Colliers International Romania Mid-Year Market Update
Total Page：16
File Type：pdf, Size：1020Kb
H1 20 18 Colliers International Romania Mid-Year Market Update Accelerating success. 1 2 Colliers International Romania H1 Research & Forecast Report | 2018 Content Romania Macro Industrial Retail Update Market Market p. 04 p. 06 p. 08 Office Investment Land Market Market Market p. 10 p. 12 p. 16 Romania macro update In the post-crisis period, Romania has been the most we saw last year cannot be maintained and the anticipated The major challenges for the Romanian economy going successful economic convergence story in this part of slowdown is upon us. Some transitory factors weighed forward remain structural in nature (so more difficult Europe. In fact, if the service-led growth continues at a on GDP, leading to quasi-flat GDP readings in quarter-on- to tackle), like building highways, cutting back red tape pace similar to the post-crisis period, Romania is likely to quarter terms in 4Q17 and 1Q18, which is not something or corruption, increasing population activity rates and surpass Hungary by end-2022 and catch up to Slovakia we considered. The important note here is that due to improving education. Take the labour market for instance: by end-2028 in terms of GDP per capita, adjusted to the way economic growth is calculated and the statistical employers are finding it ever harder to fill in positions (both purchasing power standards (this indicator is widely used relevance of these quarters, it is looking nigh on impossible for white- and blue-collar positions), with unemployment as a proxy for living standards). to achieve an expansion rate above 5% in 2018 (barring near record lows of 4.4%. But the potential is there. For any exceptional past data revisions) and we would look for instance, by simply converging the activity rates and Moving on to the current backdrop, as we (and other something along the lines of 3.5-4% for this year. That said, employment in agriculture to levels around EU averages, analysts) have been saying, the c.7% GDP growth rate we would consider any print around the 4% mark as the we estimate that more than two million people would enter Fastest converging economy in the CEE country’s “cruising speed” (similar to the so-called potential the workforce, which would mean a huge boost given that in the post-crisis period GDP growth rate), so still quite respectable and above the Romania has around 6.4 million employees (including in vast majority of EU states. the grey economy). This untapped reservoir is one of the 100 14 reasons we would feel quite bullish about the medium to 90 The sharp ongoing monetary policy tightening (starting late 12 longer term outlook on the economy. 80 2017, with money market rates well over 2ppt higher since 10 70 then), increased political noise and uncertainties about As in the past, there are some potential headwinds on 60 8 50 fiscal policy likely weighed on consumer sentiment and the horizon that could disturb the economy and are worth 40 6 contributed to the soft start of the year, alongside sluggish monitoring. Externally, this means the major central banks’ 30 4 external demand. Still, as we said a bit earlier, we believe monetary policy tightening (the Federal Reserve is moving 20 2 10 that this soft patch will not last too long as the main puzzle forward with this and the European Central Bank could 0 0 piece of Romania’s growth story remains more or less signal higher rates starting 2019), alongside uncertainties Romania Poland Czech Bulgaria Hungary Slovakia Republic in place: the wage expansion rate is lingering in double fueled by US policies (either related to a global trade war digit territory (nearly 15% YoY in April 2018); in spite of or geopolitics), as well as the eternal headaches generated GDP/capita (PPS, EU28=100) GDP/capita (PPS, change compared to 2010, right) inflation spiking to 5% in the first half of the year, a real by Eurozone politics. Internally, we are closely watching for wage growth of 9-10% is still quite respectable and likely to developments on the fiscal front (slippages risks), as well support decent private consumption going forward. In fact, as for potential flare-ups in political noise. Source: Eurostat, Colliers International retail sales have recovered nicely in April and May. 4 Colliers International Romania H1 Research & Forecast Report | 2018 with better chances for success or those which are already garnering interest from prospective tenants. As the regional Real estate, shifting gears cities are the new frontier and very much underdeveloped, The real estate market runs on a slightly different clock there is still some room to build there. than the macro cycle given the time required to actually Meanwhile, for the industrial market, there is reasonable develop projects, so 2018 is likely to remain a solid year space to grow as retail companies improve country-wide despite the slightly worse macro picture. Meanwhile, some coverage and over the medium term, the sharp growth of submarkets are showing signs of cooling a bit. That said, e-commerce also supports a steady demand of storages. even if a recession were to come soon (maybe due to one Workforce constrains in some areas of the country of the risks we listed previously, but this is not something and rising developer costs continue to be challenges, we expect), we do not see a potential meltdown of the particularly for manufacturing activities. real estate market similar to the one in the immediate aftermath of the global financial crisis. This is mostly Given the solid path for office, retail and leasing, we expect thanks to the fact that asset valuations are pretty far from both land and investment activity to do well in 2018. pre-crisis levels, while economic fundamentals also look more solid than they did back then, so a correction would Retail sales for non-food items be much milder. (index, 2015 = 100) Overall, the real estate market is a bit nuanced. For 150 retail, 2018-2019 look set to be some of the best years in the post-crisis period, as several factors are aligning 140 for landlords. Domestic sales of non-food items have 130 consistently outperformed regional peers by a significant 120 margin, while large parts of the country still have a subpar coverage of modern retail schemes. Meanwhile, the 110 increased purchasing power also means more emphasis 100 on better quality products and services. 90 The office segment is likely to start feeling the pinch of Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 the tighter labour market, as employers are finding it Bulgaria Czech Republic Hungary increasingly difficult to find talent. For Bucharest, this Poland Romania might mean scaling back on the generous pipeline for the next couple of years and bringing to market the projects Source: Eurostat 5 Industrial Market Supply Warehouse spaces delivered in selected cities in H1 (sqm) We estimate that at least 330,000 sqm in modern UKRAINE warehouse spaces have been delivered in H1 2018, more than double the level in H1 2017. This figure was calculated only based on information provided by major developers, though other smaller/independent players may have also added storage spaces. The first part of 2018 has led to ORADEA an interesting shift, as Bucharest accounted for little over HUNGARY a third of the total compared to around half for the whole 6,400 MOLDOVA 2017; in the capital, interest continues to be heavily geared CLUJ-NAPOCA towards western and northern areas, while the various 16,000 cities in Transylvania nearly add up to the overall deliveries in Bucharest; Pitesti and Ploiesti are also high up on the list. This dynamic is in tune with the general trend of regional cities outpacing the capital in terms of economic SIBIU growth over the medium term as migration patterns and BRASOV 24,600 UKRAINE business interest shift towards other parts of the country. 9,000 TIMISOARA In terms of developers, CTP was the biggest supplier 38,000 of new storage spaces in H1 – almost half of total, but WDP, VGP, Alinso Group and Transilvania Constructii also PLOIESTI expanded their portfolio quite significantly. 20,000 As another important aspect, the delivery figures do not PITESTI include self-developed warehouse spaces (by retailers or 20,000 manufacturing players, for instance), but these are seeing BLACK SEA a lot of interest as companies seem to have enough faith BUCURESTI SERBIA CRAIOVA in the general economy and believe that their long-term 113,200 10,700 interests will be better served this way than as a paying tenant in a warehouse. Source: Developers, Colliers International BULGARIA 6 Colliers International Romania H1 Research & Forecast Report | 2018 a respectable surface (say, over 10,000 sqm). 10,000 over (say, surface a respectable away find right to a client for is quite difficult it Bucharest, singledigitsnationwide,whilenear inlow remains vacancy Otherwise, themarket. a significantpartof up andbuilt-to-suitmake transactions unreported) (and that direct itislikely ofdevelopers, tilted infavour balanceisheavily the market that hand,given the other On the year. halfof the second to beclosedin ought transactions of that quiteasignificantnumber suggest pipeline andour experience own Our the contrary. On that demandispoor. donotbelieve “seems” becausewe say sameperiod.We 2017’s below thirds two some sqminH12018, 110,000 atabitunder the market) in estateagencies real the major (by transactions reported abeat,with to beskipping leasingseems numbers, supply-side the strong with contrast In anapparent E-commerce sales (%,2017/2016) sales E-commerce 1 2 3 4 0 0 0 0 0 Romania Demand Portugal Greece Bulgaria Italy Estonia Belgium Spain France Hungary Netherlands Czechia Latvia Ireland Croatia Luxembourg quite afewyears.