Romania Market Overview Real Estate Year Round Highlights 2018 –2019 ROMANIA Market OVERVIEW 2018–2019

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Romania Market Overview Real Estate Year Round Highlights 2018 –2019 ROMANIA Market OVERVIEW 2018–2019 Romania Market Overview Real Estate Year Round Highlights 2018 –2019 ROMANIA MarKET OVERVIEW 2018–2019 523 OFFICES 60 TERRITORIES 18,170 PEOPLE 04 06 10 Romanian Economic Office Investment Overview Market Market 12 14 16 Retail Land Industrial Market Market Market Independent, international, commercial, residential. 18 20 21 Locally expert, globally connected. Residential Project Property Market Management Taxation 22 Legal Aspects ABOUT THE GROUP At Knight Frank we build long-term relationships, which allow us to provide personalised, clear and considered advice on all areas of property in all key markets. We believe personal interaction is a crucial part of ensuring every client is matched to the property that suits their needs best – be it commercial or residential. Operating in locations where our clients need us to be, we provide a worldwide service that’s locally expert and globally connected. We believe that inspired teams naturally provide excellent and dedicated client service. Therefore, we’ve created a workplace where opinions are respected, where everyone is invited to contribute to the success of our business and where they’re rewarded for excellence. The result is that our people are more motivated, ensuring your experience with us is the best that it can be. Contents 2 | KNIGHTFRANK.COM.RO KNIGHTFRANK.COM.RO | 3 ROMANIA MarKET OVERVIEW 2018–2019 In our core macroeconomic scenario the YoY a high probability for the consolidation of the growth of the Romanian economy would monetary policy in the following quarters. decelerate from 7% in 2017 to 4% in 2018 and In other words, the National Bank of In Romania 2.8% in 2019, due to the maturity of the cycle Romania (NBR) would keep the policy rate the economic in Euroland and to the domestic factors: the at 2.50% in 2019 and 2020. However, we do growth pace aggressive state intervention with impact for A year between not exclude the central bank to relaunch the “decelerated last the investment climate in a context of high process of convergence of MRRs towards the year, due to the level of macroeconomic disequilibria. Euroland level in a gradual manner. normalisation 2019 cycles for Romanian However, the GDP may accelerate to 3.3% of the private On the other hand, we forecast the consumption YoY in 2020. increase of the sovereign financing costs and to the in the short-run, due to the challenges economy For the fixed investments we expect a deterioration in terms of public finance and macro- slow growth pace (2.3% YoY in 2019 and of the net foreign financial stability. In our scenario, the 2020), given the twin deficits and the low demand. manoeuvre room of the policy-mix. annual average yield for the 10YR bonds (a barometer for the financing cost in the As regards the private consumption (the Dr. Andrei Radulescu economy) would increase from 4.7% in 2018 Director Macroeconomic Analysis main component of the GDP) we forecast to 5.5% in 2019. An adjustment towards Banca Transilvania YoY growth paces of 4% in 2019 and 5% in 4.7% in 2020 and 2021 is likely, given the 2020, due to the normalisation of the real prospects for the implementation of fiscal disposable income and to the deterioration consolidation measures. of the credit markets. For the €/RON we expect the continuity of According to the PMI Composite indicator the government climbed by 5.5% YoY, due to the The public consumption would consolidate the upward trend in the short and mid-run, global growth pace decelerated to the lowest expansionary fiscal policy and the increase in 2019, while a growth by 1.1% YoY is towards average annual levels of 4.75 in 2019, level since the autumn of 2016 in January. of the wages in the public sector. The global expected in 2020, in our scenario. 4.78 in 2020 and 4.82 in 2021. This scenario In USA the GDP accelerated last year on the economy has Furthermore, the inventories of the is supported by the expected volatility on the On the other hand, the exports would continue back of the fixed investments, supported recently continued companies had an important contribution global financial markets and the domestic “the deceleration to underperform compared with the imports by the expansionary policy-mix. During to the YoY growth pace of the economy challenges in terms of macroeconomic in the short and mid-run, but a narrowing of January-September 2018 the GDP advanced process, an during January–September 2018, as the gross equilibria. the differential dynamics seems likely this year, by 2.8% YoY, as the fixed investments and the evolution mainly capital formation climbed by 11.7% YoY, due to the depreciation of the RON. In our view the main risk factors for the private consumption rose by 5.5% YoY and determined by while the fixed investments contracted by evolution of the Romanian economy 2.6% YoY, respectively. the global trade 1.1% YoY. The decline of the investments was For 2021 we expect the acceleration of the tensions and the (real and financial sides) in the following determined by the maturity of the post-crisis GDP growth pace to 3.7% YoY, on the back On the other hand, the Euroland economy maturity of the quarters are: the macro-financial climate cycle in Euroland and the domestic challenges of the improvement of the investment climate: (the main economic partner of Romania) investment cycle (global/European); the EU challenges in terms of macroeconomic equilibria. the fixed investments are forecasted to climb decelerated last year (1.8% YoY, the slowest (Brexit); the domestic policy-mix in by 3.9% YoY, the best pace since 2015. pace since 2014), converging towards As regards the net foreign demand the the electoral year (including the state potential, an evolution influenced by the imports continued to increase by a higher The acceleration of the fixed investments intervention in the economy and the fragile global trade tensions, the fading-out of pace compared with the exports during and the prospects for gradual improvement stance of the public finance); the regional the expansionary monetary policy and 9M2018: 9.1% YoY vs. 5.8% YoY. of the credit markets would determine an geo-political climate. the accumulation of challenges in terms increase of the private consumption by 5.3% of regional economic integration. YoY in 2021. Private consumption vs. fixed investments Consumer prices (HICP) YoY (%) YoY (%) At the same time, the GDP of China rose by only At the same time, the public consumption is 6.6% YoY in 2018, the slowest pace since 1990. 60 forecasted to advance by 1% YoY in 2021. Fixed investments Private consumption 7 In Romania the economic growth pace As regards the net foreign demand we expect 16 50 decelerated last year, due to the normalisation both exports and imports to accelerate in 6 of the private consumption and to the 40 2021, to 6.8% YoY and 8.1% YoY, respectively. 5 deterioration of the net foreign demand. Last, but not least, in our scenario the trend 11 30 According to the estimates of the National on the labour market would change in the 4 Institute of Statistics (NIS) the GDP climbed 20 short-run, given the expected negative output 3 by 4.2% YoY during 1–3Q 2018, a growth gap and the increasing cost pressures. 6 pace close to the potential, an evolution 10 On the other hand, we forecast the 2 supported by the affordable level of the real 0 deceleration of the average annual inflation financing costs and the expansionary fiscal 1 1 (HICP basis) from 4.1% in 2018 to 3.1% and income policies. -10 in 2019 and 2.6% in 2020, due to the 0 The household consumption advanced slowing-down of the growth pace and to by 5.1% YoY, due to the increase of the real -20 the rebalancing of the economic policy. -4 -1 disposable income of the population, the However, inflation would accelerate to 2.9% -30 decline of the savings ratio and the positive in 2021 in our scenario. -2 climate on the credit market. 2011 2017 2012 2021 2013 2015 2019 2014 2016 2018 -9 -40 The slowing-down of the real growth pace 2010 2020 2009 2011 2017 2012 2021 2013 2015 2019 2014 2016 2018 2010 2001 2007 2020 2002 2003 2005 2009 2006 2008 2004 At the same time, the collective 2000 and the prospects for inflation (fluctuation consumption expenditure of the general Source: Eurostat, BT forecasts within the target of the central bank) express Source: Eurostat, BT forecasts 4 | KNIGHTFRANK.COM.RO KNIGHTFRANK.COM.RO | 5 ROMANIA MarKET OVERVIEW 2018–2019 take-up. Pre-leases came third with a 14% Vacarescu and the CBD registered share, albeit 50% lower than the previous a vacancy rate below 3%. The total stock year’s volume. Office Market of class A and B IT & Communication and Professional ForEcast grade offices In 2019, the delivery of new office space Services remain the main drivers of “in Bucharest is expected to peak, with projects adding demand, accounting for 35% of the reached roughly 313,000 sq m of stock, including total take-up (~113,00 sq m) and 18% 2.74 mil sq m schemes such as by: Business Garden (~59,000 sq m) respectively. at the end Vastint (~41,000 sq m), Expo Business Park of 2018. (~38,000 sq m), Anchor Plaza Metropol RENTS (~36,000 sq m), Globalworth Campus III Rents remained broadly unchanged during (~30,000 sq m), The Bridge Building B the year, confirming the stability of the (~25,000 sq m), Oregon Park C (~25,000), market.
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