CEE Investment Market | H1 2019 | JLL

Romania highlights

The H1 2019 property investment volume for Romania is estimated at circa €338 million, a value almost 64% higher than the one registered in the same period in 2017 (€205 million). However, there are a number of transactions in different stages of negotiations that will most likely be concluded during the remainder of 2019 or 2020 

The number of transactions increased, however, the average deal size decreased, standing at approximately €25 million. 

Bucharest accounted for over 27% of the total investment volume, mainly because of a very large office transaction which was closed in Q2 and a retail portfolio transaction closed in Q1, both in secondary cities. Market volumes were dominated by office transactions (52%), while retail accounted for over 33%. 

The largest transaction registered in first half of 2019 was the acquisition of The Office, a 60,880 m² office park in the CBD of Cluj-Napoca, the second most important office market in Romania, by Dedeman. This is the first acquisition of a private Romanian group in a secondary city in the country and the second acquisition in Romania, after buying The Bridge in the Center-West sub-market of Bucharest. 

Other notable office transactions in Romania were the acquisition by a private group of former First Bank HQ in the CBD of Bucharest for €20 million and the acquisition by Hagag Group of the Stirbei Palace, a historical building in the center of Bucharest which they plan to reconvert into an office scheme, for an estimated €10 million.

The largest and only retail transaction concluded in the first half of 2019 was the acquisition of an 80% participation in a portfolio of 9 retail parks in several cities across Romania by Mas REI from Prime Kapital. The South African group already owned 20% in the assets and paid for the participation an estimated €113 million. 

The most important industrial transaction was the acquisition of a logistic park on the A1 Highway, at the Km. 13, the most important sub-market in Bucharest. Bought by CTP from Vabeld for approximately €40 million, the deal consolidated the position of CTP as the largest owner of industrial/logistic space in Romania.

The macro-economic forecast for Romania continues to be positive, despite some recent concerns. The country was one of the EU’s top performer in 2018 (with GDP growth estimated at 4.1%) and is expected to continue its positive evolution in 2019 as well, with GDP increase forecast at over 4.0%. On the financing side, terms and conditions are getting closer to what can be expected in the core CEE markets. Consequently, sentiment is strong, with a total volume for 2019 estimated to surpass the €1.2 billion mark. 

Prime office yields are at 7.25%, prime retail yields at 7.00%, while prime industrial yields are at 8.00%. Yields for retail are at the same level as 12 months ago, while office and industrial yields have compressed by 25 and 50 bps respectively over the year. There is a very soft downward pressure on yields, however, for the rest of 2019 we do not expect any compression, especially for retail and industrial, mainly due to the lack of prime product transactions.