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

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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 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. Prime headline rents were reported Campus 6.1 (~22,000 sq m), The Light

at €18–18.50/sq m/month. (~21,000 sq m), Equilibrium First Phase Prime rental (~20,000 sq m) and Timpuri Noi Square III levels remain Service charges have followed the (20,000 sq m). If all these projects are stable at same stable trend, ranging between 2018 witnessed a total delivered on time, the total stock of class “18.5 €/sq m/ €3.50–4.50/sq m/month. take-up for class A and B A and B office space will exceed the threshold month. offices of approximately of 3 million sq m at the end of 2019. Vacancy “322,000 sq m, a 3.5% The vacancy rate for Class A and B offices increase compared Although large amounts of new supply will witnessed a slight increase to 9.5%, due to the to the previous year. be delivered, tenant demand shows a positive substantial amount of new supply delivered outlook, having seen an increase of 3.5% during 2018. in 2018 compared to 2017. In our view, the relocations and new demand will remain the The highest vacancy rate in Bucharest is main driver of the market. still found in the submarket, at over 30%. At the opposite end, the West has Headline rents are expected to remain stable Overview Demand 0% vacancy, while Calea /Barbu over the next year. Prime headline rents Bucharest’s office market experienced (€/sq m/month) The Bucharest office market recorded healthy growth following the positive leasing transactions of approximately results recorded in 2017. Both supply and 322,000 sq m during 2018, a 3.5% increase Vacancy rates Supply vs. demand Take up evolution 16–18 (sq m) (sq m) demand remained at high levels, with supply CBD compared to the previous year, indicating registering a 55% increase compared to that demand remains strong. 350,000 Supply Demand 350,000 the previous year, while demand slightly 33% The number of transactions concluded in 14–16 Pipera 300,000 300,000 increased with 3.5%. Presei Libere Square 2018 was 213, representing a 20% increase 250,000 250,000 The Center-West area confirmed its new compared to the previous year. However, 14% hub status by closing the year ahead, both 14–17 the average transaction decreased from South 200,000 200,000 1,850 sq m in 2017 to 1,500 sq m in 2018. in terms of supply and take-up. In 2018, the Calea Floreasca 150,000 150,000 delivery of new space in this area was close /Barbu Vacarescu Larger transactions of over 5,000 sq m 12% Baneasa 100,000 100,000 to 75,000 sq m, while take-up was almost were again dominant, accounting for a 43% 100,000 sq m. 13–15 share of the total take-up. This was followed 50,000 50,000 by transactions between 1,000 sq m and 10% Center-West 0 0 In terms of tenant profile, the IT & 3,000 sq m with a 29% share. When looking Center West Communication sector still makes up the 2011 at deals by number, the most numerous 2011 2017 2017 2012 2012 2013 2013 2015 2015 2014 2016 2014 2016 2018 2018 2010 2010 2007 2009 12–14 2008 largest share of demand, accounting for 35% were those below 1,000 sq m, accounting for 8% Baneasa of the total take-up. Center almost 58% of the total take-up, followed Source: Knight Frank Source: Knight Frank by transactions between 1,000 sq m and 11–13 8% Supply 3,000 sq m with 29%. East Dimitrie Pompeiu 2018 saw class A and B supply reach The most sought after submarkets in Modern office stock approximately 168,000 sq m, a 55% Annual evolution (sq m) 11–13 2018 were Center-West, which saw 6% increase compared to the year prior, almost 100,000 sq m of leasing activity Presei Libere Dimitrie Pompeiu Square 2,500,000 Class A Class B driving the stock to 2.74 million sq m. (31% of total take up) and Center, where Among the schemes, Orhideea Towers 2,000,000 11–12 54,000 sq m of space was leased (17% 2.7% is the largest (~37,000 sq m), followed by of total take up), followed closely by West CF/BV 1,500,000 Globalworth Campus II (~29,000 sq m), Calea Floreasca/Barbu Vacarescu with 1,000,000 The Mark (25,000 sq m) and Afi Tech Park I 51,000 sq m (16% of total take up). 2.5% (~22,000 sq m). 10–11 CBD 500,000 South Looking at transaction types, relocations The submarket with the highest modern and new demand remain the most 0 office stock is Calea Floreasca/Barbu prominent drivers of tenant activity, 0% 8–10 West

Vacarescu (430,000 sq m) followed by 2011

accounting for approximately 50% of the 2017 2012 2013 2015 2014 2016 2018 Pipera 2010 Central Business District (420,000 sq m) and total take-up, followed by renegotiations Dimitrie Pompeiu (408,000 sq m). Source: Knight Frank and renewals, with a 27% of the total Source: Knight Frank Source: Knight Frank

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Demand by tenant activity sector Demand by submarket Stock by submarket 2018 2018 2018 MAIN K M G H I J L A F G H I J A H I J K L A OFFICE HUBS IN BUCHAREST F G E A+B

E 2018 B F

Baneasa

D D E

Pipera

C B C B D C A B C A B C A B C Dimitrie Presei Pompeiu 35% 18% 12% 31% 17% 16% 16% 15% 15% Libere IT & Professional Manufacturing Center West Center Calea Floreasca/ Calea Floreasca/ CBD Dimitrie Square Communication Services Industrial Barbu Vacarescu Barbu Vacarescu Pompeiu & Energy CF/BV D E F D E F D E F 11% 6% 5% 13% 9% 7% 14% 12% 7% Finance/Banking Other Medical CBD Dimitrie Presei Libere Center West Center Baneasa /Insurance & Pharma Pompeiu Square CBD G H I G H I G H I 4% 4% 1% 4% 1% 1% 7% 5% 3% Consumer Services Media Retail West Baneasa East Pipera Presei Libere West & Leisure & Marketing Square J K L J J K L 1% 1% 1% 1% 3% 2% 1% East Construction Administrative Transport South East Straulesti South Center West Center & Real Estate & Cargo M West 1% FMCG

Source: Knight Frank Source: Knight Frank Source: Knight Frank

South Demand by leased area Demand by type of transactions Demand by number of transactions 2018 2018 2018

D A D A C D A

C

C

Baneasa Pipera Presei Libere Square Stock 203,000 sq m Stock 187,000 sq m Stock 136,000 sq m Vacancy 12% Vacancy 33% Vacancy 6% B B 12−14 8−10 14−16 Headline rent €/sq m/month Headline rent €/sq m/month Headline rent €/sq m/month

B Dimitrie Pompeiu CF/BV Center West Stock 408,000 sq m Stock 430,000 sq m Stock 380,000 sq m Vacancy 8% Vacancy 2.7% Vacancy 10% A B A B A B 11−13 14−17 13−15 Headline rent €/sq m/month Headline rent €/sq m/month Headline rent €/sq m/month 43% 29% 51% 27% 58% 29% >5,000 sq m 1,000 sq m–3,000 sq m Relocation and Renegotiation/Renewal <1,000 sq m 1,000 sq m–3,000 sq m new demand CBD West Center C D C D C D Stock 420,000 sq m Stock 76,000 sq m Stock 324,000 sq m 17% 11% 14% 8% 8% 5% Vacancy 2.5% Vacancy 0% Vacancy 8% <1,000 sq m 3,000 sq m–5,000 sq m Pre-lease Expansion >5,000 sq m 3,000 sq m–5,000 sq m 16−18 11−12 13−17 Headline rent €/sq m/month Headline rent €/sq m/month Headline rent €/sq m/month Source: Knight Frank Source: Knight Frank Source: Knight Frank

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Demand which was acquired by MAS Real Estate In 2018 a total investment volume of from Atrium Real Estate Europe Limited. Total investment €973 million was registered on the Other transactions were registered in Capital Markets Brasov and involved the sale of Magnolia reached almost Romanian market, a volume 7.5% higher €973 million in than that registered in the previous year. Shopping Center and one Praktiker shop “2018, representing The majority of the transactions were sold by Miller Development and Ballymore Overview Romania investment transaction volumes the largest registered in Bucharest (around 80% from Group respectively to two private Annual evolution (€mn) In 2018, commercial property investment volume of the total volume), while in the regional individuals and Mitiska REIM respectively. reached €973 million, a decade high. Oradea also registered an important 2000 transactions in markets, Timisoara was the most active A significant part of the total transaction the past 10 years. accounting for around 6% of the total volume. transaction, the sale of Oradea Shopping volume was generated from new investors City to Sapient Center Oradea. In 2018, investor interest mainly focused on 1,500 that have entered the market. However, the office sector, which represented 65% of As in recent years, foreign investment was established players familiar with the the total investment volume. It was followed the main driver of activity, accounting market also expanded their portfolios by 1,000 by industrial with 17% and retail with 15%. for more than 73% of the total investment acquiring income-producing assets. volume although local capital is becoming The most significant office transaction was 500 Moderate yield more active. Supply the sale of The Bridge (approx. 80,000 sq m, compression is The number of assets brought to market out of which only the first building is already expected in the Yields was modest, however the size of available delivered) to Dedeman. This was followed by 0 “short to medium assets increased (the average deal size rose the sale of Oregon Park (almost 45,000 sqm Given the improved levels of activity 2011 2017 2012 2013 2015 2014

2016 term, however 2018 2010 2007 2005

2009 registered in 2018 compared with 2017, 2006 2008 2004 to €27 million from €24 million in the GLA) developed by Portland Trust to the the risk adjusted same period of last year). new entrant Lion’s Head and the sale of the yields have decreased slightly in the office returns are first building from the Campus 6 project and industrial sectors. Nevertheless, there Office vs total The office segment is experiencing a Annual evolution (€mn) still attractive (almost 22,000 sqm GLA) developed by remains downward pressure on yields, and shortage of product available for sale as compared with Skanska which was sold to CA IMMO. we predict a further yield compression may a significant share of existing landlords other regional 2000 be seen this year. 1,800 are trying to consolidate their position on markets. The industrial and logistics sector reported 1,600 the local market and are not interested in investment of €169 million. The largest The gap between the local market and the 1,400 selling. This is reflected in the increasing investor in the market was WDP, who bought leading markets in the region (Prague and 1,200 number of forward purchases, which an industrial park of around20,000 sq m Warsaw) is still above 150–200 bps. 1,000 are seen as a way to secure good quality in Ghimbav from Flenco East Europe in a 800 properties from developers. sale and lease-back transaction. They also Forecast purchasedf another 37,000 sq m warehouse 600 Retail assets remain in demand from The increased activity in the office and in Timisoara (where P&G is the tenant) 400 both existing and new investors. In 2018, industrial investment markets indicates and a 33,000 sq m warehouse in Cluj (with 200 established developers and investors a growing confidence in Romania’s top Penny as tenant). 0 were active and this additional liquidity is quality assets. Both the office and industrial likely to further encourage other investors The retail sector accounted for 15% of total segments are expected to witness a 2011 2017 2012 2013 2015 2014 2016 2018 2010 2007 2009 2006 2008 to enter the market or consolidate their investment. The main transaction reported significant number of new developments that will be delivered in the coming years, and we Source: Knight Frank existing portfolios. was the sale of Shopping Center, expect that this in itself will act as a boost to transaction volumes.

Transaction distribution by country of origin Prime yields Transaction distribution by property type KEY INVESTMENT TRANSACTIONS 2018 2018 (%) 2018 2018 Type City Byer Seller Building description Area (sq m) Price (€) 7.25 Office Office Bucharest Dedeman Forte Partners The Bridge 80,000 200,000,000 Lion’s Head Portland Trust si Office Bucharest Oregon Park 45,000 165,000,000 7.25 Investments Ares Management Retail % Atrium European Militari Shopping 65Office Retail Bucharest MAS Real Estate 54,100 95,000,000 8.25 Real Estate Limited Center % Campus 6 Industrial Office Bucharest CA IMMO Skanska 22,000 53,000,000 73Foreign – first building Knight Frank Source: Office Bucuresti PPF Real Estate Search Corporation Crystal Tower 16,000 40,000,000

Retail Brasov Mitiska REIM Ballymore Group Praktiker Brasov 21,000 23,000,000

Industrial Timisoara WDP Dunca Imobiliare Dunca Logistics Center 37,000 21,000,000 Local investors % Bucharest Business Office Bucharest One United Immofinanz 11,672 19,000,000 accounted for 17Industrial % Center % approximately 3Hotel % Industrial Cluj WDP CTP CTPark Cluj 33,000 19,000,000 27Romanian “27% of the total 15Retail activity in the Source: Knight Frank market. Source: Knight Frank Source: Knight Frank

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and Slobozia. NEPI also registered an Shopping City, investment is flowing to important completion, a shopping centre secondary and tertiary cities. Due to the strong in Santu Mare of approximately Given the volume of new completions due Retail Market performance 29,000 sq m GLA. of malls in in the next two years, we expect to see many The commercial gallery and Carrefour “Bucharest, new market entrants. hypermarket within Bucharest’s Vitantis developers are Shopping Center were closed at the heading for High street retail market beginning of 2018, an anticipated scenario expansion, both 2018 market activity remained broadly stable for the underperforming scheme, located in terms of new in the high street sector. in a very competitive area of the city. space completed New supply was mainly represented by and future spaces located at the groundfloor of new pipeline. Demand The development of new retail stock in recent office buildings, targeting catering and years has coincided with rising occupational services, or residential compounds targeting demand. Retailer interest remains high and mainly services (supermarkets, laundry, etc). vacancy rates low. New developments gave tenants the Recent new entrants were represented by opportunity to open in areas they would not brands such as Vitapur and TAG Heuer otherwise have considered. Such an example in Bucharest (in Mega Mall and Baneasa is the Timpuri Noi Square office project Shopping City respectively), while Kik where during 2018 Fratelli Group opened opened 2 stores in Oradea and Piatra Neamt Biutiful Downtown, Carnivale Food Market and Under Armour opened their first store and Fratellini Bistro. Another active player in outside Bucharest, in Timisoara. this type of space is Starbucks, who opened in Day Tower and Campus 6 office buildings. Rents In the luxury high street sector, the most Rental levels remained broadly unchanged significant opening was Hugo Boss, returning in 2018, as the market was able to absorb the newly released supply in retail centres. In the to , but this time in a different first six months of 2018, prime rents for the location, namely at the ground floor of leading schemes remained relatively stable. Radisson Blu Hotel. Rents were approx. €65–75/sq m/month The traditional well-established retail areas for 100 sq m units for shopping centres in from the residential neighborhoods remain Bucharest and between €30–40/sq m/in the the focus of food retailers, pharmacies, secondary cities. betting shops and casinos.

Forecast The Old City Center has evolved into a Developers plan to add another tourist area with a focus on leisure and 250,000 sq m to the map of the Romanian hospitality and catering. The fashion sector is malls in the next 18 months. Nearly 60% of not performing well in this location — H&M, the spaces scheduled to be delivered during one of the most important fashion anchors, this period are extensions of the existing closed their store located on street. centres and, with the exception of three However we anticipate a revival of the expansions, totalling 48,000 sq m — Veranda area amid the large number of residential Mall, Colloseum Retail Park and Baneasa accommodation announced in the next years.

PLANNED COMPLETIONS OVER THE FOLLOWING 18 MONTHS

Project Developer Type GLA (sq m) Openville Timisoara Iulius Group Extension 47,000 AFI Palace Barasov AF IEurope New project 45,000 Supply Festival Shopping Center NEPI Rockcastle 42,000 Quarter Developer (location) GLA (sq m) New project The new supply delivered in 2018 totalled Q1 S-Immo (Bucharest) 11,000 Shopping City TarguMures NEPI Rockcastle 33,000 With the New Project approximately 115,000 sq m across the entire Q2 Element Development 14,000 exception of ERA Park Iasi Prime Kapital Extension 30,000 country. Only 11,000 sq m of the new supply a few extensions (Bistrita), Prime Kapital Baneasa Shopping City BaneasaDevelopments Extension 25,000 was in Bucharest, covered by the extension of “taking place (Focsani) Colloseum Retail Park Nova Imobiliare 16,500 Sun Plaza in Bucharest owned by S Immo. in Bucharest, Q3 - 0 Extension investment Q4 Prime Kapital (Baia 90,000 Iulius Mall Timisoara Iulius Group Extension 10,000 The most active developer was Prime Mare, Roman, Slobozia), is flowing to Veranda ProdplastImobiliare Extension 6,000 Kapital/MAS REI with new space delivered secondary and NEPI Rockcastle in four cities: Focsani, Baia Mare, Roman tertiary cities. (Satu Mare) Source: Knight Frank

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MOST ACTIVE Supply Portland Trust secured a new site for a future office development, through the acquisition DEVELOPERS Bucharest’s and other secondary cities’ major of a 16,000 sq m land plot located in the AFI Europe land supply comes from former factories, Pajura area. located in semi-central areas. Globalworth ATENOR, in a transaction intermediated In Bucharest, the few remaining prime plots by Knight Frank, bought a 7,150 sq m plot in located in central, high end, residential Forte Partners Floreasca, which represented their entrance areas are also sought-after by residential into the local residential market. Hagag constructors and developers. Mitiska REIM concluded the acquisition of the Development Investors are more interested in land that have former Helitube plant in the area, already acquired development documents, and are planning to develop it into a retail unit. Portland Trust including the essential PUZ permit, rather than incur two year delays for approvals. Local developer One United bought the ATENOR 53,000 sq m Ventilatorul site, which was a Mitiska REIM Demand former industrial platform located in the Demand trends remained positive Razoare area. They now look to develop it in 2018, with high volumes of activity into a mixed use project. across all market segments. Well known developers have secured new sites for future Prices developments. Prices remained at a constant level throughout 2018. AFI Europe bought a 43,000 sq m land plot situated in the proximity of AFI Park Forecast and AFI , part of the former Land Market industrial platform, UMEB. AFI Europe is We expect the increase in demand for land planning to develop the commercial mix in plots suitable for residential and office the coming years. use to continue, with developers actively searching to secure the best available sites.

Globalworth acquired two adjoined land There will be high demand for land with ATENOR entered the plots in order to develop two office buildings, all authorizations in place, as the process of residential segment with in the Gara Herastrau/Barbu Vacarescu area, obtaining all the documents needed for a its first project, Up-Site, near the Green Court office development. development is lengthy. “through an aquisition Globalworth also bought a land plot of 30 ha of a plot of land in Floreasca, in Timisoara, near the TAP development. which was intermediated LAND PLOT PRICES BY USE Forte Partners bought two pieces of land in by Knight Frank. (€/sq m) Bucharest, a 5,400 sq m plot from Hercesa and 8,700 sq m from UniCredit. Office Barbu Vacarescu/ 1,500 Calea Floreasca Hagag Development invested in two land Center-West 700–900 plots and two buildings in Bucharest this Residential Prime areas 1,200–1,500 year. One plot was on Eliade Street and one in Periphery 250–300 Pipera, both for residential developments. Retail Bucharest 350–500 The end of 2018 was marked by important Countryside 100–250 transactions in all segments: Source: Knight Frank

RELEVANT LAND TRANSACTIONS 2018

City Byer Location (area) Use Size (sq m) Bucharest AFI Europe Politehnica Mixed 43,000 Bucharest One United Floreasca Office 26,000 Bucharest Portland Trust Pajura Office 16,000 Bucharest Globalworth BarbuVacarescu Office 13,000 Bucharest Forte Partners Orhideea Office 5,500 Bucharest One United Razoare Mixed 53,000 Bucharest Speedwell Jandarmeriei Residential 50,000 Bucharest 21Residence Pipera Residential 20,000 Bucharest Metropolitan Residence Jandarmeriei Residential 7,500 Bucharest Atenor Floreasca Residential 7,150 Stefanestii de Jos WDP Stefanestii de Jos Industrial 440,000 Timisoara Globalworth Timisoara Industrial 300,000 Brasov VGP Brasov Industrial 230,000 Bucharest Mitiska REIM Colentina Retail 90,000

Source: Knight Frank

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Deliveries by region Take-up by region Romania Take-up by tenant activity sector 2018 2018 Bucharest, 2018

Industrial Market D E F A E F G H A D E F G A

Supply the country. In Bucharest, prime rents for D The level of deliveries on a country level in modern warehouses were approximately The total 2018 was around 550,000 sq m, bringing €4.0–4.2/ sq m/month. C C Romania’s stock to nearly 3.5 million. 54% take-up in of the new supply was in Bucharest, followed Bucharest Forecast “for 2018 was by Pitesti (19%) and Timisoara (12%). CTP and Developers seem to be confident and C WDP were amongst the main contributors to approximately determined to keep up with tenant’s needs, industrial space in 2018. 300,000 sq m, as new extensions have been announced 17% higher for well performing projects in the coming B Demand than in 2017. months. 2019 is expected to register a B Total take-up in 2018 was approximately similar amount of new supply as 2018, B 443,000 sq m nationally. As the country’s with 70% of the space being located in main industrial hub, Bucharest recorded Bucharest. A B A B A B 68% of total demand, followed by Timisoara Retail players Demand remains on a positive trend, with and Deva, each with 10% of the total take-up. 54% 19% 68% 10% 55% 18% were the main both retail and logistics companies having For Romania, this was 2% lower than the Bucharest Pitesti Bucharest Timisoara Retail Logistics generators expansion plans. previous year, while in Bucharest the total “of demand C D C D C D take-up increased by 17%. both in Although a large amount of new supply is anticipated for the coming period, rents are 12% 7% 10% 8% 13% 6% Retail was the main generator of demand Bucharest and Timisoara Cluj expected to register no change. Deva Cluj FMCG Other both nationally and in Bucharest, accounting nationwide. E F for 48% and 55% of the total demand, E F G E F G respectively. Logistics followed with 18% 5% 3% Bucharest industrial take-up 2% 1% 1% 4% 3% 1% of the share in both Romania and Bucharest. 2018 (sq m) Oradea Other Pitesti Craiova Sibiu Distribution Automotive Production FMCG equated to 13% of Bucharest’s total demand and 16% of Romania’s demand. 350,000 Source: Knight Frank Source: Knight Frank Source: Knight Frank New demand was the main driver both 300,000 in Bucharest and at the national level, accounting for 53% and 40% of the total 250,000 Take-up by tenant activity sector DELIVERIES demand, respectively. Romania, 2018 DURING 2018 (SELECTION) 200,000 As a new trend, two of the major local D E F G A Location Project Developer GLA (sq m) retailers, eMag and Altex, invested in 150,000 Bucharest CTPark Bucharest West km 23 CTP 95,000 their own logistic facilities, developing 100,000 Pitesti Pitesti/Oarja WDP 80,000 approximately 200,000 sq m of logistic space Bucharest CTPark Bucharest CTP 50,000 located near Bucharest. 50,000 Timisoara Timisoara WDP 40,000 0 Bucharest Stefanesti WDP 40,000 Rents Bucharest WDP 33,000 Rents for prime industrial and logistics Bucharest - Dragomiresti 2011

2017 C 2012 2013 2015 2014 2016 2018 2010

2007 Timisoara CTP 30,000 2003 2005 2009 2006 2008 space remained stable in 2018, both in 2004 CTPark Timisoara II Bucharest and in the other regions across Oradea Oradea WDP 30,000 Source: Knight Frank Pitesti CTPark Pitesti CTP 25,000 Knight Frank RELEVANT TRANSACTIONS Source: 2018 B

Location Tenant Building GLA (sq m) PIPELINE Bucharest Auchan WDP Stefanesti 77,500 A B 2019 (SELECTION) WDP Stefanesti 56,500 48% 18% Location Project Developer GLA (sq m) Deva Carrefour Deva WDP Deva 44,000 Retail Logistics Bucuresti CTPark Bucharest West CTP 167,000 Timisoara P&G WDP Timisoara 30,100 Bucuresti WDP Stefanesti WDP 60,000 C D Bucharest LPP Romania Fashion WDP Industrial Park Stefanestii de Jos 22,100 Bucuresti MLP Chitila MLP 20,000 Bucharest Pepsi HeliosPhoenix 16,500 16% 7% Bucuresti Eli Park 1 Chitila Element Industrial 20,000 FMCG Distribution Bucharest Van Moer CTPark Bucharest West 15,000 Craiova Southern Industrial Park Zacaria 30,000 Bucharest NOD CTPark Bucharest 14,000 E F G Buzau WDP Buzau WDP 20,000 Bucharest Pirelli P3 Bucharest Park 10,000 5% 4% 2% Timisoara Global Vision Timisoara Global Vision 20,000 Bucharest Pepsi CTPark Bucharest 10,000 Other Automotive Production Constanta Global Vision Constanta Global Vision 10,000

Knight Frank Source: Knight Frank Source: Knight Frank Source:

16 | KNIGHTFRANK.COM.RO KNIGHTFRANK.COM.RO | 17 ROMANIA Market OVERVIEW 2018–2019

The greatest demand was for 1 and was heading towards a new crisis. However, Special requirements for top management 3 bedroom apartments, especially our data suggests that there is still growth (CEO, CFO, COO) are usually announced those on top floor with panoramic space, and if some changes were to occur, – 4 months in advance and the relocation The number views of Floreasca Lake. it would be in the form of price correction process often synchronises with the of transactions rather than market collapse. Demand is still international schools’ schedule. For large One United saw an average 4.5 units in 2018 is linked greater than supply, especially in the high end families, a villa with 4–5 bedrooms in the “with supply and sold per month between July 2018 Residential market, where there is still room for growth. North area is preferred, while for couples or demand factors, and January 2019. Significant interest smaller families, large apartments in high- was registered in One Floreasca with a general Corporate Residential Lettings end residential projects are chosen. City’s 1 and 2 bedroom apartments. tendency In Q4 2018, rental levels for apartments did This mixed use project with 236 towards market Market not fluctuate in the major cities of Romania, apartments, is expected in 2021. Forecast stabilization. including Bucharest. Rent levels were more High-end We expect the same level of interest in stable in terms of growth, compared to the In 2019 we expect a slight change in the profile the high end market, as long as similar sales market, which witnesed sustained price of high-end buildings and specifications. levels of high quality projects from rises in the past couple of years. In Q4 2018, Tower buildings with glazed facades and experienced developers remain. rents remained at the same level with the unobstructed views will replace low rise previous three quarters of the same year. With increasingly fewer land plots buildings in well known areas. available in high end areas, such as In the analysed period, the level of rents in the Indicating market maturity, clients are the case in markets including London cities with major university centers, including looking for balance between quality and and Paris, older buildings situated Lasi and Timisoara, have remained constant. TRANSACTIONS price. This has caused the gap between 2018 downtown are being converted into Here, ther was greater demand for 1 bedroom high-end projects and the middle segment to Last year, Prime Kapital confirmed high-end boutique projects. For units for both students and young executives. Supply reduce, which will remain the case in 2019. they will start developing on two example, Hagag launched H Victoriei 83,066 Signs of market maturity will surface Important changes occurred in terms of land plots located in the Pipera Area 139, which provided 33 high-end Prima casa Bucharest this year. In 2019, we expect 20 the supply of properties built before 2000. (Avalon Estate) and in Bucurestii Noi apartments on Calea Victoriei. new projects to be delived in the In the last quarter of 2018, the number of The government approved the total guarantee 42,203 residential segment, compared with (Marmura Residence). limit for the 2019 Prima Casa programme. High rise towers, providing excellent these properties declined by approximately Ilfov 50 new developments delivered in With approximately 800 residential city views have also been popular with 30%. This is expected considering the large This has enabled, in 2019, the Ministery of Public Finances to allocate RON 2 bilion 2018. However, this is unlikely to units, including houses and high end developers as a response to number of new delivered projects. 34,575 impact prices as the pace of new to the programme, which helps first-time apartments, the Avalon Estate is the lack of available land in the city. Timis deliveries will be sustained by In Q4 2018, the majority of corporate Romanian buyers. scheduled for delivery in 2019. projects previously started. requirements were 1–2 bedroom apartments 31,558 The amenities available include Prices in residential parks, replacing hotels, for In 2018, 20.423 credits were alocated with a Cluj Within the high end market, the promenade areas, a private At the beginning of 2018, it was short-term expat relocations. For example, total value of RON 1.9 bilion and the average most significant delivery in 2018 kindergarten, access to the Pipera expected that apartments would one of our clients has relocated 13 employees credit value was RON 94.000. Since the 26,995 Lake and commercial areas. continue to witness price gowth, as seen was One Charles de Gaulle, with 33 to residential parks, who previously would programme’s launch in 2009 until December Brasov apartments. By the delivery date, 90% in 2017. Cluj County saw the greatest 2018, 267.752 credits and promises have been Stretching over 1.5 hectares, the have stayed in hotel accomodation provided of the units were already sold. price increase in early 2017, with prices granted, with a total value of RON 23.7 bilion. Marmura Residence will consist of by the company. 23,801 rising by 16.6% compared to autumn Iasi In December 2018, ATENOR took 458 apartments designed for young 2016 and by 46.9% compared to autumn The second most common requests were Participants of the programme include: its first steps towards the high-end professionals and families. With 5,000 2014. Forecasts were indicating that a from middle management and executives BRD, BCR, Banca Transilvania, CEC Bank, 22,191 residential market in Bucharest, by sq m of green areas and 1,700 sq m continuous price rise could cause a new with requirements for modern 2–3 bedroom ING, Raiffeisen Bank, OTP Bank, Banca Constanta acquiring a plot of 7,150 m² in the of retail and commercial spaces, the ’boom’ in the real estate market. houses with proximity to parks and leisure Românească, Unicredit, Garanti, Piraeus Floreasca/Barbu Vacarescu area. The project will bring a new modern areas near their office. Bank, Marfin, Credit Agricole și Leumi Bank. Source: Knight Frank site is ideally located between the touch in a neighbourhood previously In Q1 2018, the price of housing recently redeveloped lake Floreasca dominated by older buildings. in Romania increased by 6.6% area and the underground station Aurel compared to the similar period of BUCHAREST RENT PRICE 2018 Vlaicu, which is in close proximity to Demand 2017, the increase being over the a very well known shopping centre in Demand in 2018 can be split in two. European Union average of 4.7%, Area 2 rooms/month 3 rooms/month 4 rooms/month Bucharest.This acquisition fits into The first half of the year saw a 6.2% according to Eurostat. av min av max av min av max av min av max Due to a large ATENOR’s development strategy, Primaverii 650 1100 1200 2200 2000 4000 number of new increase in buyer appetite, notably Price growth also occured in which aims to promote projects with units delivered due to the high volume of transactions Bucharest, where apartment prices Aviatorilor 700 1000 1300 2000 2000 3000 “in 2018 and a high architectural and environmental in January. The second half was more increased by 11% compared to the Herastrau 900 1400 1300 2300 2000 3000 quality across European cities with healthy economic moderate, which overall contributed autumn of 2017. Floreasca 650 1100 1500 2000 1800 2500 environment, strong economic fundamentals. to a positive but balanced 2018. Dorobanti 700 900 1000 1500 1800 2500 ATENOR aims to make this one of its In 2018, the most expensive areas, new residential Kiseleff 700 1000 1500 2200 2000 3000 flagship developments in Romania. In the high-end segment, demand were Kiseleff (€3500–€3700 / built units are prefered Baneasa 500 700 700 900 800 1200 remained constant during 2018. sq. m), Herastrau (€2500–€2800/ to those built In 2018 there were a large number of Pipera 500 600 600 800 800 1200 There was significant appetite for new built sq m), Dorobanti and Floreasca before 2000. middle segment projects announced, Central 400 600 800 1200 1000 1700 developments located next to parks, (€1900–€2300/ built sq m). The most Over 60% mostly in the north area of Bucharest. especially in the main office hubs of expensive apartment sold in 2018 was Aviatiei 500 700 700 1200 800 1300 of registered Notable announcements include the the North area of Bucharest. in Herastrau area, at One Herastrau Domenii 500 700 700 1200 1000 2000 transactions Cloud 9 Residence with around 800 Park, for €2.7 million. DorobantiCapitale 600 700 1500 2500 2500 4000 in Bucharest apartments, Aviatiei Towers with Between July 2018 and January Tei 500 600 700 900 800 1200 involved new around 150 apartments and Aviatiei 2019, Rahmaninov 38 sold 14 out of Several market commentators in 2018 properties, Park with 176 apartments. 32 of their high end appartments. claimed that the real estate market Source: Knight Frank for example.

18 | KNIGHTFRANK.COM.RO KNIGHTFRANK.COM.RO | 19 ROMANIA Market OVERVIEW 2018–2019 Where does your Project Diana Rosu Cosmin Boare Senior Manager Consultant money go in 2019? PwC Tax Service PwC Tax Service

Management We had a hot 2018 until the very year-end investing as a micro-company taxpayer for With respect to the first question, and the heat is just not stopping. The Good, the benefit of only 1% turnover tax reflects deduction of any of these costs may be the Bad and the Ugly are off with a fairness to their business plan. postponed indefinitely or deferred and memorable start for channeling the money used each year along with the current year to real estate investors’ accounts and state Interim dividend financing charges. budgets along. Ascertain the rules and distributions — short-term Concerning the second question, there is The evolution of space-as-a-service effects of some groundbreaking changes financing solution a theory based on which, the excess cost in 2019, so that you manage your portfolios A short-term solution to the of debt should be assessed even during with sound budgeting, and tax planning. aforementioned predicament of long- the investment stage, and any interest One of the often-heard critiques of the service refresh. One example is IWG, The Good news is that 2019 has brought term financing costs may be found in a that is capitalized in the investment value space-as-a-service model is that it has owner of Regus, who are rolling out their two key changes to the real estate sector, recent amendment of the Company law in excess of €1 million annually should The transition yet to be exposed to recessionary market Spaces brand and have recently acquired as briefly presented below. and Accounting law. Starting July 2018, bear tax via a non-deductible expense. of real estate conditions. Cynics point to the troubled The Engine Room in Battersea Power optional quarterly profit distributions There is also another way of reading the from a hard, experiences of the serviced-office sector in Station for their new concept, No18. New tax incentives for were introduced, with an annual setoff law and claiming both the deduction and between quarterly and annual profit levels. the non-deductible financing charges “fixed, physical the late 1990s and the buy-long, sell-short the real estate sector The first Good news with 2019 is that The intermediary profits may be paid out simultaneously once the investment is product towards characteristics associated with early 04 to shareholders up to realised quarterly commissioned. This second question Differentiation through specialisation individuals who earn salary income or a soft, flexible co-working activity. There are three key profits, retained profits and reserves gains increased relevance for real estate As the space-as-a-service market assimilated income from construction and customised points in response to such concerns. (conditions). investors and the answers may be matures, it is inevitable that operators sector employers (e.g. developers, service is still in constructors, architects, etc.) with Interim dividend distributions are typical different, depending on their business First, given the rapid proliferation of will seek to specialise and appeal to its infancy but is turnover from such activities generating to most holding jurisdictions and the local plans and investment stages. Facts and co-working operators over recent years, it is niche markets defined by industry here to stay. at least 80% of their total turnover may amendment may qualify as a step forward circumstances, as well as ruling requests inevitable that some will fly too close to the sector or business function, or benefit from a set of facilities. Namely, 10% in attracting and keeping investment to the Ministry of Finance, should decide sun and fail, particularly in more challenging differentiate through a particular service income tax exemption and exemption/ vehicles in Romania, altogether with a low the course of action. economic circumstances. Yet operational offering or member experience. reduction of social security charges apply 5% or zero (in some cases) dividend tax. At #1 APPEAL failures do not equate to the failings of those during 1 January 2019–31 December the same time, this new rule enables more A new tax on banks assets, OF CO-WORKING 2028. The only contribution that is due efficient short-term liquidity access to a lingering threat for the principles that underpin space-as-a-service. 05 Enterprise and managed solutions evolve is labour insurance contribution of immediate shareholders, but with certain real estate industry Second, drawing direct comparison between Operators are targeting larger corporate 0.34%. Furthermore, such real estate compliance costs and time-consuming The Bad and the Ugly news that arose traditional serviced-office models and occupiers either to house special project entities are obliged to pay an increased procedures, since quarterly financial close to the end of Christmas past takes minimum gross wage of RON 3,000 per statements must be audited. the form of a new tax on bank financial co-working points to an ignorance of the teams within co-working environments month for 2019. The key message to real The new rules are, indeed, a step forward, assets that starts applying 1 January 2019. clear distinctions between the two. As noted, or by offering fully-serviced, managed estate entities is to revise their accounting but are still work in progress, as potential Concisely, banks are liable to a progressive space-as-a-service is far broader than the solutions to corporates on a floor or Flexibility54.5% policies and simulate the impact of such developments are needed and further tax that varies from 0.1% to 0.5% of their provision of workstations on a flexible basis. building level. The former approach new rules, in order to determine the net impact in 2019 should be expected – adjusted financial assets stated in their seeks to position flexible space alongside benefit to their investments. accounting, legal and tax wise. accounts, with the variation depending Finally, the critique typically paints space- on the amount by which the three- and core corporate real estate, providing the All real estate investors should analyse as-a-service as a static phenomenon when, six-month ROBOR exceeds 2%. This occupier with a mix of longer-term and The leverage effect theory their solvency and capital structures, tax is due quarterly and calculated by in fact, it is evolving rapidly and in ways that flexible accommodation that better suits may still be worthwhile to identify opportunities for liquidity applying the above-mentioned rates to the may well serve to offer some protection in the The second Good news with 2019 is placement and releasing short tax-free changing business circumstances. The taxpayer’s financial assets at the end of the event of a market downturn. Some of the most that debt financing is finally regaining reserves. Community11,4% latter approach provides an end-to-end quarter. The first quarter for calculation notable features of this evolutionary path are: its territory also when it comes to tax solution to occupiers and creates more matters, since the already known rules purposes is the first quarter of 2019, with Financing your investment. secure but innovative environments. on excess borrowing costs have been the first deadline for declaring and paying But at what total cost? 01 flexed and started working in favor of the financial assets tax being 25 April 2019. Operators shifting to ownership On the other hand, interest that is investors doing business in Romania, Since the tax is pegged to the market Well capitalised operators are increasingly 06 capitalized in the investment value too. You may remember that European reference rates, opposed to any other competing with conventional investors The rise of alternative spaces continues to remain trapped into these Space-as-a-service is not narrowly tax rules were stripped from economic resembling or quasi-comparable tax tax deduction rules, as well as the for prime assets within key cities in theories in 2018 when all debt financed system in the EU, its impact amounts 11.4% restricted to office space. There are growing depreciation of capitalized interest, once Speed of set-up order to build global platforms. investments were limited to benefiting currently to 1.2% in 2019. Real estate examples of retailers, leisure operators and the investment is commissioned. On this from low tax deduction thresholds of investors should be cautious to the hoteliers all utilising their spaces to create note, there are two questions you should only €0.2 million (if in a profit position) indirect effects of this new tax on their 02 touchdown spaces for transient workers. raise your tax professionals: Market consolidation through acquisition plus 10% of adjusted tax profits. Starting investments, as the €/RON exchange rates • what happens to any unutilized excess The proliferation of space-as-a-service Space-as-a-service models are very much in 2019, Romania has aligned with the EU have already peaked to historical highs. and increased the tax deduction benefit to financing costs and when can they In addition, in the event banks may try operators, combined with strong capitalisation their infancy and there is a long process of €1 million (irrespective if the investment materialize? to transfer the tax cost to their corporate and desire for scale will bring consolidation evolution ahead. While there may be false- clients, the latter may be potentially Workplace44.3% design is generating profits or not) plus 30% of • how does the interest capitalization within the market, as exemplified by starts and dead-ends for some operators, adjusted tax profits. Any excess over these impact your tax position and at what affected by the corporate income tax effect WeWork’s recent acquisition of NakedHub. the principles of the model will hold firm thresholds is carried forward indefinitely point? of such financing related costs, should they and will become an essential component of and used within the above limits. Both of these questions may unfold into prove material enough. 03 the supply side of global real estate markets. All real estate companies should balance various possibilities of interpreting the To sum it all up, real estate investors may Scale-up and repositioning their decisions behind cash flows law and sustaining their application, need to spend time in 2019 equally with of traditional brands estimations and decide if investing as a since the wording of the tax law and designing their business plans and their Some traditional brands that have strong 6.8% Excerpt from (Y)OUR Space (1st Edition, 2018), corporate income taxpayer for the benefit the intention of the legislator remain tax strategies, due to the rapidly evolving Ease of access market presence will undergo a brand and a Knight Frank Flagship Report of the aforementioned deductions or if debatable and fuzzy. Romanian tax environment.

20 | KNIGHTFRANK.COM.RO KNIGHTFRANK.COM.RO | 21 ROMANIA Market OVERVIEW 2018–2019

Hot topic: What do GEO 114/2018 incentivesCMS_LawTax_CMYK_19-27.eps mean for the construction sector in Romania? Roxana Fratila Head of Real Estate & Construction Andrei Tercu Senior Tax Manager CMS Cameron McKenna Nabarro Olswang LLP SCP

Fiscal incentives in constructions Boost of the minimum wage — GEO 114/2018 A correlated measure of the Government is GEO 114/2018 On 29 December 2018, the new Government setting the level of the minimum wage in the is supposed to Emergency Ordinance no. 114/2018 (GEO industry to RON 3,000, while the typical have a significant 114/2018) came into effect. The GEO is minimum wage is between RON 2080 and “impact in several supposed to have a significant impact in RON 2350. key industry several key industry sectors. One of such sectors many effects is in the construction industry. Is it ok? Is it sufficient? Tax exemptions for employees A similar fiscal incentive had boosted the in the construction sector IT industry in Romania, several years ago. Employees hired by employers with business The set of measures was beneficial in various in constructions or in manufacturing respects and notably the office leasing construction materials (e.g. construction activity saw a significant growth, not only activities, manufacturing of various in Bucharest, but also in other major cities construction materials, architecture around the country. In the same time, there activities, engineering and technical were also critics for inequalities in levels of consultancy services) are exempt of the 10% labour taxation across the economy, so the personal income tax. Government is publicly aware that there are other sectors with tradition and potential The measure is supposed to be a temporary of growth, like the textile industry, who one, applying between 1 January 2019 to 31 may attempt to get next in line for similar December 2028. incentives.

The exemption will apply if at least 80% of For now, like in IT, only time will tell if the the employer’s turnover results from the new incentives in the construction sector has above-mentioned activities. The turnover been actually based on an accurate read of will be determined from the beginning the economy’s existing predisposition to a of the year, including the month when the significant growth in this particular industry, exemption is applied. as opposed to others. In addition, there To qualify for this exemption, employees may be practical challenges as regards the must have a gross income of between bureaucracy (both at the level of companies RON 3,000 (€638) and RON 30,000 and of the fiscal authorities) around the (€6,380 at an exchange rate of RON 4.7/€ 1) monthly submission and verification of received through an employment agreement. the statements regarding the fulfilment of the legal criteria for the application of such Furthermore, for individuals working incentives. in the construction sector under an In any case, such measures combined with employment agreement from 1 January a potential change in the legislation around 2019 to 31 December 2028, the social “Prima Casa” scheme that seems to be next on security contribution rate will be reduced by the Government agenda may create certain 3.75%. Also, during the same period, these more favourable premises for the further individuals are exempt from making health development of residential sector, including insurance contributions. in secondary and tertiary cities where there is This law also affects the labour insurance quite significant potential for growth. contribution due by the employer, which has Connecting been reduced to approximately 0.34%. The , above tax incentives for the construction people & property sector apply from January 2019. perfectly.

22 | KNIGHTFRANK.COM.RO KNIGHTFRANK.COM.RO | 23 KNIGHTFRANK.COM.RO Knight Frank ROMANIA Horatiu Florescu Chairman & CEO T: +40 21 380 85 85 E: [email protected] Roxana Bencze COO T: +40 21 380 85 85 E: [email protected] Natalia Gross Head of Marketing and Communications T: +40 21 380 85 85 E: [email protected] Ileana Stanciu-Necea Head of Research T: +40 21 380 85 85 E: [email protected]

European Research Antonia Haralambous Research Analyst T: +44 20 3866 8033 E: [email protected]

Recent market research publications © Knight Frank LLP 2019 This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP or Knight Frank Romania SRL for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP and Knight Frank Romania SRL in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP and Knight Frank Romania SRL to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, Romania Market To the Point Wealth Report where you may look at a list of members’ names. Overview H1 2018 2019 2019

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