Romania Market Overview Coloring Insights Q1– Q3 2017 ROMANIA Market OVERVIEW Q1–Q3 2017

CONTENTS

04 oFFICE MARKET

08 investment MARket

It is my pleasure to invite you to read the highlights of the Romanian real-estate market 10 RETAIL MARKET in Q1–Q3 of 2017, especially that we are experiencing growth and an ever-maturing industry, which makes me particularly thrilled. 12 LAND MARKET As we are approaching the end of the year, many numbers might seem easy to predict, but future is difficult to prepare in a world where the surprising routinely occurs. 14 inDUSTRIAL & LOGISTICS MARKET

We, at Knight Frank Romania, experience everyday demands and discussions in which quality has become a trending concept 16 RESIDENTIAL MARket and principle.

Holidays are approaching and it’s the time of the year when we make plans, we prepare 18 PROJECT management for an end and a new beginning, we might be tired because it is ending or excited for what’s coming, whatever the case, I invite you to take off a few minutes and feel free to take stress off your shoulders while coloring our report. Create your own shades of reality, in an already grounded one!

As the world’s largest independent property consultancy, our pledge to clients is to remain a constant in an unpredictable world and to provide you with expert advice and exceptional service.

Please feel free to reach out to us in case you would like to discuss property matters. We will be delighted to help you!

HORATIU FLORESCU Chairman & CEO Knight Frank Romania

3 ROMANIA Market OVERVIEW Q1–Q3 2017

Henri Coandă

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MAP 1 m

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Class A&B office buildings ș

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HIGHLIGHTS d u a

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C The first nine months of 2017 Overview Supply saw a take-up for class A & B offices of over 225,000 sq m, Bucharest’s office sector witnessed First nine months of 2017 welcomed 41,550 sq m new office space, few in very close to the same period a strong performance in the last

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number compared to last year’s record o i

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deliveries in new office sub-markets of t Ș u U i – T i– T Baneasa – șt a a re rg r u o e uc v p B The most sought after submarkets in i i a ș P the city, where tenants pay more for a u te a Ș a e o s s u o e a Ș a u e a s Prime rent level remains stable Q1-Q3 2017 were Calea Floreasca/ B o premium location (NEPI’s 7,250 sq m Ș an a tu lu at €18.5/sq m/month. Barbu Vacarescu and CBD (Central Aviatorilor 8 building) with additional i Ș Baneasa o s B e - i a Ș d t B- Airport u ș du amenities or even go to a completely o u l A a Business District) with an impressive s e l i e e B r Pipera d

a o og e

u l a u ă C c P r e Ch u ii n it r i– t il e t u new area for offices (Timpuri Noi ei ș ș i r leased area of 85,000 sq m, representing e t ă i r n i u a N Total stock on the Bucharest c c i o u r

t a i B n e i Square of Vastint, 32,000 sq m). a t

P n almost 40% of the total transactions. u le Ș a a o o e a i C office market reached se r pe d s a au e Dimitrieom a u a o ip P r a e t e Ch Ș aua P tri s Another project delivered, in CBD, in it Presei Libere Șose mi S o ile DiPompeiu Ș If we compare these facts with the i S t r 2,51 mil sq m at the end of the Square a ră d u a 2017 was Dorobantilor 33 of Downtown t Calea n B e same period of last year, we can notice C ar

e Floreascab first nine months of 2017 of class d u

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Center (2,300 sq m). a /Barbu ă e

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a B c l -d s e u e C as a l a a e I r l o u e r G n o a i o a l e in high demand: over 76,500 sq m in l In terms of stock by submarkets, at r i D T M l i r v K F u a i o c iț hal i o a n s r a t L i e o l e e t a u a l i c l i b -d n e a h v a B e f l e f n C A o Center-West and over 40,000 sq m in the end of Q3 2017, Calea Floreasca/ ț CBD il C

o a r u ași a râng e lea C s Dimitrie Pompeiu. Barbu Vacareascu stays on top with Ca l Iancu de Hunedoara o B-du Ș ei l Biruinț C B-du a C l a total modern office stock of approx. al e ea a G r i r V t iv B-dul D lo i ș iț i B a i i e c ci As expected, the IT&C sector still covers e i - a ș ț t v o d o u ă r t i u M 430,000 sq m, followed closely by CBD z e ir l ui o i a ul Ș M Ianc ose V r e ua au a a l Șose Pant G a e a a lim g on u C most of the demand on the market, a bei Vodă Știr h a u e e a r with almost 400,000 sq m and Dimitrie s

e u o arol I Ș C os l B-du Ș occupying approximately 125,000 sq B-d abia u r eta r l Iul a Elisab a B Pompeiu with approx. 350,000 sq m. iu Ma iu Maniu o B-dul Regin B East as niu B-dul Iul l l B - iu Maniu r -du B-dul Iul B d roi ă ul E t St l i ra an d u a Ș N In m (56% of the entire take up of the o -d du u s s B-dul CenterNaț i tr Center-West e B iunilor Unite c iilo au o r a l P a a e n B-dul Un d ia irii G u r D analized period), compared to the 40% S r a r t i i r i g a M m d a o n S West a i i r p g t e P e r a s r R i i e o e ri g l u c b u l u of Q1–Q3 in 2016. r d C em e - U t a p su B B- Se n n du l i u l C 3 u t 1 r v a i e i m Demand i a

m i r l R B e i s

r s ai u h encea i l Gh M B-du i a e u v a Total take-up of Q1–Q3 of 2017 in cea o se Ghen h o ngirea a Ș B- Prelu R dul T a heod le or P a allad C y Bucharest reached 225,000 sq m for i t

ș Ș o e South r Sp s ă la scu e iul Șoseaua Tudor Vladimire c a Un ă i u rii class A & B office space. This volume V

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a a C ri e nd C is very close to the total take up of the n xa Figure 1 Figure 2 t le aiul Unirii u A Spl r ua ă ea Șos Șo Demand by leased area Demand by type of transaction se same period in 2016, of 232,000 sq m, au a O lt en Q1– Q3 2017 Q1– Q3 2017 ițe but the average transaction grew from i 1,600 sq m in 2016 to 1,900 sq m in the

Ș o analized period. se a u a O l ia te r ni d ui n l ț a u e x i i le g In terms of the size, larger transactions r A u a i u G a e a s u o of over 5,000 sq m were again dominant, a Ș e

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o their total area accounting for a 46% share TABLE 1 TABȘ LE 2 Vacancy rates Prime headline rents of the take-up, a slight increase from the ră u nt Ce e Șo d sea a previous record year (40% in 2016). ua au de se Ce o nt Ș Submarket (%) ură Submarket (€/sq m/month) In terms of locations, the highest Pipera 23 CBD 16–18 demand was registered on the traditional Center 15 Presei Libere Square 14–16

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u Calea Floreasca/Barbu Vacarescu l u i Baneasa 10 g Calea Floreasca/Barbu Vacarescu 14–17 r

u i submarket with a 43,000 sq m (19% G a u a Center-West 8 e Center-West 13–15 s o out of total take up). An exceptional Ș Presei Libere Square 7 Baneasa 12–14 result was reached by the CBD, who underscored in the previous year and Dimitrie Pompeiu 6 East 11–13 this time is sharing the podium with South 6 Dimitrie Pompeiu 11–13

>5,000 sq m 46% Relocation AND NEW DEMAND 36% 41,650 sq m. Of particular notice in Calea Floreasca/Barbu Vacarescu 4 West 11–12 46 1,000–3,000 sq m 24% 24+1713A+241713A36 Renegotiation / renewal 35% 35+1811A+351811A the CBD is the transactions at The CBD 4 South 10 –11 3,000–5,000 sq m 17% Pre-lease 18% <1,000 sq m 13% Expansion 11% Landmark, the only office park in the West 0 Pipera 8–10 CBD, that has been leased 70% in only Source: Knight Frank Source: Knight Frank 7 months. Dimitrie Pompeiu attracted Source: Knight Frank

4 5 ROMANIA Market OVERVIEW Q1–Q3 2017

17% of the total take-up, closely Building A (28,850 sq m), Sema Parc Despite the fact that a significant amount followed by the Center (12%), Center- Office 3 (26,700 sq m), BASP Victoria of new supply is planned for delivery, West (12%) and Pipera (10%). (5,000 sq m), Rahmaninov (4,800 sq m) sentiment is positive in terms of demand. this summing up the total deliveries of Relocations and new demand on the The relocation activity was very close market are expected to be the main to that of renewals, the first reaching 2017 to approximately 136,000 sq m. drivers of office take-up, as tenants will a volume of 79,570 sq. m and the This rather small number of deliveries in be looking to move their headquarters/ second 77,800 sq m, in the nine 2017 will create low vacancy towards the back offices or consolidate their months of the year. end of the year and prepares us for the operations into new premises and new Similar to previous years, the main higher deliveries next year. players will be coming to the market. demand driver was the IT&C industry 2018 is expected to see the delivery of Headline rents are expected to remain accounting for 56% of the total take- approximately 330,000 sq m, another stable over the next year. up. Seven of the top ten transactions record year, which will increase the total were deals in this sector, and there was stock up to 2,85 mil. sq m. Noteworthy a diverse range of transaction types schemes include: Business Garden including renewals and pre-leases. The Vastint (41,300 sq m), Orhideea energy/manufacturing and automotive Towers (36,900 sq m), Anchor Plaza sectors came in second and third each Metropol (36,600 sq m), AFI Tech Park II with 9% of the total demand, followed by (30,000 sq m), Globalworth Campus II professional services and FMCG. (29,400 sq m), Oregon Park C (25,000 sq m). Over 50% of the projects will be delivered in the Center-West, where Rents vacancy rate is at 8%, whereas the rest Rents stayed similar to previous of 50% will be spread in some of the years. Prime headline rents remained consolidated office sub-markets: Calea unchanged and were reported at around Floreasca/Barbu Vacarescu (over 45,000 €18–18.50/sq m/month. sq m), Dimitrie Pompeiu, Center and CBD. Service charges have followed the same stable trend, ranging between

€3.50–4.50/sq m/month. Figure 3 Figure 4 Demand by submarket Demand by tenant activity sector Q1– Q3 2017 Q1– Q3 2017 Vacancy The vacancy rate for Class A and B office buildings is registering a new record: due to the high demand and few deliveries in the first nine months, the market is experiencing a vacancy of 8.3%.

The highest vacancy rate in Bucharest was recorded in Pipera, above 20%. At the opposite end, the West has 0% vacancy, while Calea Floreasca/Barbu Vacarescu and the CBD had the vacancy rate below 5%.

We are expecting vacancy rates to stay low throughout the year, due to the Calea Floreasca/Barbu Vacarescu 19% IT&Communication 56% Manufacturing Industrial & Energy 9% continuous strong demand and few CBD 19% 19DIMITRIE POMPEIU 17% +A+1917131210721A56 AUTOMOTIVE 9% +A+954321A deliveries announced until the end of year. CenteR 13% Professional Services 9% Center-West 12% FMCG 5% PIPERA 10% FINANCE/BANKING/INSURANCE 4% Presei Libere Square 7% Media &Marketing 3% Forecast BANEASA 2% MediCAL &Pharma 2% Q4 2017 is expecting to see 95,000 sq m EAST 1% Other 1% RETAIL 1% of class A offices being delivered on the CONSUMER SERVICES&LEISURE 1% market, in five projects: Globalworth Campus I (29,400 sq m), The Bridge Source: Knight Frank Source: Knight Frank

6 7 ROMANIA Market OVERVIEW Q1–Q3 2017

acquired the first two buildings from foreign investment was the main driver Forecast INVESTMENT MARKET the project. The third most significant of activity, accounting for almost 99% HIGHLIGHTS transaction was represented by the of the investment volume, although 2017 will likely be a record year in terms acquisition of ART Business Center 7 local capital is becoming more active of investment volumes. In the first Demand was mainly generated Retail assets were still the most sought- which was acquired by the Maltese fund and several high net worth individuals are three quarters there was a significantly Overview after asset type, followed by prime by new investors looking Hili Properties. actively seeking investment opportunities increased activity in the Romanian real In the first three quarters of 2017 there office projects and industrial assets. estate investment market indicating for existing platforms but Considering also the Iulius Group on the local market (eg. Paval family was was a significant volume of transactions The strongest demand came from new the growing confidence in Romania’s established investors have also transaction, the retail and the office in an advanced negotiation process to reported on the market which reached investors which are likely to also be macroeconomic environment. accounted for a significant sector had a cumulated market acquire the first three buildings from AFI an overall level of almost €585 million. looking for new opportunities in the weight of the investment volume. share of almost 79% from the total Park, developed by AFI Europe but the Also investor demand remained focused The largest transactions were in the following period. Nevertheless, in 2017 investment market. transaction was not finalized). on top quality assets and some new retail and office sectors with the partial established developers/investors were investors have entered the market while The total investment volume acquisition of Iulis Group followed by a also very active and the additional The industrial and logistics sector other already established investors reached 585 million in portfolio of 11 retail parks sold by Alpha liquidity is likely to further encourage also reported good volumes and new € continued acquisitions thus sending the first three quarters of Property Development and also the sale other investors to enter the market or entrants have closed the first two Yields positive signals to other potential 2017, with potential to reach consolidate their existing portfolio. largest transactions. China Investment of Coresi Business Park in Brasov. Despite the improved levels of activity investors who are still reluctant to enter 900–1,000 million by end Corporation acquired several Overall, Q1–Q3 2017 relied mainly registered in 2017 compared with 2016, the market. of the year. logistics parks from Blackstone, while on the retail and office segments but yields have not registered a decline Globalworth which traditionally was Therefore, the sentiment remains the industrial sectors also reported Demand in the office and retail sectors but mainly active on the office market, positive, and an improved market activity Foreign funds accounted for significant levels to drive up investment nevertheless the overall compression The total investment volume reported in acquired the Dacia Logistic Center in is expected over the coming years. more than 99% of the total volumes. Established players familiar trend seems to be maintained the first three quarters of 2017 of ~€585 Pitesti from Elgan Group. Overall, the activity but local capital is also with the market expanded their million mainly driven by the retail and industrial and logistics sector had a total and yields in the industrial sectors actively looking for investment portfolios by acquiring income- office sectors but also with a significant market share of approx. 21% from the decreased slightly. opportunities and might become producing assets and new entrants volume of transactions in the industrial total investment volume. The gap between the local market more active on the short term. made their first acquisitions mainly in and logistics sector. and the leading markets in the region income producing assets but also some Analyzing the above, increased demand TABLE 3 Considering the ongoing transactions stemmed from several new investors (Prague and Warsaw) is still above Bucharest prime yields investments with value-add potential. (2016–Q1–Q3 2017, %) Yields on the industrial 150–200 bps, indicating that a moderate 2017 also announces several other which are likely to close by the end of the looking mostly for existing platforms/ segment had only a moderate yield compression might be expected Office Retail Industrial transactions, with new players showing year (eg. America House) it is expected portfolios. However investors that have compression in Q1–Q3 2017 and interest in the Romanian market as that the total investment volumes in 2017 been both active and inactive in the towards the end of the year or early 7.5 7.25 8.5 the trend is expected to continue will be in the range of 900–1,000 million demand continues to be boosted by the € market in recent years have also reported in 2018, especially in the office and on the short term for all market which will mean that we will see the favorable economic environment and significant activity. As in recent years, industrial sectors. segments. largest volume of transactions in the very competitive risk adjusted returns. past 10 years.

The retail sector was the main driver of activity in 2017 as the local Figure 5 Supply Figure 6 Romania investment entrepreneur Iulian Dascalu sold 50% Transaction distribution In 2016 there was a significant level of transaction volume (annual evolution, €mn) of several mixed properties (retail and by property type (Q1– Q3 2017) supply compared with previous year, the office) located in Cluj, Iasi, Timisoara office market being the most active in and Suceava to the new entrant South 2000 terms of new deliveries (new office space African fund Atterbury Europe. Also with delivered on the market was 5 times the acquisition of the Praktiker shops higher compared with 2015). Banks have and the portfolio of 11 retail parks become more willing to provide financing 1500 (acquired by KingFisher and Mitiska for both development and acquisitions REIM respectively) coupled with several in most of the market sectors and the smaller transactions, the retail sector investment market now features a wide had a market share slightly above 1000 range of opportunities for investors, 27% from the total investment market including income producing, value-add or (excluding the share of the retail part distressed assets. from Iulius Group).

500 Also the industrial and logistics The office sector came in second, with segment is reporting a strong growth ~26% of the total investment volume. potential and there are a significant Major transactions concluded were the number of developments which will be acquisition of Coresi Business Park INDUSTRIAL 27% 0 RETAIL 26% 5 6 7 8 9 delivered in the following period hence 17 in Brasov by Immochan and also the 27A+2621A OFFICE 26% 20 10 20 11 20 12 20 13 20 14 20 15 20 0 20 0 20 0 20 0 20 0 20 16 it is likely that in the following years acquisition of the third Green Court MIXED 21%

Q3 20 we will witness a significant number of building developed by Skanska which Source: Knight Frank transactions in this segment. was acquired by Globalworth who also Source: Knight Frank

8 9 Henri Coandă

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ROMANIA Market OVERVIEWn Q1–Q3 2017

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MAP 2 RETAIL MARKET Food anchors – hypermarkets in Bucharest

QȘ1– Q3 2017

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ș rz Ș u ti U – T i– T – șt a a re rg r u o e uc v p B i i a ș P Brands that recently entered the t u e a Ș a e o s s u o e a Ș a u e Overview Forecast s a B o Romanian market: a Ș n a tu lu Retail sales have recorded a growth At the end of 2017 the focus will be i Ș Baneasa o s B e - i a Ș d t B- Airport u ș d o u ul A a s e directed to secondary and tertiary i e of 7,3%, while retailers continue their l e d B r a o og e

u l a u ă C c P r e Ch u ii n it r i– t il e t u ei ș ș i r cities where there is no modern retail e t ă

expansion plans. Among the most n i r i u a N c c

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component or it is underrepresented. active retailers were discounters and u le Ș a a o o e a i C s e d e s r p a au e om a u a o ip P r a e t e Ch Ș aua P tri s it Șose mi S o In H2 2017 approximately 70,000 sq m ile Di Ș the food retailers who developed i S t r a ră d u a t of new retail spaces are schedule to be n B e their networks especially on the ar C e b d u

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a B c l -d s e u e C as a l a a e I r l capital city will register the completion r o u e G n o a i o a l e l r i T M D l i r v K F u a i o c iț ha i o a n s r a Activity on High Street maintains a t L i e o l t l e e a u a l i c l i b -d n e a of two extension of existing shopping v a e h B f l e f n C A o ț il C

o a similar level with the previous years r u ași a mall: AFI Palace Cotroceni (6,500 sq m) râng e lea C s Ca ncu de Huned o B-dul Ia oara Ș and is dominated by food retailers as inței -dul Biru and Sun Plaza (11,000 sq m). Due to C B a C l al e ea a G r i r V t iv B-dul D lo well as by the Horeca segment. ș i i B i i țe c ac i e i ia ș ț t - the fact that there weren’t deliveries in v o d o u r t ă i u z e M ir l ui o i a ul Ș M Ianc ose V r e ua au a a l Șose Pant G a e a a lim g on u C a dă Știrbei Vo h Bucharest, we expect pressure on costs a u e e a r s

e u o arol I Ș C os l B-du Ș of the prime spaces in shopping centers. B-d abia u r eta r l Iul a Elisab a B iu l Regin B Maniu B-dul Iuliu Maniu lo B-du as l B - iu Maniu r -du B-dul Iul B d roi ă ul E t St l i ra an d u a Ș N In o -d du u s s B-dul Naț i tr e B iunilor Unite c iilo Supply au o r l On High Street segment we expect a a P a e n B-dul Un d ia irii G u r D S r a r t i i r i g a M m d a o n S to see increased demand following i a i p r g t e During the first half of 2017 the number P e r a s r R i i e o e ri g l u c b u l u r d C em e - U t a p su B B- e n n d the positive outlook of the economy S l ul i u C 3 u t 1 r v a of deliveries was limited, with only i e i m i a

m i r l R B e i s

r s ai u h in Romania. On the long term, the encea i ul Gh M 10,000 sq m completed in Oradea B-d i a e u v a ncea o se ea Ghe h o ungir a Ș B-d Old City Center will develop into the Prel R ul T a heodo (Prima Shopping Center phase I) and le r Pal a lad C y

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ș Ș o e most sought after tourist destination in r S s p ă la scu e iul Brasov. Șoseaua Tudor Vladimire c U a n ă i

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Bucharest not only for leisure but also e l

a a C ri e nd C n xa i t le plaiul Uniri In Bucharest the modern retail stock u a A S Romania so does the Horeca sector r u for accommodation, as more and more ă ea Șos Șo se au a O remains unchanged since no major lt which caters for most of the demand hotels are being finalized. en iț ei Carrefour retail scheme was completed. on High Street, together with the food Auchan retailers. As in the past years demand Ș As for the High Street segment there o se a u a Kaufland from the fashion retailers is scarce on O a lt ri e is new supply coming from the office ui ni d n l ț a u e x i i le g r Cora A High street due to the lack of a proper u a i u developments in town which offer G a e a s u o a Ș e

pedestrian area in Bucharest which can s retail space on the ground floor as part o Ș of the developers’ strategy to provide provide buildings suitable for modern ă ur retail. There is still a lack of new names nt Ce better services to their office tenants. e Șo d sea a ua au de se or powerful retailers in the market which, Ce o TABLE 4 nt Ș ură As a result of the enforcement of the at the momet, still target shopping Projects announced to be delivered in H2 2017 and 2018 laws regarding fire and earthquake centers in Romania.

safety, The Old City Center is going Project City i Developer GLA (sq m) Delivery u l

u i

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u through a period in which a lot of i G Ramnicul Valcea Mall Ramnicul Valceaa NEPI 28,000 H2 2017 u a e s building are being refurbished or o Ș consolidated. At the same time it does Rents Shopping City Sibiu (extension) Sibiu NEPI 17,000 H2 2017 affect the sales of retailers in the area In H1 2017, prime rents for the leading Shopping City Galati (extension) Galati NEPI n.a. H2 2017 which have decreased in the past year. schemes remained relatively stable. For 100 sq m units, rents were in the region Bistrita Mall Bistrita Element Development 15,000 H2 2017 of €65–70/sq m/month in shopping Platinia Shopping Center Cluj-Napoca Platinia 13,000 H2 2017 centers in Bucharest and between Demand Sun Plaza (extension) Bucharest S-Immo 11,000 H2 2017 €25–35/sq m/month throughout the rest Retailers’ expansion plans were of the country. AFI Palace Cotroceni (extension) Bucharest AFI Europe 6,500 H2 2017 influenced by the limited number of completions. However, the retail On High Street level overall rents are AFI Palace Brasov Brasov AFI Europe 45,000 2018 sales in Romania were recording mostly stable. There is a slight increase Promenada Mall (extension) Bucharest NEPI 34,000 2018 substantial growth, throughout in vacancy in the most expensive areas H1 2017 retail sales increased by in the city, such as Romana Square, Timisoara Centrum Timisoara Alpha Group Investments 70,000 on hold 7.3% yoy, according to the National which will lead to a decrease in rents in Institute of Statistics. these areas. Source: Knight Frank

10 11 ROMANIA Market OVERVIEW Q1–Q3 2017

MAP 3 LAND MARKET Expozitiei area and the recent land transactions

B-dul Poligrafiei

drivers of demand in terms of land for Overview development, while the most active Forecast Q1–Q3 2017 maintained the dynamic buyers were companies. The supply of land plots suitable for Portland Trust JVT pace of the previous year, with several good development projects is expected Bluehouse Capital Presei Libere In terms of demand per area, it is worth Square key transactions concluded for future to decrease, while demand is growing for GTC mentioning the Expozitiei area which mixed developments. land plots appropriate for residential and has recorded most of the transactions Impact office use, and as a result, we expect in the last period. Futureal Romexpo some upward pressure on prices. First transactions announced there Atenor Supply Taking into consideration the deliveries were those related to Bluehouse’s on the office sector, and also the fact There were no notable changes to land. A plot of about 6 hectares, that companies need to expand in Montreal land supply although some areas have Square Soseaua Kiseleff located on Expozitiei Blvd., secondary cities, office developers will B-dul Marasti come to the forefront of the developers' was divided into three transactions: zitiei look to buy land and develop in cities Expo attention due to infrastructure projects B-dul Portland Trust, in joint venture where their tenants want to expand and that have been announced. Strada Soveja with Bluehouse Capital is going to open new offices, such as Timisoara, There are available land plots in all develop an office project on a plot Cluj and Iasi. Bucharest’ outskirts, suitable mainly of about 24,000 sq m; GTC bought a for residential development. Valuable land plot of 15,000 sqm for approx. lands, which are a major interest for €10 million to develop a new office developers, are available but in a lower project, while Impact bought a level of supply in Calea Floreasca/ 22,000 sq m land plot for €10.6 million Barbu Vacarescu area, Expozitiei area, to develop a 600 apartment Bucurestii Noi, Baneasa and Sisesti. residential project. In an area located Kiseleff and Primaverii neighborhoods, closely to the Bluehouse site, which are the most expensive land plots Futureal bought a 15,000 sq m land in Bucharest, have a total of only three plot from Alpha Bank, for €3.7 million, land plots available. with the aim of developing a 400 apartment project. Besides these, the central and semi- central areas offer many options Recently, Atenor bought a land plot for the development of small and of 10,600 sqm on Expozitiei Blvd. medium-sized land, suitable for various for approx. €11.5 million, going after functions, from offices or hotels to Portland and GTC, to develop TABLE 5 commercial or residential areas. a 44,000 sq m office project. Land plot prices by use (€/sq m)

Barbu Vacarescu/ 1,000 Office Floreasca Demand Prices Center-West 700–900 Prime areas 1,000–1,200 In 2017, demand trends were positive, Prices were unaffected by the Residential Periphery 200–250 with high volumes of activity witnessed increased demand for residential and Bucharest 350–500 across all market segments. Office office land plots, and remained at a Retail and residential segments stay the main constant level throughout Q1–Q3 2017. Countryside 100–250

Source: Knight Frank

TABLE 6 Relevant land transactions

Location Buyer Size Value (€ million) Preciziei Globalworth 57,000 sq m 8

Pipera Prime Kapital 70,000 sq m 12

Chitila – Bucurestii Noi Oscar Development 20,000 sq m 5,5

Marmura Prime Kapital 10.5 ha 6

Source: Knight Frank

12 13 ROMANIA Market OVERVIEW Q1–Q3 2017

Figure 7 Figure 8 Figure 9 INDUSTRIAL Demand by tenant activity sector Demand by region Bucharest industrial take-up & LOGISTICS MARKET Q1– Q3 2017 Q1– Q3 2017 Annual evolution (sq m) 400,000

Overview Demand Vacancy 350,000

The industrial sector continues its positive Demand for industrial and logistics The industrial market has reached a 300,000 trend that began in 2016.Important centers has seen an increase in the peak occupancy rate. At the end of players on the industrial market, both first 9 months, with total take-up the first semester, it is estimated that 250,000 investors and developers, promise new standing at 367,000 sq m. In Bucharest, the vacancy stands at 4% nationwide, projects and expansions of the existing total take-up this year has reached which is a new record low for the 200,000 spaces in what appears to be a new approximately 220,000 sq m, which industry, with figures falling as low as record for the real estate market. The first was a 20% increase compared to the 2% in Bucharest. three quartersof 2017 were dominated same period in 2016. 150,000 by logistics companies and retailers. The main drivers of the demand are

the logistics sector – 11%, storage logistics 55% bucharest 60% 100,000 Rents retail 13% PITESTI 14% – 7% and retail sector – 6%. The storage 10% timisoara 10% Due to the low vacancy rate and high 55+A+13106541A60+A+1410941A 50,000 Supply remaining consists of e-commerce, DISTRIBUTION 6% ROMAN 9% manufacturing, distribution and demand for class A industrial spaces, As a result of a growing demand industrial/manufacturing 6% CLUJ 4% automotive industries. the average rent has seen a slight production 5% RAMNICU VALCEA 1% nationwide, it is estimated that 0 automotive 4% PLOIESTI 1% 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 increase, situating itself at approx. 0 0 0 0 0 0 0 by the end of 2017 new deliveries A total of 36 leasing transactions were 20 20 20 20 20 20 FMCG 1% ORADEA 1% 20 20 20 20 20 20 20 €4 sq m/month. 20 20 on the industrial market will reach recorded in the first three quarters of 480,000 sq m, most of which is already 2017, with ten exceeding 10,000 sq m. Source: Knight Frank Source: Knight Frank Source: Knight Frank pre-leased or is BTS. Most of the The top three largest transactions developments are in Bucharest and its were all concluded in Bucharest: the Forecast surrounding areas. The current modern renewal of DSV in CTPark Bucharest As a result of a favourable economic stock around Bucharest stands at (55,000 sq m), the extension of DSV in environment and a growing demand 1.2 million sq m, while on a national CTPark Bucharest West (35,000 sq m) ofcompanies looking for business level it has reached 2.6 million sq m. and the new lease of NOD in CTPark opportunities, the Romanian industrial The West and North-Western area Bucharest West (31,000 sq m). continues to comprise the largest stock and logistics market is expected 60% of total take-up was registered after Bucharest and its surroundings, to continue its positive trend, with in Bucharest, and cities such as with 750,000 sq m, followed by the new deliveries anticipated to exceed Timisoara and Pitesti also had notable South and South-Eastern area with 480,000 sq m by the end of the year. transactions accounting for 10%, a total stock of 470,000 sq m. Among Bucharest is not the only market that respectively 14% of total volume. the largest projects set for completion will see considerable growth in Q4 in 2017 are: CTPark Bucharest West The main source of demand was 2017; as new developments are set (68,000 sq m), P3 Logistic Park the acquisition of new lease, taking to be delivered in Timisoara (45,000 Bucharest (60,000 sq m) and WDP up to 70% of the total number of sq m), Cluj Napoca (13,000 sq m) and Otopeni (38,000 sq m). transactions. Roman (32,000 sq m).

TABLE 7 Relevant industrial transactions

Tenant Area (sq m) Property Transaction type

DVS 55,000 CTPaRK Bucharest Renewal/ Renegotiation

DVS 35,000 CTPark Bucharest West New lease

NOD 31,000 CTPark Bucharest West New lease

CEVA LOGISTICS 29,000 WDP Park Expansion

PROFI 27,000 DP Roman Built to suit

Source: Knight Frank

14 15 ROMANIA Market OVERVIEW Q1–Q3 2017

Corporate Herastrau Park, the shopping centers requirement thanks to various public RESIDENTIAL MARKET and proximity to the airport are the transportation solutions, but it still Residential Lettings main requirements of the prime remains a plus. residential tenants. However, in the The ascending trend of the economy Prices for the prime residential lettings second part of 2017 the demand for continued in 2017 and that was also continued on the same trend of 2016 The apartments are designed to cover land. The average targeted price is the central area has increased as expat Supply translated into growth for the real estate and we only saw growth in Q3 2017, the middle and high end customers around €1,300–1,500/sq m. This project tenants expressed an interest of being lettings market. The foreign investors as the stock was diminished after the The new M6 metro thoroughfare site is needs, starting from 1 bedroom is another example of the developers’ downtown, “where things happen”. continue to see potential and therefore busy period of relocations: August and expected to be started this year, moving studios to 3 bedroom apartments and interest in the Expozitiei area. The new office projects delivered in the Romania becomes more attractive as a September. For example, in Cortina the spotlight for both residential and penthouses. CBD, such as The Landmark, attracted Along with the already established new home for numerous expats. Residence, the only 2 bedrooms office developers from Barbu Vacarescu/ more residential tenants, impressed by Conarg, one of the most important developers, the second part of 2017 apartment available for rent was listed in Floreasca and central areas to Expozitiei Compared to the beginning of the outstanding architecture and proximity developers in Romania, will deliver by was marked by small and medium September at €1,700/month, compared and Baneasa. year, Q3 2017 was characterized by a to the old city center. the end of 2017 a new project close to independent entrepreneurs who to July when several units with the same small decline on the prime residential Some of the most important investors Piata Victoriei area. The building will delivered and announced new projects in While the North is characterized by specification were listed and rented at properties. Despite the numerous new announced major projects in Expozitiei have two levels of underground parking, the Center West (Politehnica, Grozavesti, numerous new modern buildings, the €1,400–1,500/month. projects delivered in high end areas, the area and besides Portland Trust, ground floor and 8 upper floors. Militari, Drumul Taberei) and Center central area offers a smaller stock of demand exceeded the supply as most of Atenor or GTC who recently bought North areas (1 Mai, Domenii, Expozitiei). new built homes. As for the tenant’s the buildings are for sale. land to invest in office projects, The project was designed for medium requirements in the central area, they The ascending trend witnessed on the Impact Developer & Contractor and and high end customers and the total The Northern area remains the prefer a modern apartment with large market throughout 2017 brought back Futureal Management will start building investment is of approx. €9 million. preferred destination for executives terrace and overview to city center. to light some optimistic ideas that were residential compounds in the area. and top management employees, as Parking is no longer a mandatory Another sign of the residential market left behind during the crisis period. Impact Developer & Contractor is revival is the interest of more and more Baneasa Development announced an investing €40 million in their project with entrepreneurs from different industries investment of €1,7 bln in the extension of 600 apartments and plans to synchronize to invest in real estate. Such example is the commercial platform with additional with the office developments announced Dan Sucu, owner ofMobexpert, who had office and residential buildings. Thereby in the same area. some tentatives in the past as well. with a 76% share of residential, this would be one of the largest mixed-use Futureal Management will develop, In Q3 2017 Dan Sucu, along with projects in Central and Eastern Europe. through subsidiary Cordia, 400 units on Conarg Pitesti, announced Arcadia a land of over 15,000 sq m located next Apartments in Domenii area, a project to World Trade Center and Romexpo. with 1,000 apartments on a 3 hectares

TABLE 8 Bucharest rent price

Area 2 rooms/month 3 rooms/month 4 rooms/month av min av max av min av max av min av max

Primaverii 700 1200 1200 2200 2000 4000

Aviatorilor 700 1000 1200 2000 2000 3000

Herastrau 900 1400 1300 2500 2000 3000

Floreasca 700 1200 1500 2000 1800 2500

Dorobanti 600 900 1000 1500 1800 2500

Kiseleff 700 1000 1500 2200 2000 3000

Baneasa 500 700 700 900 800 1200

Pipera 500 600 600 800 800 1200

Central 400 600 700 1200 800 1400

Aviatiei 500 700 700 1200 800 1300

Domenii 500 700 700 1200 1000 2000

Dorobanti Capitale 600 700 1500 2500 2500 4000

Tei 500 600 700 900 800 1200

Source: Knight Frank

16 17 LAND MARKET HIGHLIGHTS PROJECT MANAGEMENT OFFICE Millennials ‘forced’ companies MARKET to develop more evolved workspaces in order to keep Relocation and redesign of an office living in. Most of the projects of the first up with the fast-paced working resets a business’ image nine months of 2017 were relocations, environment of today and many We are witnessing, for a few years now, but we also had redesigning of older Bucharest’s office sector how offices are transforming, watching offices. Nevertheless, in both cases of these spaces are being witnessed a strong a real revolution of what a workspace we got the feedback of employee RESIDENTIAL specially designed with a focus performance in the last used to be in Romania. Sit-stand desks, excitement and involvement during and months, proved by the MARKET on their needs. incorporated technology, phonebooths, after the process. vigorous take�up standing 2017 maintained the dynamic pace lounge areas, sustainable carpets, living already at 70% of the entire Relocation and redesign is becoming of the previous year, demand trends last year level. With the health and well-being walls, modular benching solutions and were positive, with high volumes a corporate mission for the top Prices for the prime of employees being central to the list could continue with concepts that As expected, the IT&C of activity witnessed across all management of many companies, for residential lettings design we see a positive impact were not even heard of 10 years ago in sector still covers most of market segments. Office and different reasons and needs, but this continued on the same on health, happiness, and the landscape of Romanian workspaces. the demand on the market, residential segments stay the main trend will definitely not slow down, rather trend of 2016 and we productivity in the workplace. occupying approximately drivers of demand in terms of land The days when the office was viewed by further advance, since most industries only saw growth in Q3 125,000 sq m (56% of the for development. With this comes less staff business leaders as simply a container have already implemented offices of the 2017, as the stock was entire take up of the analized turnover and decreased in which to place people are long new era and this creates pressure to There are available land plots in all diminished after the busy period), compared to the employee costs overall, gone. Today, the office has become follow-suit. Bucharest’ outskirts, suitable mainly period of relocations: 40% of Q1–Q3 in 2016. especially it was proven that a mechanism through which wider for residential development. August and September. As real estate moves reset businesses design really does have an effect strategic objectives can be advanced. and enable strategic objectives to be on our state of mind. Companies are relocating and fulfilled, competitive advantage ensues. redesigning their offices in order This creates pressure for others to to better meet the needs of an follow-suit. On this basis, real estate ever-changing employee environment, decisions will forever represent a clear HIGHLIGHTS in the fast-paced tech millennia we are statement of corporate intent. RETAIL INDUSTRIAL MARKET & LOGISTICS Q1-Q3 2017 MARKET

INVESTMENT MARKET

Retail sales have recorded a growth of 7,3%, while retailers continue their expansion plans. Among the most Demand for industrial and logistics active retailers were discounters and centers has seen an increase in the the food retailers who developed first 9 months, with total take�up their networks especially on the standing at 367,000 sq m. supermarket segment. In Bucharest, total take-up this In H2 2017 approximately year has reached approximately 70,000 sq m of new retail spaces are 220,000 sq m, which was a 20% scheduled to be delivered outside increase compared to the same The total investment volume reached Bucharest, while the capital city period in 2016. Due to the low €585 million in the first three quarters will register the completion of two vacancy rate and high demand from 2017, with potential to reach extension of existing shopping mall: for class A industrial spaces, 900–1,000 million by end of the year. AFI Palace Cotroceni (6,500 sq m) the average rent has seen a slight Demand was mainly generated by new and Sun Plaza (11,000 sq m). increase to approx. €4 sq m/month. investors looking for existing platforms but established investors have also accounted for a significant weight of the investment volume.

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