Real Estate Key Trends

Transcription

1 Real Estate Key Trends Q ROANIA Office Highstreet Accelerating success.

2 Floreasca - Barbu Vacarescu Submarket Up to 300,000 m 2 potential demand for Floreasca - Barbu Vacarescu area between 2016 and ,000 m 2 AVAILABLE for leasing between 2016 and ,000 m 2 new stock 155,000 m 2 new stock 120,000 m 2 315,000 m 2 470,000 m 2 OCCUPIED 278,000 m 2 AVAILABLE 37,000 m 2 2

3 Floreasca - Barbu Vacarescu Submarket ore than 215,000 m 2 leased between 2010 and 2015, out of which: 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 28% 37% 35% New Demand Relocation from Competitive Stock Relocation from Non-Competitive Stock 25,000 20,000 15,000 10,000 5, % 4.0% 2.0% 0.0% -2.0% -4.0% Contracts Reaching aturity in Comparable Areasa ight Turn Into Relocations 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 GDP Growth New Demand Forecasted New Demand 0 100, , , Relocation from Non-Competitive Stock H Bucharest will still be attractive for companies looking to set or expand their operations. Taking into account that Floreasca Barbu Vacarescu offers the newest professionally developed office supply in Bucharest and the largest expected supply s weight in the future stock, most of the new entries will likely choose the area for their offices. In addition, the estimated positive economic background will facilitate the increase in activity for most companies currently active in the area, which can be translated into a higher number of employees and larger office area. Together, new entries (70%) and expansions (30%) will contribute with more than 110,000 m 2 to the demand in the area. Approximatelly 300,000 m 2 in contracts are estimated to reach maturity in the next 5 years in centrally located areas. Taking into account that a certain part of the tenants reaching maturity will choose to relocate to other areas and /or better quality offices, we estimated that Floreasca - Barbu Vacarescu has a pool of potential clients of more than 120,000 m 2. Approximatelly 70,000 m 2 of the transactions closed in Floreasca - Barbu Vacarescu area in the last 5 years were relocations from non-competitive stock. Taking into account Bucharest s modern office sector s short history on the market, we forecast a slightly smaller if not similar demand to be generated by relocations from non-competitive buildings in the next 5 years. Up to 300,000 m 2 potential demand between 2015 and

4 Bucharest Non-Food Retail Area Bucharest is forecasted to sustain 106,000 m 2 of additional non-food retail spaces by the end of Bucharest Household Consumption Evolution Expenditure Structure ( /household/month) % NON-FOOD share in household consumption 30% 25% 20% 15% 10% Other services & products s, coffee shops, restaurants Leisure & culture Telecom Health 5% Furniture & home related items Source: National Comission of Prognosis, National Institute of Statistics, Colliers Research 0% NON-FOOD Clothing & shoes aximal Non-Food Supportable Retail Area Occupied non-food retail area in modern retail schemes ,000 m 2 784,000 m 2 * +106,000 m f 906,000 m 2 877,000 m 2** Source: National Comission of Prognosis, National Institute of Statistics, Colliers Research * includes traditional shopping centers, non-food section in hypermarkets and other big boxes except for DIYs; we did not take into account shopping centers with vacancy rates higher than 50%; ** we also included the projects announced to be launched on the market by the end of 2018; 4

5 Bucharest Highstreet Sales It s time to consider investing in highstreet retail units Rather constant supply Price Supply Yield 8.5%-10% 2017 Prices have been pushed up Demand shifting upwards (as interest rates for bank deposits are less appealing, non real estate investors increased their presence on the market) Demand Yield 9%-11% Yield 9.5%-11% Yield 10%-12% 2013 Source: Colliers Research Stock 5

6 Bucharest Hot Areas for Highstreet Sales Summary of Transactions Indicators in ax Average Total transaction price ( ) 200,000 1,500, ,000 Average price per m 2 1,500 7,000 2, /m 2 Iuliu aniu (Lujerului) /m Ion ihalache /m 2 Dorobanti Square Victoriei Square /m /m Obor Intersection Romana Square /m Iancului Pantelimon (orarilor) /m Universitate Square /m 2 /m 2 Unirii Square /m 2 Piata uncii Average monthly rent for 100 m 2 spaces in the best locations Source: Colliers Research Piata Sudului 6

7 Romania Production Brasov, Bihor, Sibiu, Arad and Cluj are the top 5 counties with potential for future production facilities Timis County Arad Bihor Unemployment Rate (%)* Cluj Dolj Workforce Availability Sibiu Arges Number of Graduates in Technical Universities** Brasov Prahova Bucharest Iasi Net Average onthly Salary ( )* Exit from the country towards west Infrastructure Grade Availability State Aids Level*** Arad 2.7% easy large supply 35% Argeș 5.5% difficult large supply 50% Bihor 3.3% easy medium supply 50% Brasov 4.1% 1, medium large supply 50% Bucuresti 1.9% 4, difficult large supply 15% Cluj 2.6% 1, easy small supply 50% Dolj 9.1% difficult small supply 50% Iasi 4.5% 1, difficult medium supply 50% Sibiu 4.4% easy medium supply 50% Timis 1.6% 1, easy large supply 35% * 2014 data ** 2013 data *** applied to eligible expenditure (construction / leasing costs, new technical installations, machinery & equipment and intangible assets) Top 5 Counties to be considered for new production facilities taking into account: Workforce availability Salary level Infrastructure grade State aids level Brasov Bihor Sibiu Arad 5Cluj score out of Source: Colliers Research, National Institute of Statistics 7

8 Bucharest Bucharest logistics market will register the first increase in stock in the last 5 years, by the end of 2016 Consumption growth Generated positive net take-up 1 for Bucharest warehouses % 3.20% 3.40% 3.60% 52,000 m 2 44,000 m 2 36,000 m % 27,000 m 2 22,000 m % 0.60% H Available at sustainable rent levels /m 2 New projects started 110,000 m 2 4 TO BE DELIVERED BY THE END OF 2016 Decreased the vacancy rate (as the stock was constant since 2012) 15.3% 922, , , , , % 13.7% 10.2% 8.0% H Stock Evolution (m 2 ) Vacancy Rate (%) Source: National Comission of Prognosis, Colliers Research 8

9 North* Area Transactional Activity * Aviatiei, Barbu Vacarescu, Caramfil, Dimitrie Pompeiu and Floreasca over 20 ha transacted in the past 2 years over 100 mn. invested in land plots in the past 2 years 34% By Size Office 53% 19% By Volume 57% Office 13% Retail Development Potential 2,000 residential units 300,000 m 2 of office area 24% Retail Price Range* per m 2 for residential land 500-1,000 per m 2 for office land *Estimated market average, not taking into account exceptions such as package deals or distressed sales Source: Colliers Research 9

10 North* Area Transactional Activity (in the past 2 years) * Aviatiei, Barbu Vacarescu, Caramfil, Dimitrie Pompeiu and Floreasca Alexandru Serbanescu Street Nicolae Caramfil Street Aurel Vlaicu Pipera Boulevard Dimitrie Pompeiu Boulevard Pipera Petricani Street Bucharest ap Calea Floreasca Fabrica de Glucoza Road Piata Sudului Piata uncii Calea Floreasca Barbu Vacarescu Street Office Retail shape not defined Doamna Ghica Street Aviatorilor Boulevard Barbu Vacarescu Street Lacul Tei Boulevard Kiseleff Boulevard 10

11 Theodor Pallady Transactional Activity Retail 43% over 50 ha transacted in the past 2 years over 60 mn. invested in land plots in the past 2 years Retail 55% By Size By Volume Development Potential more than 10,000 residential units 57% Price Range 45% per m 2 for residential land per m 2 for retail land Source: Colliers Research 11

12 Theodor Pallady Transactional Activity (in the past 2 years) Retail Education Perisoru Alley izil Alley Theodor Pallady Boulevard Theodor Pallady Boulevard Papahagi Pericle Street Victor Brauner Street Nicolae Teclu Anghel Saligny Bucharest ap Piata uncii Piata Sudului 12

13 Romania 1 Accelerating Economy Romania GDP Growth 2.30% 0.60% 3.40% 2.80% 3.30% 3.40% 3.70% F 2016F 2017F Source: National Comission of Prognosis With a strengthening economic environment, Romania provides a healthy balance between macroeconomic stability and growth potential. Romania outpaced the other European countries in terms of economic growth in Q1 2015, posting a GDP growth of 4.1%, with 3.3% growth expected for the end of the year as a result of higher exports and domestic demand amid a low-inflation environment. Public Debt ( 14) vs. GDP Growth ( 14) 2014 Public Debt (% in GDP) Greece Bubble size = public debt (mn. ) Italy Portugal 100 France Austria Spain United Kingdom Germany 50 Netherlands Poland 2014 GDP Growth (%) Czech Republic Romania Source: Eurostat, Colliers Research Romania has the smallest public debt to GDP ratio in the EU (38%), considerably lower than EU average (90%), providing the country with a very good premise for future growth. 2 With a Positive Perception from Financial s Romania's Ratings S&P S&P oody's oody's Fitch Fitch Rating Outlook Rating Outlook Rating Outlook BBB- Stable Baa3 Stable BBB- Stable Source: Country Economy Romania has a positive perception from financial markets since S&P upgraded Romania s credit rating to investment grade in ay In a with Increasing Liquidity Transactions Volume (mil ) , *2015f* *volumes were adjusted according to closing date of the transactions Source: Colliers Research Top 5 Transactions Closed in Europolis Logistic Park* +100 mn. 2 Auchan Titan Center 86 mn. 3 Nusco Tower* 46 mn. 4 Unicredit Headquarters* 43 mn 5 Green Court A* 42 mn *transaction signed in 2014 and closed in 2015 Source: Colliers Research 2014 and 2015 confirm the development of the investment market which started to emerge strongly in Both the volume of closed transactions and the interest from foreign investors registered sizable increases. The total investment volume stood at 950 mn. in 2014 and is expected to reach 800 mn. by the end of

14 Romania Office 4 With Large Yield Premiums Prime Office Yield Gaps [2014 vs. Previous Peak; %] Bucharest: 200 bps difference [7.5% vs. 5.5%] Bucharest Prime Yieds vs. CEE Capital Cities (July 2015) Office 6.00% 5.75% 7.10% 7.50% 8.50% 5% 6% 7% 8% 9% Bucharest Warsaw Budapest Prague Sofia London Hong Kong New York Paris unich Stockholm Warsaw Prague Brussels Frankfurt ilan adrid Amsterdam oscow Budapest Sofia Bucharest Retail 5.75% 7.75% 7.25% Source: Colliers Research Prime Office Yield Spreads vs Bonds [%]: Current Prices (July 2015) 5.50% 9.00% 5% 6% 7% 8% 9% Romania 7.50% 9.00% Poland 9.00% Hungary Czech Republic 7.00% 11.00% 5% 6% 7% 8% 9% 10% 11% 12% Bulgaria 0% 1% 2% 3% 4% 5% 6% 7% Source: Colliers Reasearch, Eurostat The spread between prime real estate and soverign bond yields in Romania is over 3%. Source: Colliers Reasearch The investment opportunity in Bucharest is still strong as the spread between current prime real estate yields and yields in alternative markets, as well as the spread to the local peak remains significant. 14

15 Bucharest New The Bucharest residential market is witnessing the beginning of a new cycle. icrosoft opens the first office in Romania marking the beginning of the modern real estate market Expansion Expat demand leads to the first significant increase in villa stock in the city Increments in land prices boost residential prices Apartment supply starts building up in small scale projects The first large scale apartment projects start construction works DEAND AND PRICES PICK UP WHILE SUPPLY TRIES TO CATCH UP US subprime crisis Hypersupply Demand picks up based on consumer confidence and better economic prospects. Prices remain the same Expansion New projects are either completed or announced. land plots are purchased DECREASING DEAND GENERATES A DECLINE IN PRICES Top Increasing & diversified supply Consumer confidence Economic growth H key figures: STOCK DEAND Recession 27,200 UNITS 2,500 UNITS Recovery Drivers of the residential market: 5 Unemployment rate Interest rates direct influence inverse influence PRICES Low / m 2 iddle 900-1,300 / m 2 Upper iddle 1,300-1,500 / m 2 15

16 Bucharest Bucharest unveils multiple opportunities for professional hotel developers No. of Inhabitants 2,500,000 2,000,000 1,500,000 1,000,000 Belgrade Bucharest Budapest Prague Bubble size = number of hotels rooms Sofia Warsaw Top 5 Things to consider when developing hotel in Bucharest 500,000 Bratislava Rooms / 1,000 capita Bucharest Belgrade Bratislava Budapest out of which branded rooms 39% 33% 46% 55% Prague Warsaw 36% Sofia 16% 64% Source: Colliers Research, National Institute of Statistics, Christie+Co 1 2 Affiliate 3 advantage 4 5 areas, Choose a Strategic Location In the vicinity of the Old City Center In the proximity of emerging office areas and CBD it to a strong international chain Affiliate it to an existing operator to take of the economy of scale Offer iddle and/or upper middle concept Create the proper mix between number of rooms, restaurant size and additional facilities (conference spa, etc.). 16

17 Recommended Locations for Future Developments Hottest Areas Preciziei Păcii Parc Bazilescu Jiului 1 ai Grivița Crângaşi Petrache Poenaru 7 Grozăveşti Lujerului Gorjului Politehnică Aurel Vlaicu Aviatorilor Basarab Piața Victoriei Ştefan cel are Obor Gara de Nord Piața Romană Eroilor Izvor Piața Iancului Universitate 5 Piața uncii 8 Piața Unirii 4 3 Tineretului Pipera Piata uncii (high lodging demand in a limited competitive environment; significant potential for further developments on short run) ➊ Barbu Vacarescu - Floreasca ➋ Charles de Gaulle ➌ Dimitrie Pompeiu ➍ Unirii Hot Areas (high lodging demand in a high competitive environment) ➎ Old City Center ➏ Victoriei Area Panatelimon Emerging Areas (high potential demand in the Republica next 5 years as these areas will gain significant new office Costin Georgian developments) ➐ Orhideea ➑ Cotroceni Dristor Nicolae Grigorescu 1 Decembrie 1918 Nicolae Teclu Anghel S Constantin Brâncoveanu 17 Piata Sudului Piața Sudului

18 502 offices in 67 countries on 6 continents United States: 140 Canada: 31 Latin America: 24 Asia Pacific: 199 EEA: 108 About Colliers International Group Inc. Colliers International Group Inc. (NASDAQ: CIGI; TSX: CIG) is a global leader in commercial real estate services with more than 16,300 professionals operating from 502 offices in 67 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 10 consecutive years, more than any other real estate services firm. For the latest news from Colliers International, visit Colliers.com or follow us on Twitter (@ColliersIntl) and LinkedIn. $2.3 billion in annual revenue 1.7 billion square feet under management 16,300 professionals and staff Primary Author: Daniela Popescu Head of Research - Bucharest Phone: (40-21) [email protected] Colliers International <<Romania>> Floreasca Business Park 169A Calea Floreasca, Building A, 7th floor Bucharest, Romania Phone: (40-21) Fax: (40-21) Copyright 2015 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report. 18