces occupied by large corporations into smaller offices is occurring in about a quarter of the modern spaces in the market.
- The trend initiated by major food retail chains, such as Lidl or Penny, to diversify their local expansion strategy by renting stores.
- New international retailers are expected in Romanian malls.
- The impact of preparations for the 2024 presidential, parliamentary, local, and European elections on the real estate market.
- Over 60% of houses and apartments sold in Romania in 2023 were purchased exclusively with own resources, without a bank loan, according to SVN calculations.
- The average rate of a mortgage contracted over 25 years to purchase a new two-room apartment (50 square meters usable) in Bucharest is estimated for January 2024 at approximately 53% of the national average net salary, according to the SVN index.
- Higher construction costs will also contribute to reducing the volume of housing deliveries.
- The impact of increasing the VAT rate from 5% to 9% on housing transactions starting January 1, 2024.
- Concrete solutions to resolve issues caused by the lack of a unified urban planning framework.
- What is the average profit margin for real estate developers? Have developers started selling below the initially estimated profit margins?
- Bucharest’s historical area is being revitalized through extensive projects of consolidation and transformation of historical buildings into hotels, offices, or homes.
- Perspective on investment activity in hotel assets in the main cities of the country amid rising financing costs and the economic and geopolitical situation.
Agenda
09:00 – 09:30 Registration & Welcome coffee
09:30 – 09:35 Welcome speech by Oana Osman, Editor-in-Chief of Profit.ro, and Alexandru Urzică, Editor at Profit.ro
09:35 – 13:00 Debate with key industry figures:
- Sebastian Piu, Co-Founder & Managing Partner, 123Credit
- Andrei Boca, Leasing Director, Globalworth
- Mihaela Pană, Partner, Private Investment Capital Markets, Cushman & Wakefield Echinox
- Antoanela Comșa, Deputy CEO, Meta Estate
- Răzvan Ionescu, CCO, Imobiliare.ro
- Alexandru Mihai, Managing Partner & Sales Director, Nordis Group
- Alina Necula, Country Manager, Lion's Head
Registration
Access to this event is BY INVITATION ONLY. The organizer reserves the right to select the audience. For registration, please visit evenimente.profit.ro.
