Romania is the only country in the region to register growth in property investment during the health crisis.
While the number of transactions decreased in 2020, the average deal size increased to EUR36 million, according to the JLL CEE Investment Market Report January 2021, which analyses the property investment markets in Romania, Poland, Czech Republic, Hungary and Slovakia.
The total office investment volume for 2020 reached EUR770 million, an all-time record for this market segment.
“Even though the Covid-19 outbreak had a strong impact on the Romanian macro-economic environment, the real estate investment market managed to register a healthy year on year increase (the only one registered in CEE), boosted by the closing of some of the largest office transactions ever registered. The most important conclusion of what happened last year is that, at the right price level, there is liquidity for almost any product,” said Andrei Vacaru, Head of Capital Markets, JLL Romania.
Most of the transactions completed in 2020 were initiated before March, when the pandemic broke locally, with fewer projects coming to market during the rest of the year.
The focus of the owners shifted in the last nine months on asset management initiatives and the implementation of new rules for adjusting their buildings to the ever-changing ‘new reality’, with much fewer considering disposals.
Bucharest consolidated its dominance as the preferred investment destination in Romania and accounted for around 85% of the total transaction volume in 2020, followed by Timisoara, Cluj-Napoca and Pitesti.
Offices were the most liquid asset class in 2020, making up for 85% of the total market volume, while industrial accounted for over 8% and retail for only 4%.
The largest transaction registered in 2020 was the sale of the NEPI Rockcastle’s office portfolio, consisting of three properties in Bucharest – Aviatorilor 8, The Lakeview and Floreasca 169 and one in Timisoara – City Business Center, with a total of approximately 120,000 sqm GLA. The buyer was AFI, one of the major developers in the Romanian market, marking its first acquisition of an income-generating product.
Other notable office transactions in Romania in 2020 were the sale of approximately 61.49% of the GTC portfolio to Optima, the sale of the 37,500 sqm GLA Floreasca Park in Bucharest to Resolution Property Investment Management and Zeus Capital, and the acquisition by local group Dedeman of the third phase of The Bridge – a 21,100 sqm building part of an 80,000 sqm office park in the Center-West area of Bucharest.
The largest industrial transactions in 2020 were two acquisitions made by CTP – Equest Logistic Park and A1 Business Park – both located on the A1 Highway, at Km. 13, the most important logistic sub-market in Bucharest.
CTP also bought the Mobexpert warehouse on the A1 Highway in a sale and lease back transaction, consolidating its position as the largest owner of industrial/logistic space in Romania and one of the two dominant players in the west of Bucharest.
The limited investment activity on the industrial segment is due to lack of product as the market is dominated by strategic players who very rarely sell, JLL analysts noted.
The only significant retail transaction concluded in 2020 was the sale of Jupiter City, a 41,500 sqm shopping center in Pitesti, bought by Supernova.
Local capital is starting to play a bigger role in the Romanian investment market. Romanian buyers accounted for 28% of the transaction volume in 2019 and for over 15% in 2020, compared with just 5% until 2017.
The most active players were Dedeman, One United, Lotus Center and Element Industrial.
Prime office yields are at 7%, prime retail yields at 7.25%, while prime industrial yields are at 8%. Yields for office and industrial are at the same level as 12 months ago, while retail yields have increased by 25 points on the year.
Romania is still well positioned from a yield perspective, as the current values are still well above those registered in the last peak (2007) and those currently quoted in the rest of the region. While it remains difficult to make accurate predictions as the entire economy is still very sensitive to the evolution of the pandemic, JLL said it expects transaction volumes might slightly decrease in 2021 but forecasts may improve in the coming months with the vaccination process started and considering the significant amount of sidelined capital targeting real estate.