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Romanian Investment Trends

ONCOR INTERNATIONAL 2007

one of the largest markets in Central and Eastern Europe is the newest member of the European Union. the Balkans. the Middle East and Northern Africa. Considering the fact that the level of transactions on the Romanian market is still the lowest in Central Europe the unexplored potential of the national market is very high on a long term perspective. ONCOR INTERNATIONAL 2007  . this country is gradually becoming the perfect location for foreign investment.MACROECONOMICS I Introduction Romania. With an easy access to the countries of the former Commonwealth of Independent States.

NIS.6%.8 percent. Evolution of annual GDP growth rate: GDP growth 1995 .0% 8. On the supply side.2007* 10.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Romania Source: NBR. falling short of the September’s benchmark projection by 0.0% 6.0% -2.0% -6. For the first time in 2006. the economic growth pattern showed investment becoming the engine of GDP growth.0% 4. the growth rate of real GDP accelerated for the fourth time running to 8.  ONCOR INTERNATIONAL 2007 . Eurostat. the consumer sector is expected to continue developing.7 percentage points.G GDP/ INFLATION RATES/ FDI Economic reforms over the past 16 years have led to the present fast growing economy.8%). The privatization of the large state owned companies has attracted many western companies that considered Romania as an investment opportunity.0% 0. GDP growth forecast for 2007 is of 5. Foreign Direct investments (billion) 10 9 8 7 6 5 4 3 2 1 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007* Source: NBR. the growth rates of consumer demand and exports recorded insignificant changes quarter on quarter. relatively low interest rates and the competitive tax policy .16% flat tax.3 percent from 7. due to its economic indicators (inflation has been constantly decreasing from the 1997 figure of 154 % to 5 % in 2006. all economic sectors posted higher paces of increase. the unemployment rate is currently 5.0% -4.0% 2. *estimations Europe In Q3 2006. *estimations Although consumption and GDP per head are lower than the regional average and EU levels.0% -8.

the Romanian LEI (RON) stabilized towards Euro (EUR) with the average exchange rate amounting to RON 3. *estimations EU Foreign direct investments (FDI) growth over the last five years reflects a strong economic recovery that has propelled Romania to the top rank among SEE and CEE countries in terms of GDP and export growth. Exchange Rates 4.5 2.0 1.Romania & EU 2003 2004 2005 2006 2007* 2008* Romania Source: NBR.082 billion. Romania’s foreign debt is declining and Romanian purchasing power is rising.% 50 40 30 20 10 0 1997 2001 2002 Inflation Rates .0 3.8178 in January During 2006 the dollar (USD) slightly depreciated against the RON and reached an average price of RON 2. registering a 74. E 2007.213 billion).0 2005 2001 2002 2003 2004 2005 2006 2007* USD Source: NBR. *estimations EUR Due to the stronger RON. A strong RON is also acting as a buffer against the rise of inflation.24% increase against the same period last year (Euro 5.6132 in January 2007. This trend is very likely to continue in 2007. investments at the Bucharest Stock Exchange (BSE) continued to be profitable for foreign investors.5 1.5 4. As a result of the strong RON.5 3.0 0.5 0. In 2006 inward Foreign Direct Investments reached Euro 9. Exchange Rates In 2006. ONCOR INTERNATIONAL 2007  .0 2.

GDP 2002-2006 (bin Euros) 140 120 100 80 60 40 20 0 2002 2003 2004 2005 2006 Market capitalization Source: BSE. 2007 GDP  ONCOR INTERNATIONAL 2007 .30% energy services materials banks and financial 2. in Romania the small size of the capitalization could mean that there is a lot of space for future growth.S Securities Market Market capitalization now stands for about 23 % of the national GDP and this is mainly due to the lack of new companies and IPOs on the stock exchange and not because the current stock are rated too low.40% 2.40% 0.40% 45.70% equipments chemicals consumer goods pharmaceuticals Source: BSE. 2007 While in older EU member states the market capitalization represents a value between 50% . Market capitalization by sector for activity 2.70% of the national GDP. and a great development potential.20% 38. BSE capitalization vs.10% 0.60% 4.

stock 400 % 350 % 300 % 250 % 200 % 150 % 100 % 50 % 0% 2002 2003 2004 2005 2006 2007* BET Source: BSE. 2007 BET C BET FI Considering the fact that the level of transactions on the Romanian market is still the lowest in Central Europe the unexplored potential of the national market is very high on a long term perspective. the stock exchange does not fulfill it’s duties in the economy. Yields index. ONCOR INTERNATIONAL 2007  . meaning that it failed to help companies get financial support from the securities market.Still. telecom etc. Some sectors of the economy are yet to be present on the market: air transport.

In the neighbouring Czech Republic. The very high demand has been the perfect fuel for the real estate market.  ONCOR INTERNATIONAL 2007 .THE PROPERTY MARKET I Introduction The Romanian real estate market continues to offer investment yields that are superior to mature markets in the European Union and North America. thus ensuring the steady growth of the entire sector. estate real investments last year fell to 7.50% for office and retail spaces.25% 7. Poland and annual yields for Slovakia.

Rent Office index . focus on the building of the Bucuresti – Brasov motorway. with developers still focusing on the northern area of Bucharest. in terms of access. which would help decrease traffic issues. especially Western part of Bucharest.Romania 24 22 20 18 16 14 12 10 8 6 4 2 0 2002 2003 2004 2005 2006 2007* Bucharest Brasov Timisoara Constanta Iasi Cluj-Napoca Source: Coldwell Banker Affiliates of Romania. where high hopes. started to attract new developments. Also other areas.O Offices The office space market is expected to boom again in terms of developments starting 2008. * estimations America House Financial Plaza Charles de Gaulle Milenium Business Center ONCOR INTERNATIONAL 2007  .

5 years from now. Bucharest Mall Plaza Romania Unirea Shopping Center  ONCOR INTERNATIONAL 2007 . By then.Bucharest Office rent index (Eur/ sqm/ month .downtown & innercity areas) 40 35 30 25 20 15 10 5 0 2002 2003 2004 2005 2006 2007* 2008* Downtown Source: Coldwell Banker Affiliates of Romania. 2 million sqm of offices in Bucharest and the actual supply only reached about 1 million. R Retail Shopping Centers Romania with its potential market of over 21. Hungary (10 million).5 million) all have smaller markets.5 million consumers is the second largest market for goods and services in Central and Eastern Europe (excluding Russia and the Ukraine) In comparison. Czech Republic (10 million). * estimations Innercity It is estimated that the office market will reach a balance between supply and demand in approx. Austria (8 million) and Slovakia (5. the estimated demand for office spaces will be twice as high as supply: there is an estimated need of approx.

130 100 .130 60 . Romanian retail market has proved to be has proved to be a great opportunity for international retailers and investors alike.70  ONCOR INTERNATIONAL 2007 .downtown RENT Euro / sqm 80 .000 0 Croatia Bulgaria Slovakia Hungary France Russia Germany Serbia Italy Czech Republic Ukraine Austria Romania Turkey UK Poland GLA sqm Source: Coldwell Banker Affiliates of Romania.000. aided in part of an increasingly attractive target for international retailers which stimulated the demand for prime retail locations and solid rental growth.000 800.downtown CONSTANTA .70 50 .000 400.80 40 .400.New Pipeline Shopping Centre Schemes 2007-2008 2. High Street The high street retail sector is booming.70 45 .downtown CLUJ . BRASOV .800. Downtown historical area of Bucharest CITY BUCHAREST Calea Victoriei Street Magheru Blvd.70 50 .000 1.000 1.000 200.000 600.000. Calea Mosilor Street Stefan Cel Mare Blvd.downtown IASI . * estimations Together with one of the lowest levels of shopping centres supply in Europe and relatively weak domestic competition.000 1.80 50 .200.70 40 .000 1.000 1.600.downtown TIMISOARA .

due to the increase in the production and storage operations.Bucharest 80 70 60 50 40 30 20 10 0 2002 2003 2004 2005 2006 2007* Source: Coldwell Banker Affiliates of Romania. Brasov. Constanta. Timisoara.I Industrial / Logistic Parks The Romanian industrial market features an increasing demand for modern premises with all the necessary facilities. The industrial and warehouse real estate market can be characterized by high demand for western-grade facilities and a massive supply of antiquated premises. Cefin Logistics Park ONCOR INTERNATIONAL 2007 10 . Cluj Napoca. Iasi or Oradea. * estimations The demand for industrial space in Bucharest is strongly rising. Rent index Euro/ sqm/ year . This trend is generally seen in the most important cities such as Bucharest.

Romania 16 % 14 % 12 % 10 % 8% 6% 4% 2% 0% 2002 2003 2004 2005 2006 2007* Offices Source: Coldwell Banker Affiliates of Romania. * estimations 11 ONCOR INTERNATIONAL 2007 .7. financing their projects and imposing a series of conditions for acquisitions. * estimations Retail Industrial Some investors. Currently. sealing partnerships with major developers.M America. The following table shows the yields evolution in the last 6 years: Prime Yields Index: Commercial Property Market . Poland and Slovakia. annual yields for real estate investments last year fell to 7.50% for office and retail spaces. all the segments of the real estate market are characterized by a lack of projects that could be acquired by large foreign investors.Bucharest 1420 1220 1020 820 620 420 220 20 2002 2003 2004 2005 2006 2007* Office High Street Retail Industrial Shopping Centers Source: Coldwell Banker Affiliates of Romania.25% . possibly rising to 13% for projects located outside the capital city. Rent Index Euro/ sqm/ year . have embraced a different strategy. Market development and opportunities The Romanian real estate market continues to offer investment yields that are superior to mature markets in the European Union and North In the neighboring Czech Republic. in Romania. Such investors are getting annual yields of 8-10%.

00% 9.00% Rent trend next Yield trend next 12 months 12 months SHOPPING CENTRES Location BUCHAREST BRASOV TIMISOARA CONSTANTA IASI CLUJ NAPOCA € rent 2005 sqm / year 450 252 252 252 252 260 Yield 2005 (%) / year 8.200 480 480 480 480 480 9. 2007 first semester data ONCOR INTERNATIONAL 2007 12 .50% 8.00% 1.00% 10.25% 8.25% 8.00% 9.50% 9.00% 9.320 1.25% 8.50% 8.000 sqm+) Location BUCHAREST BRASOV TIMISOARA CONSTANTA IASI CLUJ .OFFICES Location BUCHAREST Downtown Inner city BRASOV .downtown CLUJ .00% 9.00% 8.25% 240 168 174 174 174 174 174 6.00% 9.25% 8.00% 10.00% 9.00% 12.NAPOCA € rent 2005 sqm / year 54 51 42 51 51 42 Yield 2005 (%) / year 9.00% 8.50% 7.50% 9.25% 8.downtown CONSTANTA .200 1.00% 8.00% 9.25% 8.downtown IASI .00% € rent 2006 sqm / year 52 51 42 51 51 51 Yield 2006 (%) / year 8.00% € rent 2006 sqm / year 420 230 230 230 230 240 Yield 2006 (%) / year 8.00% 10.00% 9.00% 9.00% 8.00% 12.50% 9.LOGISTICS/DISTRIBUTION (Unit size of 10.00% 9.downtown IASI .25% 8.00% 8.320 660 720 600 600 720 8.25% 8.25% € rent 2005 sqm / year Yield 2005 (%) / year € rent 2006 sqm / year Yield 2006 (%) / year € rent 2007 sqm / year Yield 2007 (%) / year Rent trend next Yield trend next 12 months 12 months INDUSTRIAL .downtown TIMISOARA .00% 9.00% 8.25% Rent trend next Yield trend next 12 months 12 months Source: Coldwell Banker Affiliates of Romania.00% 9.25% 8.downtown TIMISOARA .00% 1.25% 8.00% 10.00% 8.downtown 1.NAPOCA .downtown 216 144 162 162 162 162 162 10.50% 9.00% 9.00% 9.3% 10% 12% 12% 12% 12% 12% 222 144 162 162 162 162 162 7.00% 12.50% € rent 2007 sqm / year 390 210 210 210 210 220 Yield 2007 (%) / year 7.00% € rent 2005 sqm / year Yield 2005 (%) / year € rent 2006 sqm / year Yield 2006 (%) / year € rent 2007 sqm / year Yield 2007 (%) / year Rent trend next Yield trend next 12 months 12 months HIGH STREET RETAILING Location BUCHAREST Calea Victoriei Magheru Blvd BRASOV .560 720 840 720 720 780 8.25% 8.50% 10.200 1.25% 8.00% 12.NAPOCA .00% € rent 2007 sqm / year 51 51 51 51 51 51 Yield 2007 (%) / year 8.00% 12.downtown CONSTANTA .00% 9.50% 8.80% 8.00% 9.50% 7.50% 8.downtown CLUJ .00% 8.25% 8.00% 12.50% 8.

ro An International Real Estate Services Company North America • South America • Australia • Asia • Europe ONCOR INTERNATIONAL 2007 . Romania. Icoanei Street.50A. Bucharest 2.coldwell-banker. Code 020457 Phone: +40-21-200 39 39 Fax: +40-21-200 39 37 www.