owntown Bucharest Commercial Market Strikes

Transcription

1 owntown Bucharest Commercial Market Strikes February, 2008 prepared by Coldwell Banker Commercial Affiliates of Romania

2 Table of Content Romanian Investment Market General data 3 Bucharest Downtown Overview General data 5 Office Market Overview General data 6 Supply 7 Demand 8 Rents 8 Main office premises in downtown Bucharest 9 Investment office market 13 Retail Market Overview High street retail 15 Map of main shopping centers in downtown Bucharest 16 Shopping centers in downtown Bucharest 17 Rents 20 Trends 20 2

3 Romanian Investment Market eneral data During the last two years and especially after January 2007 (UE accession), Romania is becoming an increasingly attractive target for foreign investors, providing a more investor-friendly environment, due to its moderate economic growth compared to other South-European countries and the predictability of the economic and fiscal climate. 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 countries in terms of GDP growth and export growth. Foreign Direct Investments (Billion Euro) e Source: NBR, Eurostat; e estimations (over 2 billion Euro in real estate and retail markets) According to the estimations of the Economist Intelligence Unit (EIU) for FDI during , Romania ranks 30, with an annual average of Euro 5.5 billion in FDI, as for the investment-friendly environment, Romania ranks 48. The economic growth pattern showed investment becoming the engine of GDP growth; the growth rates of consumer demand and exports recorded insignificant changes quarter on quarter. On the supply side, all economic sectors posted higher paces of increase. 23

4 Romanian Investment Market Being one of the newest markets on the Romanian real estate sector, investment activity has experienced an important increase in the past three years, 2005 being a booming year for estate investment deals in Bucharest. The other main areas that attracted substantial investments in 2007 are: Cluj-Napoca, Iasi, Constanta, Timisoara, Brasov, Sibiu si Bacau. Some perfect tools for the dynamic of the investment world markets are the international reals estate fairs. These days, between March, MIPIM real estate fair takes place at Cannes, France. MIPIM provides the opportunity for industry decision-makers to meet and develop partnerships, presenting their latest development projects, as well. Investors that participate at MIPIM belong to banks, insurance companies, pension funds, asset management companies etc, the fair being an ideal opportunity to fuel the real estate market worldwide. Following a general trend in Eastern Europe, the Romanian real estate market has a scarcity of available quality properties. This situation, corroborated with the high demand for commercial premises will force the investors to buy properties that are still in the development stage and even to involve in pre-renting the products. So far we noticed this kind of approach in the office and industrial market. In the near future, investors will have to be involved more often in the construction stage of a property in all sectors of real estate. 24

5 Bucharest Downtown Overview eneral data The downtown of Bucharest mainly consists in the well-known areas such as Victoriei, University, Romana and Unirii, as well as several main neighborhoods like: Tineretului, Vitan, Mosilor, Iancului, Stefan cel Mare, Cotroceni, Domenii-1 Mai, parts of Dorobanti and Floreasca. The area is highly populated (approx. 550,000 inhabitants according to Coldwell Banker estimations, figure which includes a share of 35% unrecorded inhabitants). The center of Bucharest is inhabited by high and medium income population, their revenues being with 25% higher than the Bucharest average. The downtown area around Victoriei, Romana, Magheru, Dacia and Polona displays a mixture of communist blocks and houses with different architectural styles, as lofty buildings like the embassy villas blend with old houses in different stages of degradation. The other central residential areas mainly consist of 4-10 stories high apartment blocks, most of them dating back before 90 s, parks and green spaces having a small share. Because there is a shortage of large land plots in the central areas and the land price is very high (2,000-3,000 Euro/sqm), there are few office buildings pipeline premises and residential projects in these areas (most of them are located in Unirii-Vitan and Stefan cel Mare areas). The present study analyses the main features of the local commercial market, its trends and potential of growing. 25

6 Office Market Overview eneral data Following the trends of the last 3 years, the office market in Bucharest has strongly developed towards a mature market. The office stock has reached 1.2 million sqm, other approx. 500,000 sqm being scheduled for delivery by the end of this year. Although many important office schemes were released on the market or are to be released, there is still a big gap between the supply and demand. The north and the central parts of Bucharest still dominate the Bucharest office market in terms of the developers' preferences. The central areas, despite their attractiveness, face a lack of large plots suitable for large Class A office developments. Map of main office buildings in downtown Bucharest: Source: Coldwell Banker Commercial Affiliates of Romania existing pipeline 1 Marriott Grand Office Bldg. 2 Forum BC 3 Opera Center I, II 4 Bucharest Financial Plaza 5 Sitraco 6 PGV Tower 7 Delenco Office Bldg. 8 Vulturilor Office Bldg. 9 Platinum Center 10 IBC Modern 11 Unimed 12 Union 13 Palazzo Italia 14 Batistei Office Bldg. 15 Millennium BC 16 Dacia Office Bldg. 17 Maria Rosetti Office Bldg. 18 The Architects House 19 Cathedral Plaza 20 Mecano Exportimport 21 Atlantis BC 22 Buzesti Office Bldg. 23 Cascade 24 Europe House 25 Barba Center 26 Bucharest Corporate Center 27 Bucharest Office Solutions 28 America House 29 BRD Tower 30 Bucharest Tower Center 31 Neocity 32 Metropolis Center 33 Floreasca BC 26

7 Office Market Overview upply The supply of central office premises shares approx % of the total existing office stock in Bucharest. Main office buildings delivered in the central part of Bucharest in 2007: Surface (net sqm) Avalansei Office Bldg. Splaiul Unirii 3,500 Dacia Office Bldg. Dacia 9,600 Matei Basarab Office Bldg. Unirii 3,200 Main office buildings due for delivery in downtown Bucharest in , totaling approx. 175,000 net sqm: Surface (net sqm) Delivery Felix Plaza Victoriei 30,000 Q Bucharest Tower Center Ion Mihalache 29, Cathedral Plaza Luterana 23,000 N/A Metropolis Center Victoriei 12,500 Q Platinum Center Unirii 10,200 Q Dorobanti OB Dorobanti 10,000 Q Delenco Office Bldg. Delea Noua 9,600 Q Excelsior BC Victoriei 8,800 Q Bluehouse OB Victoriei 7,900 Q Victoria Center Victoriei 7, Maria Rosetti Tower Intercontinental 6,600 Q Victory BC Delea Noua 5,700 Q Other smaller premises of up to 5,000 sqm scheduled for delivery in 2008 are: Sun Tower (Unirii area, 5,000 sqm) Rosetti Office Building (Pitar Mos area, 5,000 sqm) and Batistei Office Building (University, 3,000 sqm). 27

8 Office Market Overview emand IT & Telecom companies are among the most important clients for the office segment. Due to a powerful increase of this market, these companies require more office spaces both for corporate headquarters, as well as for call centres. Demand also comes from: banking and financial institutions, fast moving consumer goods, pharmacy and energy firms but also services companies: law, advertising firms etc. The present demand of office premises in Bucharest is estimated to around 2.5 million sqm. North and the central parts of Bucharest remain in the top of the companies preferences in terms of relocation. Following the development trends the gap of approx. 1.3 million sqm is expected to balance in the next 4 years. The office market in central Bucharest benefits from a very good vacancy rate, the level of this rate reaching around 4% at the beginning of 2008 due to a very high demand and a relatively low supply. There even are premises where the occupancy rate almost reaches 100%. ents Prime office rents: (Euro/sqm/month+VAT) Area Class A Class B Trends up to 2010 Center The average sale price for Class A office spaces in central Bucharest is around the value of 2,200 Euro/sqm+VAT, which is quite close to the similar average price in Prague, namely, 2,600 Euro/sqm+VAT. In other major cities the sales prices start from 600 Euro/sqm+VAT and goes up to 1,200-1,400 Euro/sqm+VAT. Because the market is under supplied as compared to the existing demand, there is a stable and growing trend for both leasing & sales prices. An advance payment on 3-6 months is usually paid as a guarantee at the beginning of the lease contract. Most often, the contracts are signed for 3-5 years, the 7-10 year lease term being quite seldom. The rent is paid monthly or quarterly in Euro. The tenant must also pay the maintenance costs which vary between 2.5 and 4 Euro/sqm+VAT/month. The prices for parking places in central office buildings in Bucharest are: are Euro+VAT/outdoor unit and Euro+VAT/indoor unit. 28

9 Office Market Overview ain office premises in downtown Bucharest Description of main office buildings in downtown Bucharest - existing developments America House Victoriei area 50,000 sqm 2006 Another famous office development of the last years is America House, located at Victoriei Square, an area well-known for the high density of office buildings Main tenants: Cosmote, S&T, Delta Airlines, The embassy of Japan, Schlumberger. Millennium BC University 25,600 sqm 2006 Built in one of the most crowded areas of the City, near University Square, Millenium BC was one of the most controversial developemnts in Bucharest. The argue between the Armenian Church and the developer, because the site of the building is located in front of the Armenian Cathedral of Bucharest, was on the verge of ending this development even before starting. At the end of 2006 the building was sold to European Convergence Fund managed by Charlemagne Capital for 36.5 million Euro. Main tenants: World Bank, Sanofi-Aventis, Transelectrica, Romexterra Bank. Bucharest Financial Plaza Calea Victoriei 31,000 sqm 1997 Located in the central city area, on Calea Victoriei, BFP is one of the first office buildings developed in Bucharest. BFP distinguishes by the top location and by the good finishing. Although the parking places represent a problem in the central area of the city and though the supply of BFP's parking units is not enough, the building represents one of the top developments of Bucharest. Main tenants: Comerzbank, Reuters, ABB, GTS Telecom, BCR Erste. 29

10 Office Market Overview Description of main office buildings in downtown Bucharest - existing developments Opera Center Opera area 15,000sqm 2004 Delivered in 2004 and after that bought by the Austrian investment fund CA Immo, Opera Center is located in downtown area of Eroilor. The building, benefits from a good lay out and the metro station just across the street. Main tenants: Pricewaterhouse Coopers, Cooper Cameron, Lilly. Europe House Victoriei area 14,300sqm 2003 Built in 2003 and sold 2 years after to the investment fund Europolis, Europe House, the developement of the Israeli group GTC, is another landmark of Bucharest. Located in Piata Victoriei, with very good access to public transportation- metro, bus and tram, Europe House features a top location and great amenities. Main tenants: Orange, Eurisko, Microsoft, AIG Life, Oracle. PGV Tower Vitan area 11,500 sqm 2004 Located in the central area, close to Vitan Mall, this building developed by Jaguar Developement, was sold last year by Charlemagne Capital to the investment fund Alianz Group (DEGI) for 27.4 million Euro. Benefitting from a location with good access and the proximity of the first mall in Bucharest, PGV Tower represents one of the representative buildings in Bucharest. Main tenants: EFG Eurobank, Eurolines, Jaguar Developement. 10 2

11 Office Market Overview Description of main office buildings in downtown Bucharest - pipeline developments Felix Plaza Victoriei Square 30,000 sqm Q This new architecturally striking office building with stunning facade is ideally located few minutes drive from the heart of Bucharest. Felix Plaza, scheduled for completion in the first quarter of 2010, will feature approx. 30,000 sqm modern office suites arranged over 5BS+GF+17 floors+technical floor, combining a contemporary style with the latest technologies and amenities. Bucharest Tower Center Ion Mihalache-Victoriei Sq. 29,500 sqm 2008 The building will offer 23 spectacular floors of steel and glass, in one of the most modern structures in Bucharest. A glass curtain wall covers the front of the building, offering totally panoramic views for the tenants. It features 29,500 sqm of class A office space, 1,700 sqm of prime retail space and 160 underground parking places. Metropolis Center Victoriei Square 12,500 sqm Q Metropolis Center is located in the heart of Bucharest, within a few minutes walking distance from Victoriei Square. This project is a modern multi-functional class A building-complex, which combines an office building, a residential compound, apart hotel and retail spaces. The office building is arranged over BS+GF+7 floors and offers an attractive and business friendly office environment. 211

12 Office Market Overview Description of main office buildings in downtown Bucharest - pipeline developments Platinum Center Unirii area 10,200 sqm Q This modern office building benefits from a prime location in the midst of Bucharest's business area, right behind some of the city's most famous landmarks, such as Unirea Shopping Centre and Unirii Square. Due to its proximity to the capital's main boulevards, it provides easy access to all major areas. Arranged over 4BS+GF+12 floors, it features 10,200 sqm net office spaces as well as 4 underground levels for parking. Blue House Office Bldg. Victoriei area 7,900 sqm Q Bluehouse is located in down town of Bucharest. It offers convenient access by public transport. Victoriei and Romana metro stations are just 5 minutes away from the building. It is close to main administrative, financial and shopping districts areas. Distributed over BS+GF+Mezz+9 floors, it provides 7,900 sqm office spaces, high quality finishing and amenities. 12 2

13 Office Market Overview nvestment market The Bucharest office market has been attracting an increasing number of investors looking for alternatives to the more established Western and Central European markets. However in spite of the obvious market possibilities in the rapidly developing market the same problems are evident a lack of suitable investment product and increasing competition between investors for what product there is driving down yields. The first market entrants such as Europolis, CA Immo and Immoeast have snapped up most of the existing income producing buildings, therefore investors need to be more creative in order to conclude investment deals. The market does however offer alternative investment strategies such as forward purchase agreements and partnerships with developers in the office market where there is considerable product in the pipeline. The office investment market in Bucharest started in autumn 2003 with the sale Europe House purchased by Europolis and Opera Center purchased by CA Immo - both office buildings located in the center of Bucharest. The yields at the time waw 12.5%. Since then yields have dropped significantly towards 6.5% within 3 years, arguably the highest yield compression seen so far in the CEE. The catalyst for this unprecedented yield compression has been the strong interest from foreign investors on the Romanian market, combined with a lack of investment grade product suiting their criteria. Therefore, many institutional investors, in order to secure high quality product, have looked towards forward purchase transactions offering a clear exit to the developers, in return for more competitive yields. Starting with 2007, major real estate funds entered on the Romanian market, for some these being the first signs of market maturity. We can mention DEGI which acquired the entire office portfolio of Charlemagne Real Estate or the transaction in which America House (downtown area) was sold to Natixis Europe for the lowest yield in the market so far: 5.6%. 213

14 Office Market Overview Top 10 - office building transactions in 2007 in Bucharest Office building Owner Investor Price Yield (mill. Euro) America House GTC Natixis S-Park Primavera Immoeast Development Victoria Park Liebrecht&wooD Immoeast 60 N/A Cubic Center Kendama Fabian Capital Millenium BC Charlemagne Alianz Group Capital (DEGI) PGV Tower Charlemagne Alianz Group Capital (DEGI) Construdava I Charlemagne Alianz Group Capital (DEGI) Riverside Tower Iliotomi Immoeast 25 N/A Baneasa BC Immoconsult Fabian Capital 24 N/A Baneasa Airport 75% Immoeast Immoeast 20 N/A Tower 25%Valueroi Grup (total take over) As the above table shows, three of these office buildings (America House, Millennium BC and PGV Tower) are located in the central parts of Bucharest. rends Taking into consideration the future developments in the central areas of approx. 175,000 sqm, we estimate the occupancy rate would be expected to decrease in the next 2 years, but due to the many projects announced several major companies have delayed their relocation for this year. Therefore, as the demand will still over pass the supply, the rents are expected to maintain stable or even slightly increase., technical facilities and parking places will be the key elements for the clients when choosing an office building. The prime yields for office spaces were 6-7% in 2007, still there were cases of office transactions last year with yields under 6%. For 2008 the yields for this market segment could continue to decrease with approx %. 214

15 Retail Market Overview igh street retail High street retail is concentrated in Bucharest downtown, along the major boulevards of Magheru, Calea Victoriei, Balcescu and Kogalniceanu. Each of them has particular retail features, in spite of the fact that all of them stand out as major concentrations of international and local multiple chain retailers. Calea Victoriei and Magheru are considered the best prime retail streets of the city. Average unit size is around sqm, with rents of around Euro/sqm/month. International brands are mainly present within the restaurant, fashion and services sectors in high street retail. Major companies include: Hugo Boss, Mont Blanc, Swarovski, Guess, Vodafone, Steilmann, Kenvelo, Lacoste, Orange, Timberland, Terranova, Beauty Shop - Sephora and restaurants such as McDonald's, Pizza Hut or KFC. The high street retail zone is yet to reach the size and value of other central European capitals. Although luxury fashion brands are present, most high street retail spaces are occupied by services. The city lacks a modern pedestrian high street retail zone which would provide a safer, more pleasant and leisurely shopping atmosphere. The existing pedestrian area has been left in decay for a long period, thus no longer attracting customers. Repair work is expected to begin this year, with the first stage being infrastructure and utilities upgrading. Stefan cel Mare Victoriei Magheru Magheru Unirii Unirii 215

16 Retail Market Overview Map of main shopping centers in downtown Bucharest: Dambovita Center 2 Unirea Shopping Center 3 Esplanada 4 Bucuresti Mall existing pipeline Source: Coldwell Banker Commercial Affiliates of Romania 216

17 Retail Market Overview hopping centers in downtown Bucharest Shopping Mall GLA (sqm) Levels Shops Anchors Owner Opening Unirea Shopping Center 44,000 LGF+GF+3 N/A La Fourmi, Nova Trade 1976 Leonardo, Media Galaxi, Carrefour Bucuresti Mall 34,500 LGF+GF G Market, Anchor Group 1999 Media Galaxy, Hollywood Multiplex Marks&Spencer Description of main shopping centers in the center of Bucharest: Anchors Tenant mix Unirea Shopping Center Unirii Square 44,000 sqm 1976; 2003 (refurbished) La Fourmi, Media Galaxy, Diverta, Carrefour The tenant mix is strongly fashion oriented. The scheme has got a 4floors lay out with services, cosmetics and accessories on the ground floor, women's fashion on the first floor, men's fashion on the second floor, household appliances on the third floor. The fourth floor has recently been dedicated to the leisure and food court areas whilst the underground is used for the supermarket. In addition, since 2007 there is a hypermarket (Carrefour), at the rear side of the scheme. The scheme is a partly converted department store. Located in the city centre with optimum public transport accessibility and relatively easy transport access, the scheme remains one of the most significant retail destinations in the city. Despite the fact that this is not a true shopping centre and does not attract typical shopping centre customers, the scheme is bound to remain a significant player on the retail market of Bucharest. 217

18 Retail Market Overview Description of main shopping centers in downtown Bucharest: Anchors Tenant mix Bucuresti Mall Unirii-Vitan 34,500 sqm 1999 G Market, Mark & Spencer, Hollywood Multiplex, Media Galaxy, Debenhams Bucuresti Mall is the second largest recognizable shopping centre in terms of GLA and number of shops. The scheme is fashion oriented and provides 44 fashion and footwear units. Household goods, food court and services are also present. Major tenants include Debenhams, Marks & Spencer, Sephora, Body Shop, Steilmann, Kenvelo, QuickSilver. There is a Hollywood Multiplex cinema (10 theater halls). Together with Plaza Romania, Bucuresti Mall is regarded as being the best shopping centre in the city until now. The scheme has, however a weak layout with four floors and structure resembling a department store. Accessibility is relatively poor as it is located far from major public transport routes, apart from a single tram line. Pipeline projects in downtown Bucharest: Dambovita Center Splaiul Unirii 120,000 sqm Having been planned for some years, Dambovita shopping centre should be part of the refurbishment of the former Radio building located approx. 1 km from the downtown area and relatively close to the proposed scheme. It will include a shopping centre with a multiplex cinema, hotel and office space. The scheme is smaller than the neighboring Cotroceni Park. Construction has resumed this year after more than 3 years of several postponements. 218

19 Retail Market Overview Pipeline projects in downtown Bucharest: Esplanada Splaiul Unirii 25,000-35,000 sqm N/A The Esplanada will be developed on a government land along Unirii Blvd., the prime central business location. The project will be one of the most important developments in Bucharest and will comprise a shopping centre, hotel, office buildings and residential buildings. The shopping centre will reach almost 25,000 sqm GLA. The scheme is likely to anchor the city centre retail that could start spreading towards the location of Unirea and Esplanada. The strengthened city centre retail area could have a negative effect on the operation of all shopping centres. Bucuresti Mall is said to be the most affected shopping mall after the completion of this development project. There is currently a low supply of modern shopping centres for a city of over 3 million inhabitants, although there are numerous retail developments in pipeline in the inner and outskirts areas of Bucharest. Most pipeline projects are expected to be finished in the following 1 to 3 years. Domestic and international investors are showing increasing interest in the shopping centre market. Prime yields for retail properties are between 7 and 7.5%. The yield level is expected to compress in the next period, with an expectation of 6.5 % to 7 % in the next 12 months. 219

20 Retail Market Overview ents The level of rents for the high street retail spaces records high variations depending on the location, while the rents for shopping centres depend on the sector of activity of the potential client. High street retail Shopping centres* Rent (Euro/sqm) Rent (Euro/sqm) Calea Victoriei Magheru Blvd Calea Mosilor Stefan cel Mare * excluding hypermarkets - average prices rends There is currently a low supply of modern shopping centres for a city of over 3 million inhabitants, although there are numerous retail developments in pipeline in the inner and outskirts areas of Bucharest. Most pipeline projects are expected to be finished in the following 1 to 3 years. Domestic and international investors are showing increasing interest in the shopping centre market. Prime yields for retail properties are between 7 and 7.5%. The yield level is expected to compress in the next period, with an expectation of 6.5 % to 7 % in the next 12 months. 220