Although the number of office space projects put up for sale has increased over the past yeas, few of them meet investment funds’ requirements, Colliers said in a press release Thursday.
The average length of a rental contract, a key criterion for investors in search for solutions to ensure cash-flow predictability, was impacted by the economic situation and uncertainty on the market in the last three years. Therefore, rental contracts on three years and break-option contracts have become a common practice on the market, which affected the attractiveness of office buildings, reads the press release.
Once the economy becomes stable, renters will again be willing to sign long-term contracts, which will unfreeze activity on the real estate market and stimulate investors’ appetite.
Most investors and banks are interested in rental contracts on at least five years and no break-option. To attract investors, this should be the rule on the local office space market, Colliers said.
Investors focus on well-situated office buildings with a high occupancy rate. On this segment, the rental activity has improved lately, said Blake Horsley, investment director at Colliers International Romania.
According to Colliers analysts, in 2012, many private equity funds in Europe or in Central and Eastern Europe, either ended their mandate or reached their investment target and exited the local market to attract capital.
Private capital funds will return in 2013 with extended investment mandates, and Romania will compete with other countries to attract real estate investors, Colliers said.