2018 is certainly giving many encouraging signals with regards to the real estate investment market, particularly in the office segment. We feel that momentum is shifting in this segment, as larger office schemes come to the market and subsequently increase the average ticket size per transaction. Consequently, we expect liquidity on the office segment to increase substantially compared to 2017 and put Romania on the map for new investors. Activity in the industrial segment has the potential to remain buoyant in 2018, but in this case, the number of transactions suffers from a limited number of products available on the market. Activity on the retail segment will be slightly more muted, also due to a limited supply of available products.

 

 

Analysing the type of products coming to the market, the office segment is set to experience the biggest shift in 2018. Over the past ten years, the quality of office products coming to the market has improved markedly as the number of professional developers with extensive experience has increased. The number of institutional-grade products has increased progressively and we are now at a point where Romania can be competitive compared to other CEE countries with regards to building quality as well as tenant profile. Even more encouragingly, these changes have also been noticeable in regional cities where both local and international developers have been able to produce buildings of considerable quality and attract blue-chip tenants.

 

 

 

I am very optimistic with regards to the outlook for real estate investment in regional cities. Looking at the broader CEE landscape, we have identified two development patterns: Hungary, which is a capital-focused country, and Poland, which has very strong regional cities. Romania is roughly in between these two countries, but there are strong signs that is evolving towards the Polish model. In particular, internal migration patterns show that regional cities will continue to develop at a very strong pace and demand for real estate spaces will remain very strong.

 

Over the past two years, the leasing activity for regional cities has been very energetic, leading to single-digit vacancy rates in the main three regional cities: Cluj-Napoca, Timisoara and Iasi. Along with the very strong leasing market, the supply of high-quality office assets has increased significantly over the past few years and we believe conditions are ripe for new investments in regional cities.

 

 

The usual sources of capital remain very strong for Romania. Investors from South Africa, the Czech Republic, Israel, Poland, Austria or Greece look to increase their exposure to the market. Additionally, new investors from the US, Germany and Turkey are very active in prospecting the market. Overall, we would say that the main drags on new investments are the volume of projects coming to the market along with political noise which causes uncertainty for investors.

 

 

Banks’ appetite for lending has improved over the recent years. Lending margins have been on a downward trend and coupled with the low Euribor rates have resulted in an attractive lending package for investors. However, lending in RON has suffered due to the rise of interbank RON-denominated rates.