april 2014, number 2 office - business...
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April 2014, Number 2www.business-review.eu
OFFICENEW HORIZONS
OfficeDemand for office space in thecapital was up by about 25 percentin the first semester against thesame period of last year, and thetrend is expected to continue
ResidentialHousing demand is on the rise,say pundits, but newdevelopments have stalled asbanks remain reluctant to financeresidential projects
ArchitectureThe next generation of shopping malls will need to find ways to offer consumersmore than just shopping options
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Property
2 OVERVIEW www.business-review.euBR Property | August 2014
PropertyFacts&Figures
Commercial2 – retail projects will be delivered thisyear in Romania: Vulcan Value Center(35,000 sqm) in the south-west ofBucharest and Shopping City Targu Jiu(27,000 sqm), both developed by NEPI 1.66 million sqm – Romania’s modern re-tail stock890,000 sqm – Bucharest’s modern retailstockEUR 60-70 sqm/month – rents for primeshopping centers in Q1EUR 55-65 sqm/month – rents for primehigh street units
Source: JLL Romania
Five largest office projects(2014)Green Gate (31,000) – developed byS Group Holding and delivered thisMayCity Offices (27,000 sqm) – devel-oped by Globalworth in the Eroii Rev-olutiei SquareGreen Court Bucharest (19,500sqm) – developed by Skanska in theBarbu Vacarescu-Floreasca areaHermes Business Campus (18,000sqm) – developed by Atenor in thePipera neighborhoodAFI Park 2 (12,200 sqm) – developedby AFI Europe close to the Polytech-nic University
Top five officetransactions (H1) 16,000 sqm – pre-leased by Vodafonein the Bucharest One project devel-oped by Globalworth13,700 sqm – pre-leased by Orangein Skanska’s Green Court Bucharestoffice project4,800 sqm – pre-leased by Endava inthe third building of AFI Park devel-oped by AFI Europe4,000 sqm – expansion by Ericsson inthe West Gate office park owned byGenesis Development3,500 sqm – leased by Allianz in theFloreasca Park office projects ownedby Portland Trust
Residential1 percent – the increase in askingprices for Bucharest apartments inthe first semester against the begin-ning of the year EUR 1,073/sqm – average askingprice for Bucharest apartments atthe end of H1EUR 1,183/sqm – average askingprice for new apartments inBucharest at the end of H1EUR 991/sqm – average asking pricefor old apartments in Bucharest atthe end of H1
Source: Imobiliare.ro
InvestmentsEUR 402.4 million – the investmentvolume in Romania in H1 2014, thehighest six-monthly volume since H12008 222% – increase of the investmentvolume in Romania in H1 2014 y-o-y58% – share of office transactions inthe total investment volume 55% – share of prime properties inthe total investment volume9% – share of distressed propertiesin the total investment volume8% – prime yields on the office seg-mentEUR 60/sqm/mth – prime rent forshopping centers EUR 18/sqm/mth – prime rent for of-fices EUR 3.8/sqm/mth – prime rent forindustrial space15 – number of land transactions inH1, totaling 630,000 sqm
Source: CBRE data
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EDITORIAL 3www.business-review.euBR Property | August 2014
EDITOR Simona Bazavan
COPY EDITOR Debbie Stowe
PHOTO EDITOR
Mihai Constantineanu
LAYOUT Beatric e Gheorghiu
ART DIRECTOR Alexandru Oriean
PUBLISHER Anca Ionita
EXECUTIVE DIRECTOR
George Moise
SALES & EVENTS DIRECTOR
Oana Molodoi
SALES & EVENTS
Sales managers: Ana-MariaNedelcu, Oana Albu,
Raluca Comanescu
MARKETING
Ana-Maria Stanca,
Ana Maria Andrei, Iulia Mizgan
PRODUCTION Dan Mitroi
DISTRI BUTION Eugen Musat
PUBLISHER
Bloc Notes Media
ADDRESS
No. 10 Italiana St., 2nd floor, ap. 3Bucharest, Romania
LANDLINE
Editorial: 031.040.09.32Office: 031.040.09.31
EMAILS
[email protected]@[email protected]
BR Property
Contents4 Office market: ready for ten-
ants
6 Housing market still
awaiting kick start
9 New Praktiker owner plans
to resume expansion
10 Back to basics in retail and
office architecture
EDITORIALSimona BazavanEditor
It is always the office segment, withits lower associated risk, that kick-starts a new real estate cycle, say in-dustry representatives. The officemarket did indeed have the most dy-namic evolution by far of all the realestate sectors in the first semester,the period on which BR’s latest prop-erty supplement focuses.
Some 95,000 sqm of office spacewas delivered in Bucharest in the firsthalf of this year and the figure is ex-pected to increase to about 135,000sqm by yearend. Demand for new of-fices increased by around 25 percentduring the same period, fueledmostly by IT, outsourcing and tele-com firms, BR learned from industryrepresentatives.
Will this be enough to fillBucharest’s newest office towers?Real estate agencies are, of course,optimistic, but the actual net take-up,meaning new entrants on the marketor expansions of existing companies,stood at 46,000 sqm in the first se-mester, according to JLL data. Re-newals and renegotiations made upanother 82,000 sqm, adding up to agross take-up of 128,000 sqm.
On the residential sector, on theother hand, the word that best de-scribes the evolution in the first se-mester is tepid. While developersspeak of demand picking up, thenumber of state-backed loans takenout through the Prima Casa program,the market’s main driver since itslaunch in 2009, dropped in the firstsemester y-o-y. Securing a loan for aresidential development remainsnext to impossible and bankers them-selves complain that even for endusers, procedures are so tight that bu-reaucracy has become the main issuethe sector is struggling with at present.
In the meantime, asking prices inthe capital increased by 1 percent inthe first semester, a figure well withinthe margin of error. There is no dataon actual sale prices, but stagnation,if not further drops, appears likely.
Should economic conditions fur-ther improve and the market get pastthe Prima Casa program, several de-velopers are waiting in the wings tostart works.
On the commercial segment no
new projects were delivered in thefirst semester. In fact, only two mod-ern retail schemes totaling 62,000will be delivered in Romania this year,the lowest level reported since 2005,according to a JLL report. The full halfof the glass is that several large sur-face shopping malls are being devel-oped in Bucharest and outside thecapital, and should be delivered fromnext year.
To find out what the future gener-ation of shopping malls will look like,BR talked to Mario Sua Kay, the archi-tect behind Immochan’s EUR 60 mil-lion Coresi mall in Brasov, the largestmall to be delivered outsideBucharest next year.
And talking about the future,CBRE has recently announced that 15major land transactions totaling630,000 sqm were closed in the firstsemester. The number and value ofland transactions has been going up,always the first sign of more develop-ments to come.
And there is “huge potential forgrowth,” industry representativeshave been repeating for several yearsnow. Judging from the results in thefirst semester, this potential is still along away ahead, but should the in-dustry post more substantial growth,it would be a sign that the entire econ-omy is advancing on more solidground.
Real estate: tepid evolution but a morepromising outlook ahead?
Photo: M
ihai Constantineanu
Office market: ready for tenants
35 percent, and second, new demand,from new entrants on the market andexpansions, reached a record level inH1. It represented about 30 percent ofthe total demand so far,” said Gala-tanu, adding that the trend is ex-pected to continue.
Given the high number of pre-leases in the first semester, the overallvacancy rate should not be affected,other market representatives agree.
“The majority of the office buildingsthat were already delivered in 2014, orwhich will be delivered by the end of2014, already have more than 80 per-cent of the space pre-leased. In somecases, the tenants are going to relocatefrom similar spaces, which means thevacancy rate will remain similar, but,in other cases, we have new tenants inRomania or net expansions, which,overall, will decrease the vacancy rate,”Marius Scuta, head of the office de-partment and tenant representation atJLL Romania, told BR.
According to JLL data, gross take-up in Bucharest stood at approxi-mately 128,000 sqm in the firstsemester. This was “slightly above thelevel registered in 2013 during the
same period (123,000 sqm) and in 2012(126,000 sqm). In general, gross take-up has remained stable over the pastthree years,” added Scuta. Out of the128,000 sqm gross take-up, approxi-mately 46,000 sqm represented newtake-up or net growth/expansions andapproximately 82,000 sqm comprisedrenewals or renegotiations.
Compared to 2011-2012 when de-mand was dominated by renegotia-tion and expansion transactions, thisyear there is more balance betweenthe various types of contracts – pre-leases, expansions, relocations fromnon-competitive to competitive stockand new entries, said Iorgu. “We canexpect a gradual increase of pre-leasecontracts over the next few monthswhich will give further momentum tothe local office market,” he concluded.
The IT waveCompanies active in IT, outsourcingand telecom remain the main playersdriving up the local office market, ac-cording to both developers and realestate firms. Over one third of lastyear’s office transactions involved ITfirms, as did about half of those sealed
this year, went on Iorgu. “In the first quarter, approximately
65 percent of the total demand for of-fice space – renegotiation transactionsnot included – came from companiesactive in IT and telecommunications.In the second quarter the share stoodat about 55 percent. So we can say thatmore than half of the demand formodern office space reported in thefirst semester came from these firms,”confirmed Galatanu.
And the trend is expected to con-tinue, given that lower costs, a versa-tile labor force and overall improvingeconomic performances continue toattract outsourcing and IT companiesto the local market, say pundits. WithPoland and the Czech Republic in-creasingly perceived as becoming sat-urated, over the coming period thelocal market should see more firms ac-tive in these industries set up localbraches or expand their existing oper-ations.
“Poland (Warsaw and Cracow), theCzech Republic (Prague) and Hungary(Budapest) are Romania’s main com-petitors. However, these markets arereaching a level of maturity, not necessarily from the perspective oftheir office space stock, but rathertheir labor force. As many centershave been set up in these markets,competition to get the right employ-ees and labor costs likewise is increas-ing,” explained Sirbu. Romania offersboth a well trained labor force with language skills plus a large officestock, and “a tenant’s market”, shewent on.
Outside the capital the costs areeven lower, and cities like Timisoara,Cluj-Napoca, Brasov and Iasi are in-creasingly on investors’ radar. Devel-opers are taking notice. “In big cities such as Timisoara, Cluj-Napocaand Iasi there is a large number of of-fice projects being built or which haverecently been delivered, most ofwhich are extremely efficient class Aoffice developments. They are alsobeing delivered in cities where de-mand is increasing – demand for office
∫ SIMONA BAZAVAN
Approximately 130,000 -135,000 sqmof new office space should be deliv-ered in Bucharest this year. Demandhas been going up but is it growingenough for developers to fill their newoffice buildings by yearend?
To begin with, this year’s new of-fice stock is below the average volumeover the last decade, Razvan Iorgu,managing director of the local CBRE office, told BR. Moreover,
“given the solid and stable growth ofdemand over the last six-eight quar-ters, there is reason enough for therenot to be a surplus in the market,” headded.
The net growth of demand for of-fice space in the first semester spellsoptimism for the industry, agreesOana Sirbu, associate within the officeagency of Colliers International Romania. “Basically, there were fewerrequests for renegotiations or reloca-tions within the same class of officespace. Moreover, we’ve seen the entryof several large players and thesetrends are the first signs of a healthymarket,” she told BR. New transac-tions are being signed or are currentlyin the negotiation phase, whichmeans that some of the new officeprojects will post vacancy rates of lessthan 20 percent by the end of the year,she added.
According to Mihaela Galatanu, re-search specialist at DTZ Echinox,some 60 percent of this year’s newstock was already leased by the end ofthe first semester. “Developers havemostly managed to attract tenantssince the construction phase – for ex-ample Green Court, Green Gate andthe second and third phases of AFIBusiness,” she told BR. And above all,demand for new office space – renego-tiation transactions not included –was up by 25 percent in the first half of2014 y-o-y, she stressed.
“We’re seeing two new trends thisyear. First, relocations from class C of-fice space to class A and B were up by
Demand for office space in the capital was up by approximately 25 percent in the first semester compared to thesame period of last year, and the trend is expected to continue, say real estate pundits. Companies active in IT,outsourcing and telecom remain the main players driving up the local office market, according to industry representatives.
The 31,000 sqm Green Gate project is the biggest office scheme delivered in H1
4 OFFICE www.business-review.euBR Property | August 2014
OFFICE 5www.business-review.euBR Property | August 2014
Having just emerged from its firstcrise de croissance, the Romanianreal estate office market is displayinga number of standard maturity char-acteristics: diversification, optimization,realism, environmental awareness.
DiversificationFor occupiers, the good news is that,after the major contraction in 2009,the office market still remains, formost sub-markets, a tenant’s market. Process-wise, once may sense a cleartrend of tenants’ migration to betterand sometimes cheaper spaces, andthe awareness that better space op-eration requires regeneration, refur-bishment and optimization.
Structurally, however, office de-velopment is definitely more diversi-fied (with a significant number of ten-ant-tailor-made developments), whileoffice letting/operation is also seeinga behavioural change towards a het-erogeneous tenant mix.
OptimizationDevelopers now need to secure some-what higher levels of pre-letting in or-der to have access to project (bank)
increasingly gained weight in the over-all leasing activity volume.
The current market context par-ticularly fosters pre-leases as newavailable stock expected to be deliv-ered is insufficient to meet the relo-cation demands of corporate occu-piers.
Environmental awareness It has become standard practice forthe new office developments to begreen buildings, and owners’ interesthas focused on undertaking refurbish-ment measures aimed at turningolder facilities into Class A energy ef-ficient buildings or simply into greeneroffice accommodation, and theBucharest office market has alreadyseen some successful reconversionprojects in this sense.
***
For Romania, the real estate sectorremains a key driver for economicgrowth, but the market matured andthe new expansion wave is now bene-fitting to experienced developers andinvestors only.
financing, which in fact translates addi-tionally into good deals for occupierswilling to pre-lease. Further, optimiza-tion is being fostered by differences be-tween sub-markets and as a conse-quence by the changing ratio of forcesbetween landlords and tenants.
As there is currently a clear prefer-ence from occupiers for good qualitycentral spaces at the expense of sec-ondary locations, owners of modernclass A office spaces enjoying good lo-cations are favoured in dealings with ten-ants, whilst Class B properties, espe-cially those located in non-metro orperipheral areas, are encountering sig-nificantly diminished leasing demand
and higher vacancy rates. This trend will,however, likely lead to a repositioning ofa significant number of office buildings,which, mainly because of location orstructural limitations, no longer meettenants’ demand.
Finally, the market now looks set forowners and occupiers to competefiercely for their interests with the resultevident in the quality of real estate proj-ects and their service operation. All in-volved (land-owners, developers, finan-ciers, owners, operators, tenants andother users, etc.) are likely to show anincreased flexibility, which is expectedto improve conditions for anyone.
RealismThere has been a clear demise of spec-ulative office development and transac-tion activities.
Pre-leasing is getting sacrosanct inoffice development finance, and its sharecontinues to increase. While pre-leasetransactions were almost nonexistent inthe first years of the economic crisis,when tenants would show excessive pru-dence and consequently an almost ex-clusive preference for completed proj-ects, since 2012, pre-leases have
OPINIONFlorian Nitu Managing Partner, Popovici Nitu & Asociatii
Office development sector in the young adult age
space outside Bucharest was up byhalf in the first quarter y-o-y,” addedIorgu.
While real estate firms maintain anoptimistic tone about the overall out-look, there are more measured viewson the market as well. Liviu Tudor,president of Genesis Development,which owns the 150,000 sqm NovoPark and West Gate office projects inBucharest, thinks it will be hard forthe market to absorb this year’s stock,even in the context of IT companiesexpanding their local footprint. “Weshould remember that in the first sixmonths alone almost 100,000 sqm ofoffice space was delivered and an-other 20,000-30,000 sqm is expectedto be completed by yearend. I think it
will be difficult for the market to ab-sorb a 130,000 sqm stock, given thatup to 15,000 employees can work onsuch a surface,” he told BR.
2014 office roundupSome 95,000 sqm of office space wasdelivered in Bucharest in the first halfof this year, approximately 15,000sqm more than the figure reported inthe same period of 2013.
The 31,000 sqm Green Gate projectfrom Czech real estate developer SGroup is the biggest office scheme tobe delivered so far in Bucharest thisyear. The office project required a EUR57.5 million investment and is locatedin Chirigiu Square. It was delivered inMay with an occupancy rate of about
60 percent. The project’s main tenantis local IT company Teamnet, whichhas leased around 10,000 sqm for its600 employees for a seven-year pe-riod. Other tenants include Mapei Romania, Teaha Management Con-sulting and Fujitsu Siemens.
The developer estimates that thebuilding will be fully leased in about ayear and, confident in the market’spotential for further growth, is lookingto buy more land in Bucharest for an-other office project, said VladimiraNovakova, managing director ofGreen Gate Development, during theopening event.
Elsewhere, AFI Europe deliveredthe second building of its AFI Park of-fice project in April after having pre-leased almost the entire 12,200 sqmGLA to American IT player ElectronicArts.
The third building in the project,which will be delivered in December,will add another 12,200 sqm GLA, outof which 40 percent has been pre-leased to British IT company Endava.AFI Park is located near the AFI PalaceCotroceni shopping mall, and whencompleted will feature five buildingstotaling approximately 60,000 sqm.Construction of the last two buildings,which will comprise 32,000 sqm ofGLA, started in April.
The end of the year will also see thedelivery of the first phase of Skanska’s
Green Court Bucharest project. It hasa leasable area of some 19,500 sqm, ofwhich 13,700 sqm has recently beenpre-leased by Orange Romania.Schneider Electric Romania had pre-viously pre-leased another 3,100 sqm.The entire project will feature threebuildings totaling 52,000 sqm.
The developer has invested EUR 46million in the construction of the firstbuilding and the foundation of thesecond one, which should be com-pleted by May next year. In addition todeveloping Green Court Bucharest,Skanska is also looking to buy moreland for a new office project and is
“likely” to close a land transaction byyear-end, company representativeshave previously stated.
Whereas Green Court Bucharest islocated in the Floreasca-BarbuVacarescu neighborhood, an area thatremains the capital’s most dynamicoffice sub-market, Green Gate and AFI Park are in the south and center-west. Despite its smaller size, the latter in particular is rapidly emergingas a new key destination for businessin the capital, due to its transport accessibility, proximity to the Poly-technic University, nearby studentcampuses and densely populated residential neighborhoods, accordingto JLL.
simona.bazavan @business-review.ro
2013 y-o-y 12 mo outlook
Completions 119,000 sqm +143% positiveTotal stock 2.08 mln sqm +6% positiveVacancy rate 14.4% -1.6% contractionGross take-up 293,000 sqm +20% positiveNet take-up 150,000 sqm +65% positivePrime headline rent EUR 18.5/sqm/mo - stagnationPrime yields 8.25% - negative
Source: JLL
Bucharest office outlook
impossible in the current market condi-tions, developers complain.
As a result, in recent years most ofthe residential developments have beenfinanced from private equity. Real es-tate developer Adama, which last yeardelivered 210 apartments in Bucharestand will deliver 50 more new homes inIasi this autumn following a total in-vestment of close to EUR 16 millionfrom its own funds, has land inBucharest to develop new residentialcompounds, Alina Necula, head of mar-keting & sales at Adama Group, told BR.
The developer is considering theBerceni, Razoare and Vasile Lascar areasof the capital for its next projects butsays it is difficult to give a precise time-line for beginning works.
“On one hand there is the process ofobtaining all the authorizations andpermits and there is also the market’sevolution,” she outlined. Adama is cur-rently in the process of getting the nec-essary permits and will most likelybegin a new project in the first quarterof next year, she added.
And the market evolution has beenpositive so far, said the marketing &
Housing market stillawaiting kick startHousing demand is on the rise, say developers and real estate pundits, but new developments have stalled asbanks remain reluctant to finance residential projects. The good news for prospective buyers is that prices arestagnating too, and fluctuations of less than 5 percent are likely by yearend.
∫ SIMONA BAZAVAN
Average asking prices for Bucharestapartments increased by 1 percent inthe first semester of the year comparedto six months ago, according to datafrom real estate portal Imobiliare.ro.And this stationary situation applies tomore than house prices, but the evolu-tion of the entire residential market inthe first semester.
“It is too early to talk about the resi-dential market (…). There are two enti-ties dictating this. On one hand thereare the banks, who cannot be convincedto start financing the residential sectorovernight, and on the other hand thereare the developers who so far don’twant to hear about residential projects,”said Attila Peli, head of developmentand land at JLL, during the 13th editionof BR’s Realty event in June. Neverthe-less, he predicted that the situationcould change next year.
Peli, who believes a new real estatecycle has begun, explained that like thelast time around, it is the office segment,with its lower associated risk, that willbe the first to experience the rebound.And recent market developments con-firm this.
New housing market crawlstowards recoveryOver 27,300 new flats located in 115 res-idential compounds of over 20 unitshave been built in Bucharest and Ilfovcounty since 2006, according to CBREdata. More than a third of this stock is inIlfov. In the capital, district three takesthe lead with a 17 percent share of thetotal modern stock. Headline askingprices are below EUR 1,000/sqm (grossbuilt) for 69 percent of modern stock.
Around 4,000 flats located in 31compounds were in various stages ofdevelopment by mid-2013 and were ex-pected to be delivered by 2015, accord-ing to the same source. However, themajority of these homes represent ex-pansions of existing developments.
With plenty of toxic real estate assetsin banks’ portfolios and the industrygenerating good business for insolvencyfirms, securing financing for new resi-dential developments remains next to
sales head. Prices bottoming out andthe various financing options availablefor prospective buyers are the main fac-tors encouraging people to invest inbuying a home, believes Necula.
As a result, the developer has seensales improve constantly in the first se-mester and expects to surpass lastyear’s level. In 2013, Adama sold 25 per-cent more properties than the previousyear and it has set the target for this yearto maintain monthly sales of at least 12-15 units, a target it has surpassed, ac-cording to company data.
Confident in the obvious need formore apartments in the capital, otherdevelopers are waiting for market con-ditions to improve to begin similar proj-ects.
For example, AFI Europe Romania,the developer of the AFI PalaceCotroceni and AFI Palace Ploiesti shop-ping malls, is looking at expanding intoresidential, the developer’s CEO, DavidHay, told BR in an interview earlier thisyear. However, there are no firm plansfor next year. “It is in the cards. Not nextyear, for sure, but the market willchange. We see this and we are getting
ready for when it does. It could take one,two or three years, but it will change.Right now the demand is, let’s say, onlyfor apartments that qualify for thePrima Casa scheme. We’re hardly seeingany sales outside of this. The marketwill move past this when people feelmore secure and are ready to take risks,”he predicted.
Financing still in limboWhile financing conditions for develop-ers remain tight, the situation has defi-nitely improved when it comes tofinancing buyers, thinks Necula. Onegood sign is that buyers are now lookingat other options beyond the Prima Casa(First Home) government-backed loanprogram.
“The Prima Casa program remainspopular but it is used exclusively bythose who cannot afford a down pay-ment of more than 5 percent. Increas-ingly we have clients taking out regularloans for which monthly repaymentsare similar to if not more advantageousthan Prima Casa,” she said.
continued on page 8
Going up: Bucharest’s new housing stock is expected to surpass 31,000 apartments by 2015
6 RESIDENTIAL www.business-review.euBR Property | August 2014
8 RESIDENTIAL www.business-review.euBR Property | August 2014
Year 2008 2010 2014
Household revenue EUR 660 EUR 660 EUR 660 Level of indebtedness 50% 50% 50%Loan duration 30 years 30 years 30 yearsMaximum loan EUR 52,000 EUR 48,000 EUR 55,000LTV 75% 75% 75%House price EUR 69,000 EUR 64,000 EUR 73,300Construction price EUR 1,840/sqm EUR 1,150/sqm EUR 920 EUR/sqmBuilt area 37sqm 56sqm 80sqm
Source: Kiwi Finance estimations based on the revenues of an average two-person household with no other debts
Property possibilities: what type of home can a household earning EUR 660 buy?
continued from page 6
Despite this, there is still room forimprovement, think banking repre-sentatives.
“The market has gone forward interms of demand but banks aren’tcatching up,” said Anca Bidian, gen-eral manager at Kiwi Finance, duringBR’s Realty event. In order to reducerisks, lenders have tightened proce-dures to the point where bureaucracyhas become the main issue the sectoris struggling with at present. “Thebanking system is running prettymuch like the Ministry of Finance inthis regard,” she commented.
“A worrying share of credit requestsare denied for bureaucratic reasonsalone.”
There is liquidity in the market, andthe growing demand and clear signsthat even the residential market is en-tering a new growth phase will pushbanks to further loosen credit for endusers, added Bidian.
Prima Casa loans decline infirst semesterNevertheless, Prima Casa has beenand continues to be the main driver ofthe local residential market, with fewapartment transactions being closedoutside the program. Its attractive-ness consists mostly in the fact thatbeneficiaries can buy an apartment ora house with a down payment of only5 percent compared to the minimum15 percent required for regular mort-gages.
The most recent data from the Na-tional Guarantee Fund for SMEs(FNGCIMM) indicate that the numberof state-guaranteed loans issued inthe first semester has dropped y-o-y,contradicting the idea that demand ison the rise.
In the first semester of this year,some 11,000 guarantees were issued,below the approximately 13,000 is-sued in the first semester of last year,show FNGCIMM data.
According to the same source, ben-eficiaries are mostly young peopleaged between 26 and 35 who have opted for one-bedroom apart-ments. Almost a third of the loanswere taken out by beneficiaries fromBucharest.
Between 2009 and July this year,
over 119,200 guarantees worth ap-proximately EUR 2.3 billion were is-sued for mortgages totaling EUR 4.56billion. The average value of a loantaken out through the program is EUR38,300.
Half of the RON 2 billion theFNGCIMM has available this year forsuch lending was used in the first se-mester.
Prices plateauThe market should move by no morethan 5 percent over the next 12months, expects Necula. “These arenormal fluctuations on a mature andstable market, which is somethingthat the segment is heading towards”she predicted.
Indeed, the average asking pricefor Bucharest flats increased by 1 per-cent in the first semester compared tothe beginning of the year, accordingto data from real estate portal Imobil-iare.ro.
This means that the average priceper sqm is now EUR 1,073 comparedto EUR 1,062 six months ago. Whileasking prices for new apartmentshave remained relatively stable (atEUR 1,183/sqm), owners of old apartments have increased their ex-pectations (to EUR 991/sqm, up from EUR 982/sqm at the beginning of the year).
DIY 9www.business-review.eu BR Property | August 2014
will not pose competition problems forPraktiker, says its new owner. “There isroom for everyone on the market,” con-cluded the businessman.
How the mighty have fallenThe local DIY market has been throughmajor changes since the start of last year,with OBI closing its local stores and bau-Max selling its network to French Adeoonly the latest industry news.
The reasons behind these shifts inthe market date back to the beginningof the crisis since when, following thecollapse of the real estate market, localDIY retailers, most of which arebranches of international players, haveseen their business shrink. With few ex-ceptions, expansion plans were alsofrozen.
In response to its poor results, thenews broke in July that OBI is to close allseven of its local stores this September,five of which could be taken over byGreek toy retailer Jumbo. OBI, which ispart of German retailer Tengelmann,opened its first local shop in 2008 andexpanded until 2010. Its 2013 turnoveris estimated at EUR 37 million.
While OBI did not manage to sell itsentire network, Austrian DIY retailerbauMax announced the same month
New Praktiker owner plansto resume expansion∫ SIMONA BAZAVAN
After five consecutive years of fallingsales in Romania, the local Praktikernetwork wants to recover its losses bythe end of 2014, said its new owner. Thelocal businessman, who controls sev-eral other companies active in the con-struction field, took over the 27Praktiker branches in Romania this Feb-ruary from the insolvent Praktiker AG.
“Over the past three months Praktikerhas reported profit, and by the end ofthe year we will recover, I hope, all ofthe losses,” he told BR. This is the resultof several changes to the retailer’s strat-egy. Among other things, these includethe introduction of new products andproduct categories and customized of-fers and price cuts for loyal customers.
“The new Praktiker will be a customer-driven store. Right now customers wanta good price-quality ratio,” said the busi-nessman. The entire repositioning cam-paign should start bearing results byyearend, Susli believes.
Last year, the firm reported sales ofapproximately EUR 130 million and aEUR 16.3 million net loss. This is lessthan half the level it reported in 2008.
The German retailer has been pres-ent in Romania since 2002 and saw itssales peak at EUR 292.4 million in 2008with a network of 25 outlets. As marketconditions worsened and competitionincreased over the following years, theretailer saw sales drop and losses in-crease.
Though the market is showing nosign of an upturn, Susli is confident inwhat the future holds for Praktiker. Hehas no plans to close down any of the 27branches and, moreover, is planning toopen new ones. “We want to increasethe profitability of the existing storesand more than that, over the next twoyears we want to expand the network to45 outlets. In less than two months wewill open stores in Giurgiu and TarguJiu,” he said.
The businessman is also open tobuying other Praktiker stores from theirowners and recently entered the auc-tion for the 15 stores Austrian DIY groupbauMax was selling in Romania. “Wewanted to buy some of their stores butbecause the Austrian retailer wanted tosell all of them together, they chose an-other buyer,” he added.
However, such market shifts and theoverall slow recovery of the DIY sector
that all of its 15 stores in Romania wouldbe taken over by French DIY group Adeo.The value of the transaction has notbeen made public and is now pendingregulatory approval from the Romanianauthorities. Adeo, which owns severalDIY retail brands, is already present lo-cally with a Leroy Merlin store inBucharest.
Kingfisher, the biggest Europeanhome improvement retailer, last yearbought the 15 local Bricostore branchesfrom French company Bresson. By mid-
2015 the company wants to transformall 14 local Bricostore outlets into theBrico Depot low-cost retail format andeven open new shops. Kingfisher repre-sentatives said last year that the com-pany wants to grow to 50 branches inRomania over the coming years, despitethe fact that the market has been con-tracting for some time and is showingno solid signs of growth. However, noactual timeline has been offered forreaching the 50-store target.
While international players struggle,local Dedeman, which is owned by Ro-manian businessmen Dragos andAdrian Paval, has grown to become theleader of the Romanian DIY market. Un-like its international competitors, thecompany has managed to maintain asteady expansion rhythm over recentyears, reaching a network of 36 outletsat the end of 2013. Its 2013 turnover wasexpected to increase by 8 percent toabout EUR 590 million.
In March, Dedeman opened its 37thstore in Sibiu following a EUR 13 millioninvestment, and said that another 13outlets would be opened in the future,three of which would be inaugurated byyearend.
Over the next two months, new Praktiker stores will be opened in Giurgiu and Targu Jiu and the DIY retailer’snetwork should increase from 27 outlets at present to 45 in two years’ time, Omer Susli, the businessman whotook over the local Praktiker business this February, told BR.
Name Number of outlets
Dedeman 36Praktiker 27bauMax 15Bricostore 14*OBI 7Hornbach 5
*At least two of the stores hadbeen rebranded as Brico Depot
Source: Companies’ data
Largest DIY retailersin Romania by number
of outlets at end of 2013
10 COMMERCIAL www.business-review.euBR Property | August 2014
thing besides what they can do athome?” he asks.
Back to basicsAll in all, the next generation of shop-ping malls will mark a return to the ba-sics. “In a way, it is going back,humanizing the experience, making itmore touchy feely,” outlines the archi-tect, who nevertheless admits that
“there is still very much a closed box ideagoing on” when it comes to retail archi-tecture.
Kay, who has been to Romania be-fore and also designed Martifer’s PrimeTowers office project in Bucharest(2008) and Benevo’s retail scheme inColentina, a project that the developerlater dropped, thinks the local marketwill definitely evolve further in terms ofarchitecture and design.
This will happen even with officeprojects, where developers still like toplay it safe. With fewer people nowworking the regular 9 to 5 full-time pro-gram and the concept of smart citiesgaining ground, offices will have toevolve as well.
But at the end of the day, how im-portant is a project’s architecture to itssuccess? It is one of the basic require-ments, thinks Kay, and as competitionbetween developers to attract shoppersand tenants increases, architecture
Back to basics in retail and office architecture
∫ SIMONA BAZAVAN
“I’ve visited shopping malls from theBaltic countries to the Balkans and theyare all so similar. Internally they are allbeige, safe, straight and very dull placesto be. People go there because there isno alternative, in a way,” argues Kay, thefounder of Portuguese firm Sua Kay Ar-chitects. And Romania is no exceptionto this general trend, with most localmalls being “isolated boxes that looklike railway stations or airport termi-nals”.
Kay, the architect behind Im-mochan’s EUR 60 million Coresi projectin Brasov, says the mall, which will beopened next year, will break away fromthis. “The shopping mall itself will bevery much city specific. It’s not a boxthat could be built anywhere else andhave the same impact,” he says.
The first step was to get the feel ofthe city and integrate that into the fu-ture mall. “Brasov has a certain charmbecause the old bits work with the newones,” making it similar in this regard tocities like Seville or Lisbon, he says. El-ements in the facades, the colors andthe building’s irregularities have refer-ences to the city itself. “We’ve tried tofollow the city’s pattern where you walkand discover new places,” in the waythe interior corridors are designed,notes Kay.
The project is branded as a “shop-ping resort” and special attention hasbeen given to integrating the outdoors,a step up from the general idea that “ashopping mall is something that is to-tally internal, that you go in and theonly thing you do is shop, shop, shop,and you don’t want to know about theoutside”. This will translate into the useof glass, lots of natural light, an openfood court and an outdoor terrace, addsthe architect, whose firm has designedanother Immochan mall which will bedelivered this November in Portugal.
Making the shopping mall commu-nity relevant is another important fea-ture for the Coresi project and in linewith what is happening elsewhere inEurope, says the architect. Going to ashopping mall to get a passport or paythe bills, and retail projects that hosthealth facilities or entire clinics are be-coming customary.
But above all, Kay says he wants hisretail projects to be places that offerpeople more than shopping options,fun places where people of all genera-tions come together, socialize and enjoythemselves. “With the new generationof shopping malls, a lot of people thinkit’s all going to be electronic. And I say,why do you want to put people in ashopping mall, looking at screens withtheir mouths open and not doing any-
should have an increasingly importantsay.
This will mean better days for archi-tecture firms as well, which alongsideother real estate players have seen theirbusiness shrink in recent years.
Depending on the country, the pro-ject’s complexity, the value of the in-vestment and the services provided, anarchitecture firm can be paid around 2-3 percent of the entire value of the proj-ect, says Kay.
Immochan Romania wants toopen Coresi Brasov in March2015The EUR 60 million first phase of theCoresi Brasov real estate project, devel-oped by Immochan Romania, the realestate division of the Auchan Group,will be delivered in the first quarter of2015, probably March, company repre-sentatives have previously stated.
It will comprise an Auchan hyper-market (13,000 sqm) and a commercialgallery (32,000 sqm) which in turn willfeature some 130 stores, a cinema mul-tiplex (with eight projection rooms), afood court (3,500 sqm) and an enter-tainment area (1,500 sqm). Some 70percent of the project is already leased.
Coresi Brasov is being developed ona 100 ha plot of land that was part of theTractorul industrial platform in Brasov
Romania’s new retailsupply hits nine-yearlow in 2014l Only two modern retail schemeswill be delivered in Romania thisyear, totaling 62,000 sqm, accord-ing to a JLL report. This is the low-est level reported since 2005, saysthe real estate service firm.l The two projects are VulcanValue Center (35,000 sqm) in thesouth-west of Bucharest andShopping City Targu Jiu (27,000sqm). Both are being developed bySouth African real estate invest-ment fund New Europe PropertyInvestments (NEPI).l Romania’s modern retail stockpresently stands at 1.66 millionsqm, out of which 890,000 sqm arein Bucharest. No new projects weredelivered in the first quarter. Bycomparison, 95,000 sqm joined themarket in Q4 2013, according toJLL.l However, several large surfaceshopping malls are being devel-oped in Bucharest and outside thecapital, and should be deliveredfrom next year.l 2015 will see the opening of the70,000 sqm Mega Mall developedclose to the National Arena inBucharest. The shopping mall willrequire an investment estimated atEUR 150 million. Its main owner isNEPI, whose local portfolio hasgrown to over EUR 1 billion.l Sonae Sierra and Caelum Devel-opment are working on another70,000 sqm shopping mall inBucharest. The EUR 180 millionParkLake shopping mall is locatedin Titan, the same Bucharestneighborhood as Mega Mall, andshould be completed in 2016, somenine years after it was first an-nounced.l Outside the capital, CoresiBrasov, being developed by Im-mochan, is the largest retail proj-ect currently under construction.
(190 km from Bucharest) which Im-mochan bought in 2012. The develop-ment of the entire project is projected totake 15 years. In addition to the mallbuilding, it will feature several other re-tail boxes (DIY, furniture, sports andelectronics stores) and a service station.
Relevance beyond shopping – this is what the next generation of local shopping malls should move towards,Mario Sua Kay, the architect behind Immochan’s EUR 60 million Coresi mall in Brasov, tells BR.
Photo: Silviu P
al
