Romania R.E. Shaped

2021

Real estate accounts for nearly 40% of total carbon 04 emission, so what are we doing about it?

Romania will offer interesting opportunities 08 across the board in the next 18 months

The best is yet to come for regional cities in 16 Romania

Desks will not represent anymore 21 the key element of the office space

Romania R. E. Shaped | 2021 Macroeconomics Romania Year 2016 2017 2018 2019 2020 2021 Editorial Contents GDP € bn. 170 188 205 223 215 232

GDP growth % y-o-y 4.7 7.3 4.5 4.1 -3.9 4.3(f) 04 Real estate accounts for nearly Inflation rate % y-o-y -1.5 1.3 4.6 3.8 2.6 (f) 2.4 (f) 40% of total carbon emission, so what are we doing about it? Average net wage € 455 512 568 629 653 679 (f) 06 7 questions real estate investors are asking of their portfolios Unemployment rate % 5.9 4.9 4.2 3.9 5.0 4.5 (f) 09 Raising capital from corporate Retail sales % y-o-y 13.5 10.7 5.7 7.2 2.1 - real estate Sources: JLL Research, National Institute of Statistics, National Commission for Strategy and Prognosis 10 What can a real estate consultant bring to a corporate Office Market for rent Bucharest (A & B class) client’s business strategy

Year 2016 2017 2018 2019 2020 12 Romania offers an attractive environment for new occupiers Stock m² 2,226,700 2,369,000 2,514,100 2,800,500 2,955,700 By Silviana Petre Badea 16 The best is yet to come for regional cities in Romania Annual deliveries m² 291,700 142,300 145,100 286,400 155,200 19 The increase of online Gross take-up m² 374,000 353,100 334,500 388,500 217,500 Romania RE-shaped commerce, a great opportunity for industrial market Net take-up m² 161,400 173,400 124,100 203,800 71,400 We are excited to present you the already third edition of Romania REShaped and we Desks will no longer be the key are extremely happy to see it become a staple of JLL Romania’s publications. This 21 element of the office space Prime rent €/m²/mth 18.5 18.5 18.5 18.5 18.5 year’s release marks a new important milestone for us – the first bi-lingual publication of this type to come out both in Romanian and English. 22 Flexibility – the new normal for Prime yield % 7.50 7.50 7.25 7.00 7.00 the office market. How will your After a 2020 that made us all think and reconsider our own priorities, 2021 is the workplace change with the times beginning of a new era – a time of innovation, of reinventing one’s self and one’s Institutional investors are Industrial Market for rent Romania 26 business, of looking at mundane things (office space, travel, our living spaces, our work moving their focus to Eastern Year 2016 2017 2018 2019 2020 habits, our commute) differently – a period of redesigning our entire environment. European residential markets Stock m² 2,872,800 3,230,100 3,814,100 4,464,100 5,052,000 28 How Covid-19 is turning the In this time of unprecedented flux and conditions, my colleagues and I have compiled spotlight on green finance Annual deliveries m² 330,000 357,300 584,000 650,000 587,900 for you in this post Covid -19 edition of Romania RE Shaped, the best of JLL’s local and global research and insight into the way we will be doing things differently in real Why renewable energy is 32 Gross take-up m² 475,200 519,800 514,200 550,900 695,200 estate, areas to watch in office, retail, industrial, capital flows orresidential and Private fueling investor interest Rental Sector (PRS) as well as the opportunities Romania has to offer in 2021. 36 Increased vacancy and the Net take-up m² 356,500 423,200 385,100 490,400 525,100 main factors leading to it The golden thread that goes across this entire edition and, indeed, JLL’s strategy Prime rent €/m²/mth 4.25 4.25 4.25 4.10 4.00 going forward is sustainable development and management. JLL is committed to do 37 How the e-commerce boom its part to reduce the impact the real estate has on the environment, from the building during COVID-19 is changing the Prime yield % 9.00 8.50 8.25 8.00 8.00 we occupy to the ones we lease and sell on behalf of our clients or the ones we fit-out industrial real estate for our corporates. To this end, we are active in areas such as renewable energy, Retail Market Romania (shopping centers & retail parks over 5,000 m²) retrofitting buildings for low carbon emissions, supporting green financing etc.

Year 2016 2017 2018 2019 2020 We hope you will enjoy the read and please contact any of us for details. As always, we Hot topics are happy to receive your feedback and comments. Stock m² 3,250,300 3,380,300 3,410,300 3,582,500 3,724,700 The rise of the Romanian 11 Annual deliveries m² 235,000 130,000 30,000 172,200 142,200 real estate investor Prime rent €/m²/mth 75 75 75 75 73,5 Shopping centers Silviana 14 The Romanian capital market Prime rent €/m²/mth 8.5 9.5 9.5 8.5 8.5 becomes Emerging Market Retail parks CONTACTS Prime yield % 7.25 7.25 7.00 7.00 7.25 Shopping centers Managing Director PR & Marketing Research 18 Healthier/sustainable Prime yield % Silviana Petre Badea Cristina Lupașcu Alexandru David 8.25 8.00 7.75 7.75 7.75 buildings Retail parks [email protected] [email protected] [email protected] Sources: JLL Research Romania R. E. Shaped | 2021 4. What are JLL approach further resources as required. and concerns regarding sustainability? By driving all our sustainability and corporate responsibility activities Our purpose, We shape the future through Building a Better Tomorrow, of real estate for a better world, has we aim to deliver consistency, best strong and deep roots in our identity practice and direction globally across and history. During 2019 we set JLL’s the four Pillars of the program, as well organizational purpose into a short as the underpinning Foundations. In and memorable phrase, endorsed by so doing, we will come closer to our our Global Executive Board and Board ambition of embedding sustainability of Directors. We shape the future of real throughout our organization. estate for a better world by partnering with our stakeholders to drive To demonstrate our commitment to disruptive, impactful and sustainable a sustainable future, we have set a change. We do this by embedding science-based target, an ambitious sustainability into everything we do emissions reduction goal that is in through the four Pillars of Building line with climate science and the aims a Better Tomorrow: Clients, People, of the Paris Agreement. We have also Workplaces and Communities. signed up globally to the World Green Building Council’s Net Zero Carbon The four Pillars of Building a Better Buildings Commitment. Tomorrow are underpinned by three Real estate accounts for Foundations: our commitment to Details on JLL’s sustainability the highest standards of corporate targets can be found in our Global governance, our efforts to develop Sustainability Report. and drive thought leadership in nearly 40% of total carbon this area and our commitment 5. How can JLL help clients to deploying innovative, forward to meet their sustainability thinking solutions for ourselves and ambitions? the building sector has the greatest our clients. We believe these are the emission, so what are we opportunity to reduce greenhouse gas fundamental elements to the success emissions compared to other sectors, of Building a Better Tomorrow Through industry-leading strategies, with potential savings estimated to be as and the achievement of the UN tools and technologies, we help our

much as eighty-five Gt of CO2 and energy Sustainable Development Goals. clients achieve their sustainability goals. doing about it? savings of 50% or more by 2050. All this Implementation of Building a Better Increasingly, they require innovative and puts JLL in a strong position to create a Tomorrow across JLL is supported consistent solutions across all regions. significant impact through the work we by a global governance structure for In response to this demand and to do with our clients and people as well as sustainability that is reflective of all further drive the development of value- in our workplaces and communities. parts of the business. based services and products, in 2019 we expanded our focus on energy and 3. Why are investors turning Throughout 2019, implementation sustainability capabilities with the intent We have asked Denise Michela 1. Why sustainability is changes for our business, our people, our towards sustainability? was focused on JLL’s operation and of providing a broader complement Sofia, EMEA Sustainability now very important? How clients, our communities and our planet. services in eight key JLL markets: of globally scalable, consistent and Officer JLL how the sustainability sustainability can improve Interest and engagement in the U.S., the U.K., Australia, France, profitable services. The initial scope of strategy is positively impacts not our lives and, ultimately, 2. How sustainability is environmental, social and corporate Germany, Greater China, India and these offerings will be directed to our only JLL and our clients, but also our businesses? impacting the real estate governance (ESG) within the investor Japan. They will lead the way in Corporate Solutions clients. market? community continues to grow. This is driving meaningful change in our brings segnificant benefits to all Sustainability is about taking actions that due to several reasons: operations around the world. In 2020, Our vision is that this will ultimately form our stakeholders. create positive impact not only today, Buildings account for approximately JLL will begin formal engagement with the basis of enterprise-wide delivery. but also in the future. There is a strong 36% of global final energy consumption • Companies with the highest ESG the next tranche of countries, twelve Further supporting this strategy is our and direct correlation between our and nearly 40% of total direct and ratings outperformed the lowest- in total, to roll-out Building a Better commitment to training and upskilling environmental, social and governance indirect CO2 emissions. With the global rated firms Tomorrow. Overseen by our three our professionals on sustainability- performance and the long-term health trend towards urbanization and ever- • Asset owners funds are increasingly regional CEOs, the relevant country related topics, including climate risk, By Cristina Lupașcu and success of our business. We increasing demands for building stock, demanding sustainable investing CEOs are responsible for overseeing green building certifications, health and address this by putting into action our these numbers are only set to rise. As strategies from their asset managers the successful implementation of well-being, sustainable cities and more. sustainability strategy, Building a Better well as a challenge, there is significant • Risk mitigation Building a Better Tomorrow in our key Tomorrow, which delivers transformative opportunity, UNEP estimates that • ESG activism by investors markets, including appointment of www.jll.ro 4 5 Romania R. E. Shaped | 2021 operational risk?” While not the sole to other markets remains motivating”, customers back in the same numbers source of recapitalization for operating she adds. whilst offering a safe environment. companies and listed sector players with limited credit lines, private equity could 5. Am I using the right analytics? 7. Should I change the contract play a part, he adds. type for new leases or renewals? For all investor types taking stock, a 4. How liquid are my funds? wider range of data analytics are now on At present, it is very difficult to analyze offer than was the case after the global individual businesses and to decide For fund managers, the housekeeping financial crisis of 2008, says Sawdey. the amount of tenant incentives you questions real estate task varies; in the UK open-ended are willing to offer. “In the retail sector property funds were swiftly gated (the “The kinds of tools investors and the sharing of the profitability through move was not dissimilar to that made occupiers have at their disposal today Turnover Rent may well be an equitable following the UK’s vote three years ago simply did not exist in 2008,” he says. and transparent manner to build trust to leave the European Union). So far, “The access to data simply wasn’t there with your clients. However, this is not investors are asking however, a repetition of the handful of back then – and when it was, the cost a model that is appropriate in other 2016’s quickfire sales has not followed. was significantly higher. “The maturity sectors such as Offices or Logistics”, of data analytics has come a long way.” says Radu Podașcă. In Germany, major fund managers of their portfolios are well-placed. That’s partly due 6. How will I be impacted by One thing is clear however, shorter and to rules put in place after the global the reforms in organizing more flexible leases are required to adapt Investors are re-evaluating the strengths and weaknesses of their financial crisis to keep outflows in workplaces and change of to rapidly changing markets. How this portfolios at a time of heightened uncertainty. check via redemption limits, as well as impacts on fit-out costs and who pays low use of leverage. shopping and travel habits? will become a more crucial consideration for both owners and occupiers. “High liquidity among German open- One of the short to medium term 7 By JLL ended funds means they remain consequences of COVID-19 was the Longer-term change focused on the task of meeting return accelerated rearrangement of the expectations, usually from core population’s way of life. ”The effects More broadly, a move to more regular assets,” says Richards. of the high pace of change might be portfolio valuation and reporting may be polarized between a bigger burden for needed. And it could come quicker than Likewise, major fund managers who existing properties as landlords have to expected, says Richards. 1. How can I assess the assess and model portfolio behavior at have undeployed capital and no seed dig deeper into their pockets to adapt current risk? a time of increased discussion around assets may find that allows time and to present times and a lower stress “There’s broad discussion over the rent-free periods. space to consider, and in some cases, for the pipeline properties that can long-term implications and outcomes alter their strategies to a different adapt inexpensively”, commenrs Radu of this current pandemic,” he says. nvestors are facing a huge challenge When interpretations of pricing and “Landlords across all sectors are asking market, he adds. Podașcă, senior valuer JLL Romania. “We may perhaps see more regular Istemming from the lack of economic valuations are so fluid, it’s a challenge themselves what leasing events there Convenience retail, neighborhood valuation reporting become a mainstay clarity due to the new coronavirus to evaluate the relative strengths of are across my portfolio in the next six “Perception of liquidity was and schemes and open retail such as feature. More investors are realizing outbreak. The need to assess current current portfolios, says Richards. But months?” says David Sawdey, director of remains an issue in Romania with low Retail Parks will continue to perform the importance of good data in the portfolios is becoming increasingly investors are carrying out deeper business intelligence at JLL. “Where are investment volumes raising concerns well whilst the challenge for enclosed current climate. Its use can and will important for investment managers analysis of their existing assets. the renewals, what’s turning over in the to investors regarding the ability to city centre retail will be how to entice only accelerate.” with low liquidity, for listed real estate next six months and who’s got a lease recycle capital or to have relatively companies with discounts to their net “There’s undoubtedly a reassessment expiration coming up?” short hold periods”, comments Alina asset value (NAV), as well as for private of risk to be done,” he says. “When Cojocaru, Head of Valuation and equity investors with positions in Europe is currently faced with such 3. Do my operators have enough Consultancy JLL Romania. operating companies. contrasting fallout from COVID-19, cashflow? Access to high yielding core assets with investors want to know the ups and underlying strong growth attributes “Housekeeping is by far the main focus downsides of owning assets in a For the many private equity firms who is attractive but as growth is muted for investors faced with the impact of particular sector or micro-location. have taken positions in operating by the pandemic and yields increase COVID-19 and consequent uncertainty,” “Where is income most stable and companies, the focus has turned elsewhere the appeal to Western says Matthew Richards, head of EMEA occupation most dense?” quickly to business continuity and European capital may reduce. Capital Markets at JLL. “And while it immediate cashflow. means quite different things to REITs, 2. How could rent-free periods “However, most capital invested in private equity funds and investment affect me? “Many, particularly those with large Romania in recent years comes from managers, there’s a lot of common ground portfolios, will be now looking to see if other areas (such as CEE, Middle East, in the types of issues being raised.” Real estate underwriting and data their operators have enough cashflow,” South Africa as well as domestic) teams with asset mapping methodology Richards says. “They’re asking which and for these investors the positive are in demand as all investors look to parts of their portfolios have the most difference Romania offers compared

www.jll.ro 6 Romania R. E. Shaped | 2021 2020 has brought to market an interesting portfolio and more are likely Romania will Raising capital from to come in 2021. The security provided by the strength of the occupier and the structure of offer interesting corporate real estate the lease can outweigh the geography, so we should see investors that are Corporates and owner-occupiers are looking more and more to new to Romania interested in such unlock the value of their property portfolios through sale and products and record-breaking yields opportunities leaseback transactions and this trend is also reaching Romania. for the country. Corporates are starting to consider By Andrei Văcaru & Viorel Opaiț such disposals and are demonstrating across the board in high degrees of creativity in how they interesting to observe what structural structure sale and leasebacks to changes will be left behind. Will people place - compared with €3.7bn in 2018. minimize operating expenditure, rather return to shopping centers or will Industrial and logistics disposals than focusing exclusively on maximizing the next 18 months the shift to online shopping become In these transactions, properties have grown markedly over the past capital value. For instance, some permanent? To what extent will they are sold to landlords in return for the few years. In fact, €17.4bn took place corporates asked prospective buyers Investors and owners are certainly prudent in these turbulent continue to work from home instead of company taking an occupational lease. between 2015 and 2019, compared with to bid their lowest rent against a fixed times, most of them continue to be active and searching for the going to the office and communicate €7.4bn between 2010 and 2014. capital price. best opportunities to fit their strategies, said Andrei Văcaru, head over online platforms instead of The ongoing global Covid-19 crisis of Capital Markets JLL Romania. More about property investment traveling? presents enterprise-wide challenges for Furthermore, 2019 saw the total value market you can find in the interview below: Access to financing could also be a all businesses, regardless of their size, of corporate disposals reach €5.7bn, challenge, especially in the retail and sector or geography. up more than 50% on 2018 and only hospitality segments. narrowly behind activity in the office By Cristina Lupașcu At a time when debt markets and other and retail sectors. What are the opportunities you sources of capital are significantly Almost 900 million market What is the mood of the see on the property investment constrained, businesses are increasingly The UK, Germany and France were looking at the different routes the most active markets for corporate investment volume registered investors / owners with whom market in the next 18 months? in 2020 in Romania. The figure you are currently discussing available to generate liquidity from disposals in 2019, accounting for 69% I believe the Romanian real estate their properties. Disposals remain of the total value of transactions in is unexpected if we consider the possible transactions? market will offer interesting an attractive route to releasing EMEA. In the UK, the value of corporate challenging times. What are the The mood is quite different depending opportunities across the board in the capital – not only because they can and owner-occupied disposals almost main trends that you observed on the asset class. Hotels continue next 18 months. From core assets allow for considerable operational doubled in 2019, with €7bn worth of in the last year on the Romanian to be seriously impacted so there is enabling returns far higher than flexibility, but also because investors corporate disposals taking place. property investment market? tension within that industry. On the anything with a comparably low risk are becoming more aligned with the other hand, the logistic segment is profile to value-add propositions which needs of corporates. Healthcare disposals in the UK raised animated as it has seen little if any are likely to be very profitable in the €2.2bn alone in 2019, more than any Indeed, transaction volumes in negative impact. I would say that context of a strong economic bounce 2019 was a record year for corporate other sector. Disposals in Germany also Romania in 2020 will be higher than overall, although investors and owners back of the country. disposals of owned real estate across increased markedly in 2019, reaching those registered in 2019 which is are certainly prudent in these turbulent a wide range of industries. In the EMEA €5.8bn. Industrial and logistics assets atypical if we look at the rest of the times, most of them continue to be What was the biggest win for region alone, disposals of corporate continued to represent a higher share world. This is a sign of the confidence active and searching for the best JLL Capital Markets team in the and owner-occupied real estate raised of corporate disposals in Germany that investors place in the country’s opportunities to fit their strategies. a record €23.1bn across more than than in other major European markets. fundamentals and medium to long last year? 460 transactions, up sharply from Slightly more than half of German term perspectives. Most transactions What do you think are the main We are especially proud to have advised €17.4bn in 2018. corporate disposals in 2019 were of that started before the Covid-19 challenges that the property on the largest office transaction – AFI’s industrial properties, raising almost pandemic have either been closed or acquisition of the former NEPI portfolio Offices, retail and industrial continued €1.7bn. France saw €3.2bn of corporate continue to advance. However, less investment market will face in - and the largest logistics deal in 2020 - to be the most active sectors for disposals in 2019, a slight increase on projects have been launched in the the next 12 months? the sale of the A1 Business Park. corporate and owner-occupied the previous year. second part of the year as everyone The uncertainty related to the evolution We continue to offer the most complete disposals in 2019, accounting for 76% of became more cautious. With a of the pandemic is understandably the set of services in the market with the total value of disposals in EMEA. In this context, we have seen the first solution to the medical crisis on the main challenge now. the support of a solid team with vast attempt at a landmark sale and leaseback horizon as of November, I expect experience and a wide range of skills Corporate disposals of retail and transaction in Romania in 2019. However, liquidity in 2021 will remain in line with But once there will be more clarity and including important differentiators such leisure properties grew sharply in despite high investor interest, the the last 5-year average. predictability in this respect, it will be as Debt Advisory and Living. 2019, with €6bn of transactions taking transaction was not concluded. www.jll.ro 8 9 Romania R. E. Shaped | 2021 Development side Similarly, to other post-communist What can a real estate The rise of the countries, modern commercial real estate developments started to emerge in Romania in the mid to late 1990’s, consultant bring to a corporate Romanian real first in Bucharest and then in the large cities across Romania, such as Cluj, Timișoara, Iași, Constanța or Brașov. client’s business strategy estate investor Traditionally, the first developers were international groups which brought Client’s expectations changed in line with the real estate market. Property sector is to Romania their experience in other By Maria Florea dominated now by professional players, tenants or landlords, more demanding and countries in Europe or across the much more careful when it comes to real estate issues. world. This track record resulted in the first shopping centers (București JLL has adapted and responded to these The question is what is next? point of contact that understands your Mall and Plaza Romania) and the early changes by re (imagining) the services Since I took on the role of Key Client needs and can coordinate the solution forms of office buildings (World Trade offered to clients into solutions and Director with JLL Romania 3 years ago, to its full implementation. Center or Opera Center) in Romania. creating a “Solution driven approach” I had the opportunity and pleasure to • Drafting the appropriate real estate The success of such assets inspired rather than a service driven approach. work with clients who understood the strategy - companies that have a a wave of local developers which value of a trained, experienced Real completely different core businesses became more active towards the When I started working in the real estate Estate advisory team concentrated on face real estate problems like any The Romanian real estate investment market, which was second half of 2000’s and after 2010. industry - in the office department, in their needs and desired outcomes. The other but might not have real estate traditionally dominated by international players, has witnessed, In offices, developers such as Genesis 2005, some people even called us “well- simple fact that we all live in real estate expertise in-house. A seasoned across its 20 years modern history, shining examples of local Development, River Development, paid taxi drivers”. Basically in 2005 we and have acquired or rented our own real estate advisor can help them investors and developers who managed to create and develop Iulius Group, Forte Partners or Mulberry had 3 new buildings, some office projects flats or houses does not automatically make the most of their ambitions by business models that can make even the largest of investment Development targeted sub-markets under construction and a car with which make us all Real Estate experts. It is this proposing, translating in business funds envious. which were previously ignored by the we taxied CEOs around town to identify type of understanding that allows the terms and implementing a coherent large international groups in a move the closest office location to their current largest and most successful occupiers strategy that fits within their wider which proved to be very inspired. Large accommodation. We were preparing a to navigate profitably the flow of their goals. Analyses like buy vs. rent vs. projects, such as Novo Park , West By Andrei Drosu simple presentation with plans and the Real Estate needs be it offices, industrial, built are common and just a small Gate, Sema Park, The Office and all the tenant had to choose between the few retail, land development or residential. part of a typical strategy that you, as different phases of United Business options available. I rarely met any Real In Germany, England or France this a client, might need. Investment side Bridge, an office project in Bucharest. Center and Iulius offices became Estate Managers in the region. article may seem strange, as more • Communication and Change Even though in the early stages of the Moreover, through a partnership with landmarks in their various locations. Now, 15 years down the line, the mature markets have evolved into a sort Management - in processes that modern real estate, the Romanian Element Development, another very Genesis Development and the Iulius tenant gets to choose their future of outsourcers of the real estate function involve real estate, the potential for investor avoided putting his money active local investor, Dedeman became Group became so big, that now they are office space based on a 5-10 years cash long before Romania has. However, even disruption is immense (sometimes into commercial properties, this active on the industrial / logistics market. in the top 10 Romanian owners of office flow analysis, a traffic analysis and a for them, as well as for us, there is now a leading to more than 30% of staff changed dramatically over the course Besides the now traditional players buildings in the country, proving that technical comparison made by the growing need for: being disenfranchised) while it is of the last 3 years. From an average such as Tiriac Imobiliare, One local developers can be as successful, if project management team between also emotional and time consuming of around 5% of each yearly volume United, Forte Partners or the 2 not more successful, than international the fit-out costs to bring each space to • Integrated services - from a simple for the management. Having a invested in assets in the last decade, above mentioned parties, several companies which have the support of the standard desired, among others. case in which you are looking for senior businessperson collecting, 25% of the capital accounted since other local investors, mainly high pension funds and years of experience Add to this the analysis made by the an office and you need someone to understanding and implementing the 2018 is of Romanian origin. net worth individuals are buying or behind them. HR department on how one project or calculate how many square meters you strategy on their behalf helps mitigate This is mainly due to the new wave of are considering acquiring smaller another will bring them a competitive might need, to making a study of your these two major threats. This allows Romanian entrepreneurs who are eager properties, from all 3 main sectors In retail, the target of the domestic advantage on the labor market, as existing teams and workflow in order management and staff to concentrate to spread their acquired wealth into – office, industrial or retail, but with developers were mostly large well as increase attrition rates and you to accommodate the employees in on core business and have the different industries, with real estate prices no larger than €20 million. secondary cities, with one hugely have a full- scale business consultancy the space, to helping you negotiate the certainty that the real estate is dealt being one of the top targets due to its successful example – that of Iulius piece that needs to be coordinated, best terms of the lease, to supporting with at the highest standards. significant returns when compared There are solid signs that this trend Group, which developed one of the understood and scored. And this is only with the design and fit-out of the space • Relationship based on trust - none of with deposits, bonds or other forms of will continue for the years to come, as most renowned shopping centers in the tip of the iceberg. to match your corporate culture, to the above examples can be achieved financial investments. more and more Romanian nationals are Cluj-Napoca, Timișoara and Iași. We have evolved, we have specialized, we reinventing existing space to create without creating a relationship of trust gaining capital which needs to provide Past examples encouraged new local have become business consultants with the hub for productivity that offices with the person you work with. As The best example is that of Dedeman, the more than a low interest from a deposit entrepreneurs to become developers real estate expertise, with knowledge and will remain depending however on their outsourced “real estate partner”, investing arm of the second richest family in a bank. Moreover, the implementation and the traditional players to continue understanding of business models and HR how much we work from home, to you are part of their team, you are in Romania. The company which owns of Real Estate Investment Trusts their expansion plans, a trend that policies of more than one industry and our managing such space for you – ideally. the binder that helps them be more the largest DIY chain in Romania made vehicles and the legalization of the is reflected in an increasing number clients are beginning to appreciate more You should be able to outsource all that profitable, better, more competitive, its first acquisition in 2018 - The Office, pension funds to invest in real estate will of projects in various stages of and more the customized and complex to one provider that would offer you a have an edge over the competition. the largest office park in Cluj-Napoca and open a new market for local investors to development that will be financed services we are able to offer. dedicated account manager, a single continued by buying all 3 phases of The place their money. purely with 100% Romanian money.

www.jll.ro 10 11 Romania R. E. Shaped | 2021 that the previous fit-out/design of their package, no matter if we discuss about green, well, immune or any other system offices will not be able to sustain the existing or new office spaces. which will appear. Also, be open to find Romania offers an new ways of working. Those who are common solutions with existing tenants already acting to adapt to the new way Another opportunity might be the to pass this difficult period together of life will gain an important advantage possibility to attract new investment and don’t use the difficult situation the attractive environment in front of the others, which will reflect in and investors in our country. Pressured tenants are passing to force them to the retention and attraction of talent. by the current and future economic accept something that they would have For some landlords, the main challenges environment to reduce some of the never accepted during normal times. for new occupiers will be to fill their empty spaces, existing costs (wages and real estate), considering many companies put their some companies in the Western or One advice for the tenants: expansion or relocation plans on hold, Central Europe might decide to relocate due to pandemic. Other landlords will some operations in Romania. At the Start thinking on how to prepare your have to work with their tenants and find same time, countries that were main office for when people will return, business solutions to pass this period support hubs like India, but where the because they will return. Don’t act Tenants must start thinking about the moment when their which could help both parties. IT infrastructure cannot permit a hybrid purely on cost savings and cut your employees will come back in the office, saidMarius Șcuta, Head of work system, will suffer. This could start office space considerably. If the future Tenant Representation and Office Agency JLL Romania. He told us Which are the main a change in the call centers approach, of work will be a hybrid model, then for also how the office market reacted to Covid-19. opportunities for the Romanian focusing on countries where you can the people who will return, you need to office market – tenants, work from home, like Romania. create a healthy space where physical distance must be offered. Also, try to developers, landlords – that One advice for the landlords: understand the difficulties your landlord By Cristina Lupașcu COVID-19 crisis will create? might face and all the efforts he is Invest in systems and equipment that doing in order to provide the maximum The first opportunity brought by any type will sustain a healthy and Covid-free support he can possibly do. of crisis is clearly an improved commercial life, including certifying your buildings

How the pandemic has changed Unlike others, I don’t believe that the work, but I do miss human interaction. the Romanian office market? office market will die, and I’m not just I feel losing work relationships, random Unfortunately, all these changes saying this because I’m working in this discussions with great potential of came at a lightning speed, and all business. There are several simple finding new ideas, listening to other major market indicators dramatically reasons that support my affirmation: the people outside my team of people, decreased, compared with what all increasing mental struggle created by with their different experiences. All local experts predicted for 2020 and the isolation who forced employees to these losses will increase over time compared with every single quarter of work more individually, the lack of WFH and will matter more than spending 2019. Gross and net demand dropped infrastructure (not all employees can time in daily traffic. We will all lose with more than 50%, with all companies physically work from home due to lack important social capital, during which sending their employees to work from of space, the lack of proper furniture, any creative ideas or brainstorming will home and the majority putting all children at home, pestering pets eager be insignificant. their occupancy plans on hold. Several to be part of any video call, low speed projects were strategically delayed internet, etc.), increased inefficiency In my opinion, all these examples are and moved to 2021. The share of office at different tasks required at work, only some logical reasons to see that stock available for sublease increased difficulty in retaining and training companies will still need physical exponentially, putting a lot of pressure on talent, etc. office spaces. landlords with vacant units. The vacancy also increased at close to 11% and The WFH risks to suffocate the Which are the main challenges based on our estimation, will continue to creativity and it will keep people away for the Romanian office market increase with 100 to 300 bps. from new experiences. The capacity in the next 12 months? of creative thinking is diminished by There are voices that in the this required isolation. All informal For tenants, the main challenges will context of the increase of discussions that happen inside the remain their internal organization and “work from home” are talking office are many times, more useful than space management. Most of the tenants all the formal meetings. still believe that no harm is coming about “the end” of the office with the WFH situation and even for spaces. What is your opinion But don’t get me wrong – personally, I the companies who already adapted to about that? don’t necessarily miss the commute to a hybrid model, they still don’t realize www.jll.ro 12 13 RomaniaRomania R. E. Shaped R. E. Shaped | 2021 The Romanian capital market

company in which the Romanian state the issuers Banca Transilvania and status, this highway represented by becomes Emerging Market - is the majority shareholder – have met Nuclearelectrica in the FTSE All-Cap the capital market will facilitate the the necessary criteria to be included, indices, which are representative for circulation of cash flows to and from starting from September 21st, in the the upgrade to the new market status, anywhere in the world. That is why All-Cap indices dedicated to Emerging other Romanian companies listed the listing of companies on the stock a historic moment Markets according to the classification of on the Bucharest Stock Exchange exchange, whether they are largely the global index provider FTSE Russell. can benefit from the inclusion in the state-owned or privately-owned, is the Emerging Market indices. According to way to the economic and sustainable st For the first time in history, the Romanian capital market is included, starting from September 21 , The contribution of the two companies the FTSE Russell classification, the first development of Romania. Continuing 2020, in the Emerging Markets indices, according to the classification of the global index provider was decisive for the upgrade of the Romanian company that benefits from the listing process ensures that FTSE Russell. The promotion of Romania to the Emerging Market status after 25 years from the re- entire market, as the promotion the market upgrade is TeraPlast (stock opportunities are seized and that establishment of the local stock exchange, a fundamental institution of the Romanian capital market, considered the presence of companies symbol TRP). the capital is accessed in a fast and represents an unprecedented success. in the All-Cap indices (which efficient manner. The main common include Large, Medium, and Small Consequently, starting from September objective, both in the economic Capitalization companies, excluding 21st 2020, TeraPlast becomes the first and in the political environment, is the Micro-Sector). Romanian company included in the the development of Romania”, said By Cristina Lupașcu Banca Transilvania becomes the first FTSE Global Micro-Cap index. The Radu Hanga, Chairman of the Board, privately-owned Romanian company Micro-Sector is not considered by the Bucharest Stock Exchange. listed on BVB that is included in the global index provider in the decision FTSE Russell indices dedicated to regarding the country upgrade, but the Romania’s promotion to emerging Emerging Markets. inclusion of the Romanian companies market status should, theoretically in these indices can contribute not open the Romanian capital market to the coming years and sends a strong country’s former Frontier Market status. Nuclearelectrica becomes the first only to enhanced visibility but also to a new category of investors, namely signal to privately-owned and state- majority state-owned Romanian attracting capital from fund managers. emerging markets funds. At the same owned companies that they can grow Two Romanian companies: company listed on BVB that is included time, it should increase the visibility significantly via the stock market. outstanding contribution to in the FTSE Russell indices dedicated Consolidating the Emerging of the Bucharest Stock Exchange and ccording to the the new status to Emerging Markets. Market status locally listed companies and help Arepresentatives of Bucharest Stock New investment funds that manage local companies get easier access to Exchange, the effective promotion billions of euros will be able to invest Two Romanian companies, Banca The first effects “Romania has a new highway that financing and more visibility on the to the Emerging Market status will in the Romanian companies listed on Transilvania (TLV) – the most connects us with the whole world, radar of foreign investors. This could allow the Romanian capital market BVB, which was previously impossible traded stock on the BVB – and As a result of Romania’s upgrade to the not only with Europe. Following also lead to better valuations for and economy to absorb new funds in due to the restrictions generated by the Nuclearelectrica (SNN) – a BVB-listed Emerging Market status by including the promotion to Emerging Market Romanian companies. www.jll.ro 14 15 Romania R. E. Shaped | 2021 Macroeconomics of the main office markets in Romania

City Bucharest Cluj-Napoca Timișoara Iași Brașov *Permanent resident population (July 2019) at 2,139,439 326,145 326,636 382,767 289,190 municipality level *Permanent resident population (July 2019) 2,139,439 734,168 756,218 956,216 635,861 at county level GDP in € bn. at county level (2019) 52.29 10.63 10.40 6.89 7.56 GDP per capita in € bn. at county level (2019) 24,441 14,479 13,753 7,205 11,889 Employees at county level (July 2020) 1,028,308 258,850 250,545 175,416 188,388 Unemployment rate in % 1.7 1.1 3.0 2.4 at county level (July 2020) 1.3 Net average wages in € at county level (July 2020) 893 825 703 700 608 Permanent Resident Population represents the number of persons with Romanian citizenship and permanent residence in Romania, delimited by territorial administrative criteria. The best is yet to come for Sources: JLL Research, National Institute of Statistics, National Commission for Strategy and Prognosis The growth pattern developing service sector, resulting in a that regional cities can offer all the sustainable growth spiral. conditions for future expansion, from Each of the major cities is of high skilled workforce to an adequate regional cities in Romania interest for different types of activities: On the other hand, there is a totally working environment. And this trend Cluj-Napoca is a strong IT&C hub in different story with cities relying primarily has been continuing for the last 3 years. Romania and concentrates many service on the industrial sectors and with less Romania is a country opened for business, an established EU that new players are entering these providers, Timisoara is renowned for the developed IT, financial, and professional How the future looks like? member and a source of many opportunities, some still untapped. markets, while for Bucharest, net take-up automotive industry and for its SSC and services sectors. Development there has This is a valid statement not only for the capital, Bucharest, had a smaller percentage, of only 20% IT sectors, Iasi attracted many BPO and been much more subdued, with those At the global level, and in context of the but also for flourishing regional cities, especially Cluj-Napoca, of total demand during the period. This SSC operators in recent years, but also cities attracting fewer new inhabitants pandemic, companies are reconsidering proves that companies prefer to expand IT companies, while Brasov hosts a wide and witnessing a slower growth, such as their costs, strategy and externalization Timișoara, Iași and Brașov. to regionals cities, not just in Bucharest, range of hi-tech providers and pharma Oradea, Constanța, Galați, Sibiu, Craiova, approach. This could become an continuing the trend which started and IT&C companies. Bacău and Târgu Mureș. opportunity for regional cities in approximately 4-5 years ago. Romania, which usually have a very By Claudia Cetățoiu & Alexandru David The unemployment rate in the major Iași and Cluj-Napoca are also well- The evolution of the regional office quick response time and adapt more regional markets (Cluj-Napoca, known as “tech cities of the future”, markets in Romania can usually be easily to new situations. However, for this Timișoara, Iași and Brașov) is below enlisted as such by fDi and TNW’s defined by 3 situations in relation with to happen, there is also a strong need the national average rate, or between 1 in their most recent study, Tech how companies approached them: for partnerships between the business and 3%, compared to over 5%. Wages Cities of the Future for 2020/21. The • Companies that were initially present environment and both local and central The office market continues to tend to be above the national average, study collected data for 76 locations in Bucharest have expanded further public authorities. By accomplishing expand in regional cities but still considerably below Bucharest. and analyzed five main areas: into regional cities, such as Endava, this, Romania could become even more This trend will most likely continue for Economic Potential, Innovation and Microsoft, SAP, Genpact, IBM. competitive at the regional level. Bucharest has a total modern office the medium and long term, although Attractiveness, FDI Performance, • Companies which opened their first The COVID-19 pandemic has been an space stock of 2,9 mil. sq. m, while the 4 the speed of the expansion might be, to Cost-Effectiveness, and Start-up office in Romania in a regional city unforeseen and extreme shock to our mong the many advantages main regional cities mentioned above some extent, reduced on the short term Environment. This study was created and later on entered the Bucharest world, with far-reaching consequences Afor Romania is the cost competitiveness. add another 1 million of sq. m of office because of the pandemic. with the aim to map cities across market, such as the well-known case over the short, medium and, most likely, Compared to Poland, or other EU space, and new buildings were delivered Europe with high potential to attract of Amazon, and local companies, long term. On the short term, there countries in Eastern Europe, it is a well- on the market despite the Covid-19 Regional markets can prove to be very business investments. mostly startups in the IT&C sector, will be an inevitable correction, as the known fact that Romania enjoys very pandemic. During the first 9 months of attractive for some companies. For The growth pattern of the most which emerged in Iași and Cluj-Napoca, economic impact of the pandemic is attractive labor costs. It also offers a large 2020, out of the total demand for office example, there are currently 17,000 IT successful regional cities in Romania, became successful on the local market, felt throughout all areas of corporate pool of foreign language speakers and spaces in regional cities, the largest share companies active in the country, out Cluj-Napoca, Timișoara and Iași, is also and then expanded to other cities. activity. However, over the longer term, skilled workforce. These are the top 3 was represented by net take-up. of which only 5,400 are in Bucharest. the result of a mix of favorable factors, • There are also several companies the office will remain a fundamental part indicators for a company when looking to The rest, with approximately 45,000 such as demographics and economic which started their activity in regional of our corporate culture and will play an open a new location or when reviewing This shows an increase of the office employees, are mostly located in the density, accessibility to major markets, cities and decided not to enter the essential role in our work, productivity the existing ones. space occupied by existing tenants and above 4 major markets. attractive universities and a fast- Bucharest market at all, being confident and future growth. www.jll.ro 16 17 Romania R. E. Shaped | 2021 The increase of online commerce, Healthier/sustainable a great opportunity buildings for industrial market Since the coronavirus pandemic began, reviews on the job sites have The industrial and logistic or slow-down works on the projects that up in certain areas. Such challenge been increasingly focused on the health and safety of workplaces — sector has the highest chances they have been working on. A second will put additional pressure on the in addition to the usual discussions about corporate culture. to be the least impacted by positive aspect I would consider to be commercial conditions, coming with the excitement visible in all economic new and interesting advantages for There are two major sectors which will be treated separately below. the current situation and the areas after the lockdown period has the tenants. As the industry specific tenants must be ready to adapt finalized, around May-June 2020. events are being postponed due to the By Bogdan Plutariu and the variation of temperature for to the new consumption trends pandemic, the investors are looking the introduced air is limited. and opportunities, said Costin People were considering that, slowly, at new opportunities to market their Bănică, Head of Industrial things would start going back to normal projects and try to identify the strong Another solution can be implemented Department JLL Romania. (even a new normal) and were exploring points that differentiate their projects through smart building management back the opportunities considered at the from the competition during the summer seasons, when systems with air quality control beginning of the last year. Unfortunately, the outside temperature reaches +40 sensors which can allow an accurate, the evolution of the pandemic and the What about opportunities? By Cristina Lupașcu The old/existent buildings which Celsius degrees or in the winter when real time control over the introduced/ return of the second wave of infections Will the pandemic and the new require an update of the air handling we can have -10 Celsius degrees or recirculated air, a solution that can be in both Western Europe and Romania normal create opportunities units in order to improve the quality of even lower. implemented also in existent buildings. would bring uncertainty over the next the introduced/recirculated fresh air. Last year, industrial and period and effects over the economy and on the local industrial and This can be done by either increasing There are plenty of solutions which Healthy = sustainable logistic market has witnessed on the population. logistic market? the capacity of the air volume, can be implemented to reduce the a good year, if we look at the replace the AHU filters or avoid to Covid-19 spreading inside confined Retro-commissioning is a process level of the demand and of the Which are the main challenges I consider the opportunities to be recirculate the interior air through spaces, depending on each landlord that involves systemic evaluations of new projects delivered despite that industrial and logistic linked to the specifics of what is the the heat recovers since the eventual budget allowance, but in order to a building’s HVAC and other systems market will face this year? new normal. The increase in online Covid-19 particles will be recirculated remain competitive and attractive that can help identify opportunities the Covid-19 pandemic. What commerce has been accelerated by as well, putting the life of the building in the current market, the above to improve air quality. This process were the main factors that One of the main challenges will be to the lockdowns that affected all Europe, occupiers in danger . upgrades are becoming a must. also has an added benefit: discovering favored the evolution? mitigate the risk of a higher vacancy and the trend has been visible also in new ways to cut energy consumption rate in the main cities, as Bucharest, Romania. All the retailers had to shift For the buildings that are equipped For the future projects or under and effectively reduce a building’s Indeed, the aggregated results for Timisoara and Cluj have also witnessed abruptly to the e-commerce channel with openable windows, they can construction buildings, all the above environmental footprint. the industrial take-up in 2020 do some speculative development and as the lockdown has prevented the be corelated with the HVAC system solutions are recommended as well not suggest a potential slow-down some of the retailers have moved population to buy from the traditional by implementing contact sensors and should become a market standard. In the end, improvements accelerated tendency of the market. The industrial in owner-occupied facilities. The retail channels. and automatization, so once the One solution, which is less costly by the pandemic should ultimately development activity also remained vacancy in these cities, that have also windows are opened (manually or to be implemented than in the old lead to healthier occupants who will be largely unaffected by the difficult year experienced increased take-up rates in An advice for the landlords automatically), a command should buildings, is defined by implementing happier and more engaged. we have experienced. I consider that the previous years, is expected to reach turn off the HVAC in the controlled area air handling units dedicated for each positivity was one of the main factors values close to 10%. Although not a Maintain your positivity! Our sector in order to reduce power consumption. floor. These will reduce any viruses According to specialized studies, an that helped our sector this year, and I worrying value, it is higher than the has the highest chances to be the least Also, procedures and trainings should spreading and will allow the tenants average person spends 90,000 hours am referring to this on multiple layers. vacancy this sector has experienced in impacted by the current situation. be provided to the building occupiers, to locally control the temperature at work over a lifetime, one third of If we look at the year from a the past years. from visitors to permanent occupiers, of the introduced air according to our life and this should be the trigger chronological point of view, the first An advice for the tenants encouraging the use of the windows their needs, recirculating only the that makes relevant all of the above positive approach to the pandemic I Another challenge is to attract the to refresh the space and to respect the air volume from the served space recommendations, keeping in mind would consider to be the uninterrupted new demand, as the competition Maintain your positivity! Be ready to internal health rules. Of course, these comparing with the buildings where that happier employees equals works on the industrial construction has increased and there are multiple adapt to the new consumption trends measures are impractical, especially the air handling units are centralized increased productivity. sites, as most developers did not stop projects competing for the new take- and opportunities. www.jll.ro 18 19 Romania R. E. Shaped | 2021 Companies exploring options to diversifying Mitigating risks by and regionalizing their manufacturing and supply networks Desks will no longer building resilient Now, companies are exploring various ways to build more resilience into their manufacturing and supply be the key element networks—even if that resilience leads supply chain to extra costs. With massive value at stake, global enterprises are seeking to mitigate risk and secure better Supply chain managers strive to achieve the ideals of fully integrated of the office space access to supplies and markets. They The key differentiator in the market will be the ability to turn efficient and effective supply chains, capable of creating and are exploring options for diversifying How did the activity of the PDS challenges into opportunities, considered Cezar Florea, Head of sustaining competitive advantage and regionalizing their manufacturing department evolve in the last and supply networks, adding backup Project & Development Services. production and distribution capacity, 12 months, in the context of and reoptimizing inventory. Companies the Pandemic? By Cristina Lupașcu By Mihai Escu are also seeking to improve their supply chain flexibility, risk-monitoring Despite COVID situation spanning way we knew them before. Office as well as identifying the best possible capabilities, and capacity to respond throughout 2020, we cannot say that spaces will lean more on gathering solutions for our Clients, hence rapidly to new shocks. our activity has been impacted in a areas, brainstorming and socializing meeting the needs of the present days. The trade war between the US negative way. Looking retrospectively spaces where colleagues can meet Such new projects will represent both As supply chains become more and China accelerated shifts in along the last year, we noticed a and share ideas/thoughts/out of the for our Project Management division, as complex as a result of global sourcing procurement. Trade between the two small number of projects being put box thinking. Spatial distancing will well as for Tetris, a great opportunity to and the continued trend of ‘leaning- economies dropped by 16% in 2019. US on hold or canceled. Even further, for force the allocation of larger areas prove our capability to deliver services o this end they must balance down’, supply chain risk increases. auto-part imports from China fell by the second half of the year we can for such collaborative spaces. Office seconds to none. Also, interesting Tdownward cost pressures and the need The challenge to business today is 17% but rose by 10% from Turkey and say that several new projects showed desks will keep their role in an office developments in sustainability and for efficiency, with effective means to to manage and mitigate that risk by 24% from Southeast Asia. up, giving us confidence to look space yet will not represent anymore wellbeing are making their presence manage the demands of market-driven creating more resilient supply chains. The global supply and manufacturing positively to 2021 and beyond. In the the key element of the office space. felt in modern offices around the world. service requirements and the known The current pandemic has elevated networks that have served multinational same time, after a year that has seen The employee-centric workspaces Cultivating happiness is an important risks of routine supply chain failures. the importance of supply chain risk enterprises well for decades have a monumental change in how people will become a key marker for business topic in the modern workplace. Modern commercial supply chains mitigation, with a major Covid-19 required substantial investments, hard- work, many design trends that were success, as more corporations than Knowing that an employer has a vested are in fact dynamic networks of risks perception survey for the earned experience, and relationships emerging among progressive offices ever seek to optimize staff performance interest in its people’s wellbeing will interconnected firms and industries. World Economic Forum highlighting that took years to build. are set to become part of the norm. by enhancing the employee experience have a positive impact on productivity No organization is an island and even a protracted disruption to global But they have also been premised on Flexible workspaces, a design priority and offering flexibility in where and and job satisfaction. the most carefully controlled processes supply chains as one of the most likely many assumptions of the way the world on employee wellbeing, and office how to work. are still only as good as the links and ‘fallouts’ for the world. works that are fast becoming outdated. furniture with a residential aesthetic What is the department’s nodes that support them. To thrive and win in the post-Covid-19 are among the solutions predicted to What are the biggest biggest win in the last year? As a result, building greater supply global economy and beyond will require inspire employees to engage with the challenges you see in the next In today’s uncertain and turbulent markets, chain resilience will become building supply chains that are resilient to office space as working from home period for the line of business Linked with out of the box thinking supply chain vulnerability has become an an increasing area of focus for disruption and flexible enough to capture becomes increasingly prevalent. mentioned above, I would not issue of significance for many companies. companies globally. new sources of competitive advantage. ​ you lead? necessarily mention the name of a What changes has the Challenges will exist for sure, however, specific Client, as all Clients have COVID-19 crisis brought to our key differentiator in the market anyway their specifics, which would the way office projects are will represent the ability to turn those qualify each of them for the above challenges into opportunities. Most award. I will say that the biggest win of built and office spaces are probably, the expansion of the office 2020 is the entry in Romania of Tetris arranged? spaces will not happen at the scale we D&B services which I can say is a win have seen by the end of 2019, yet the not just of JLL, but also for the whole It is a fact that COVID19 has changed present circumstances will push the fit-out market in Romania. Tetris aims the way companies are looking at their Clients to adjust their premises to the to bring a new vision in this domain, real estate portfolios. Working from new working environment, triggering with astonishing solutions, great level home turns into a mind shift both from the need of a new project. These of quality, all these under the wing of employee and employer perspectives. new projects will turn into a great cost-effectiveness. No doubt that these Even post-COVID era, the office spaces, challenge for us by means of properly elements will represent a big win for most probably, won’t look like the understanding the needs of the Client, our Clients.

www.jll.ro 20 21 Romania R. E. Shaped | 2021 Flexibility – the new normal for the office market. How will your workplace change with the times?

After the great home working experiment caused by COVID-19, companies of all sizes are now reassessing their stance on working from home. The top management of companies started to ask themselves if this forced work from home exercise will be the new normal, will define the future of working and will reshape the office segment of real estate.

By Alexandru Orzea

step to customizing their workplace or individual tasks solving. The set and physical interaction is a must Shifting employee attitudes effective time dedicated to individual started growing for everyone. But can that translates into a headquarter/club up for these spaces has a higher on the long term. Juniors need to be While some people are eager to return work started decreasing in the usual creativity, innovation and the power to located in an easily accessible area for percentage of the total area dedicated physically close to seniors to be able to the office as soon as possible, others 9 to 5 timeframe so many started adapt to this “new normal” be sparked the top and middle management of the to collaboration and informal meetings to ask questions when they encounter have enjoyed working from home, to observe that even without the by fear? company where client-facing meetings with interaction and ideas exchange at obstacles in their day-to-day job, and according to a global study of 2,115 commute to the office and back, the can take place, in the CBD or central the core of its design. this cannot be done with a dozen of people by JLL. time dedicated to working increased More than 6 months after the full areas and few spaces spread around daily phone calls and online meetings. and their personal time started to be lockdown, as the next lockdown the city close to the high-density More than ever, an open conversation According to JLL CEE Workplace Half of respondents said they liked affected. “Can you see my screen?” and seems very close, many are thinking residential areas where most of their between leadership and the solution teams’ studies, employees having no commute with 45 percent “your mic is on mute” took the place of that this way of working might define employees live. organization regarding the necessary can be segregated according to their enjoying flexible hours and 31 percent “hi everyone” and “how are you today?” hybrid working, but still, as studies space for work needs to happen by presence in the office preference by benefiting from an enhanced work-life leaving no social interaction between show, the main reasons employees are These clubs or satellite offices grant carrying out surveys that highlight the number of days in order to achieve balance. But that’s not to say they want teammates and colleagues. not coming to the office is the fear of employees collaboration areas and needs of everyone involved so that the correct estimation for a hot- it to last forever. At most, people want using public transport and the lack of focus work areas where all the different business can be smoothly run and desking approach making the surface one or two days of their working week Most companies kept saying that physical space provided inside their tasks can be carried out. keep a high degree of competitiveness estimation easy to be established at home. productivity has not been affected offices to ensure the recommended in the market. as a starting point for reshaping the and that is even growing, but the safe distance to hold back the potential This approach also started a new office space. Design, flexibility and So, many employees adapted and real determination came out of fear virus spread. trend called “work from near home”, Tracking short term productivity engagement encouragement seem started embracing the situation, but which is not the best argument for the away from the “close attention” during the lockdown caused by the to be the keywords that define the calendars started to fill out with an long run. Fear of losing the job and The hub & club concept of children, providing face to face pandemic has been the focus for most workplace future, companies just overwhelming number of calls, out not finding another, fear of missing interaction with colleagues or suppliers of the managers and HR departments, need to ask the right questions and of which many could have been just deadlines, fear of being left out, fear So many companies started to explore and allowing teams to get together but workforce development and new adapt to this new normality that is an email with an extended CC. The of being misinformed about decisions ‘the hub and club’ approach as a next to speed up processes for collective skill acquirement are at all-time low unfolding ahead. www.jll.ro 22 23 Romania R. E. Shaped | 2021 „Henri Coandă” International Airport 10’ 1 Otopeni Dynamics of Bucharest’s Buftea DN1

Buciumeni Tunari residential areas - housing Odăile A3 Ștefăneștii Mogoșoaia 3 de Jos follows infrastructure & Afumați commercial real estate Chitila Voluntari Găneasa

Ring Road 12 14 Real estate projects have always followed the infrastructure development. The infrastructure development projects in Bucharest have always led to important private investments. Chiajna

4 Pantelimon 13 A1 By Flavius Pop 11 2 10 Cernica 8 7 9 A2 Manolache office and residential segments in Baneasa - Expoziției area was Legend Glina stimulated by the announcement of • 1 A new terminal for the International Airport Popești-Leordeni the new M6 subway line which will Bragadiru or example, the construction connect Bucharest to Otopeni Henri • 2 The M5 metro line Fof the Basarab overpass inaugurated Coandă Airport. The attractiveness • 3 M6 ​​subway line, section 1 May - Tokyo, are in 2011, has attracted major of Cotroceni area both for office scheduled to begin in the secondMăgurele half of this year investments in the area, such as and residential developments has and are expected to be completed by 2023. Vârteju Orhideea Towers, The Bridge or significantly increased alongside the • 4 Splaiul Independenței – Ciurel Business Garden Bucharest office extension of the M5 metro line which In the light of this progressive focus, • 5 Berceni overpass over the Ring Road 5 developments. Large landmark connects the densely populated the investors and developers respond • 6 A0 southern highway – southern alternative ring road projects have also been completed Drumul Taberei neighborhood to the swiftly by opening new areas through 7 or started after the enlargement of city center. office and retail projects. • The widening of Prelungirea Ghencea Road Buzesti Street, such as The Mark office • 8 Overpass to Domnești 6 project developed by S Immo or, more The improvement of the city’s The strong establishments reflected • 9 The extension of Brașov Street between Prelungirea recently, Țiriac Tower office building. infrastructure represents a powerful through the office sector’s expansion Ghencea and Alexandriei Road, The construction of Pipera catalyst for generating new commercial generates the right premises for the rapid 10• A connection road between Valea Cascadelor and overpass, in the north part of the opportunities. New projects aiming development of the residential market. Prelungirea Ghencea city, stimulated the development to solve the heavy traffic’s congestion The current ongoing and planned 11• The widening of Preciziei Boulevard between Valea of the well known Floreasca - difficulties, through several overpasses investments managed to redefine Barbu Văcărescu office area. The and alternative routes, followed by the various areas of the city into multi- Cascadelor and Iuliu Maniu Boulevard development of these newly created underground train’s expansion to reach functional districts. This is expected 12• The widening of Fabrica de Glucoză Road office hubs generated important distant neighborhoods and establish to generate more housing solutions, 13• Pantelimon parking and multimodal node investments in residential projects. a faster connection with the airport with a practical approach on the 14• The extension of Northern ring-road between DN7 and A1 highway The massive development of both are already creating a positive impact. living segment.

www.jll.ro 24 25 Romania R. E. Shaped | 2021 postponing of the mortgage loans the Romanian residential market, requirements and the availability of installments payments, the extension I believe the benefits of this crisis the right assets on the local market. Institutional of Prima Casa program and, more will be reflected at many levels, We are currently working on creating importantly, the extension of the from better products (adjusted to the products / portfolios which will 5% VAT threshold should be just the buyers’ needs) available on the make Romania a top destination the beginning of the Government market, to bigger investments in on the residential investment map. investors are implication in order to support this infrastructure works, from more Bucharest and its residential market industry. diverse governmental measures have huge investment potential helping both buyers and developers, which will be materialized by the What are the main challenges to a higher level of business coming institutional investors, rather sooner moving their focus for the residential market in with the institutional investors’ than later. the next year? market entrance. An advice for the developers. I think the main challenge is to In few words, the market will become to Eastern European keep our minds open and have the more mature and will take another step Adjust your products to the market capacity to reinvent and adjust towards its more advanced CEE peers. changes. Anticipate buyer’s needs ourselves/ our businesses to these and expectations. Secure good land new times which are both challenging Appetite for Living investment plots for built-to-rent. residential markets and interesting, though but also continues to grow across full of opportunities. The change is the Europe, with investors An advice for the investors in coming much faster that we could Living Andreea Hamza is running the Living Department. We asked her have ever imagined on many levels focusing on sustainable assets. to share with us insight information about the residential market and it is crucial to keep our focus on Are there investors that are Multifamily assets proved their and her perspective about the year ahead. chances rather than remain stuck in considering Romania for such resilience during uncertain times all the difficulties from the past. investments? over EMEA and in Romania you will find some of the highest yields in Do you think that the There are several major residential Europe. Developers slowly started to By Cristina Lupașcu pandemic crisis will also institutional investors who are shift from BTS (built-to-sell) to BTR create opportunities for the actively looking at Romania right (built-to-rent). The importance of the now. One of the biggest challenges house, providing both comfort and Romanian residential market? for us during these times is finding functionality, was never as highly The effects of pandemic on the designated area, etc.). Moreover, the flexibility in the price negotiations/ Definitely. It has been proven in the right product for the investment regarded as today. This is the time to residential market represented efficiency of the partitioning becomes discount promotions / special offer the past that problematic times are funds as we are witnessing a invest in Romania Living market. one of the hottest topics in crucial, while the proximity / easy for the end users are to be expected, followed by flourishing periods. For significant gap between investors’ these days. JLL is looking very access to the city center is no longer in a market where financing becomes carefully at the Romanian the main decision factor. much more difficult to obtain. Moreover, there is a change in the residential sector. What is your decision process – those who were Investors’ perspective view about the main changes actively looking for dwellings before seen on this market because of the pandemic took the decision Institutional investors are moving their COVID-19? faster. That’s why we have seen focus to Eastern European countries, record sales during the summer Romania being one of the new hottest The changes came on several levels, months on most projects which were places to invest in multifamily. “Small each of the market players being delivered or close to delivery. Houses investors” (looking to buy packages of impacted differently. and second homes (country-side 2-10 units for rental and capital gain) properties) became more popular in are currently looking for distressed The buyer’s perspective buyers’ preferences. opportunities, which have not yet become an easy to find product while There is a visible change in buying The developers’ perspective “short term rent” investors have frozen preferences – given the longer time their investments looking to new spent at home, buyers are looking for The trend of adjusting the product opportunities on other market segments bigger outdoor spaces (larger terraces to new buyers’ preferences – this or private gardens), compounds with move will be more tangible in the Government perspective diverse facilities for leisure (from next 2-3 years, when the projects private park, playground, swimming- currently under planning phase will It is crucial that the State will support pool, gym to more sophisticated be available on the market. Moreover, the effects of the economic downturn ideas such as business lounge, tougher negotiations on general with creative measures meant to daycare / playroom, storage / delivery contractor terms as opposed to more support the real estate market. The www.jll.ro 26 27 Romania R. E. Shaped | 2021 securing green loans for cross-border bonds, which can have a positive portfolios, change is coming from local impact on corporate credit ratings, How Covid-19 is government efforts. In Germany, the have been more common. Industrial drive to clean up cities by 2030 through & logistics specialist Prologis was the more carbon-neutral properties first to do so in 2018. Then last year, will in turn create more opportunity it raised a further €450 million for its turning the spotlight for lenders to finance green assets, Prologis European Logistics Fund explains Helge Scheunemann, JLL (PELF) via a 10-year green bond issue. head of research for Germany. Favorable conditions on green finance “An increase in the amount of green- certified buildings in German cities is Momentum could also come more likely,” he says, pointing to a rise in the past through incentivization; namely the five years from 5 percent to 10 percent. inclusion of criteria which could work in favor of borrowers and their margins. Respondents to the quarterly German The loan margin for French property Real Estate Finance Index (DIFI) survey company Gecina’s €150 million green Green finance for investors and developers is becoming a long-term by JLL and the ZEW-Leibniz Center for loan, signed in 2018, from ING is feature of real estate lending as Europe emerges from its lockdown. European Economic Research said ESG dependent on ESG performance and criteria now has between a medium measured by its rating on the Global and a strong influence on decisions Real Estate Sustainability Benchmark around financing property, despite (GRESB). Lloyds Bank also brought By Maxime Otto margins and loan-to-value ratios not green credentials into focus as key being heavily impacted by a building’s performance indicators for Unibail- level of sustainability. Rodamco-Westfield.

“Around half of those surveyed are However, Europe’s lending scene green finance,” says JLL head of debt focused on green-certified real estate continues to face the challenge of how and structured finance, International in grade A-locations,” Scheunemann to determine standards. Capital Markets EMEA, Michael Kavanau, adds. “Long-term ESG considerations Even if climate change might still be a Green bond for EUR 650 m on 1st who points to vehicles such as M&G are increasingly important priorities in “As we come out of the current matter of debate for some politicians, October 2020. CTP’s inaugural Green n a post-Covid-19 world where Investments’ 2018 debt impact fund. Germany for both borrowers and lenders.” Covid-19 malaise, more structures real estate green financing is catching bonds became the largest debut Iit’s far from being business as usual, Prior to the Covid-19 outbreak, and standards will need to emerge to on in all geographies, driven by a rise issuance by a CEE real estate company. governments and investors are looking Commercial Mortgage Backed Across Europe, green loans have been support green finance’s growth and in ESG investing and sustainability The bonds received a strong reception to turn disruption into the opportunity Securities (CMBS) and bonds were made available to borrowers. Derwent appeal,” says Kavanau. “Investors consciousness. from investors and were several times to build a greener future. becoming more popular for larger London last year became the first UK seeing that green paper is priced more oversubscribed with a peak order book volumes. Europe’s first green CMBS REIT to take a green revolving facility with favorably, for example, could be a Worldwide, at least $30.7 trillion of in excess of EUR 2 Bn. The European Commission wants loan, River Green Finance, was a £300 million tranche of a total £450 significant game-changer.” funds is held in sustainable or green to ensure the region’s recovery issued by Goldman Sachs earlier this million loan from HSBC UK, Barclays and investments, up 34% from 2016, At a different scale, we are as well creates a more sustainable and year, underwriting a €183 million NatWest, classified as green. Research points to investors’ growing according to a report by the Global witnessing the emergence of “green” resilient economy, boosting green loan secured against a Paris office ING and Lloyds Bank have also appetite for companies that are Sustainable Investment Alliance. housing loans that reward, through investment that integrates climate and property. The loan was issued under provided green finance, with the compliant with ESG standards. For Within CEE, main players are as well discounted borrowing costs, the environmental risk into the financial the International Capital Market latter’s commercial banking arm having example, BNP Paribas’ ESG Global using green bonds in their funding acquisition of energy efficient buildings system. The commission’s Renewed Association’s Green Loan Principles. refinanced a €600 million facility in Survey 2019, found that about 68% strategy. In July 2020, both NEPI and offering both higher comfort and lower Sustainable Finance Strategy is part “Green certification is often applied 2017 for Unibail-Rodamco (prior to its of asset owners and asset managers Globalworth issued, under its respective running costs. of a €1 trillion package to make the to buildings that are classified as merger with Westfield). allocated above 25% of funds towards EMTN program, green Eurobonds for € European economy greener by 2030. core or prime, or those being built or ESG investments, up from 51% in 2017. 500m and € 400m ,respectively. Despite Taking into consideration the current Its focus reflects the range of renovated to core,” Kavanau says. “To Canadian investor Ivanhoé Cambridge More than 90% are targeting similar the unprecedent context, these issues context and increasing appetite for Environmental, Sustainability and get to a point where there is wider use and Natixis Assurances jointly obtained allocation levels by 2021. were successful since both were nearly environmentally friendly financing, Governance (ESG) considerations of green finance, lenders will need Europe’s first green certification, two times oversubscribed by a broad it is to be expected that such type gaining traction within real estate more help – from a general accepted through the Climate Bond Initiative, a Empirical studies from MSCI analyzed range of institutional debt investors of funding will continue to grow investment decision-making. standard in identifying underlying commercial real estate loan for their how ESG affects the financial profile across Europe. especially because EU countries must assets are truly compliant.” DUO towers project in Paris from a of companies over a ten-year period. develop a strategy for renovating “Covid-19 may have stalled momentum consortium of French and German They suggested that high ESG-rated In addition to the above, CTP B.V., one their building stock to become highly but institutional investors and listed Change driven at a local level banks in 2018. companies achieve higher profitability of Europe’s top 5 logistics property efficient and decarbonized by 2050 real estate investors with active and valuations, lower borrowing costs companies and the largest logistics but also because investor’s awareness boards and shareholders to report While international investors, such For major property companies and better risk management. property owner-developer in the regarding sustainability is becoming of are to remain particularly focused on as Singapore’s Capitaland, are investing in large volumes, green region, successfully issued a debut higher importance.

www.jll.ro 28 29 Romania R. E. Shaped | 2021 “Green retrofitting existing buildings, Jain says that investors should also while potentially of higher cost in the look beyond implementing energy short term, creates more resilient, efficient technologies to how the competitive assets in the long term building is managed. while delivering measurable return on investment,” she says. “Not doing so “Sub metering and close control could prove costly – with divestment in of BMS, for example, is one way to the future harder to achieve.” manage energy use in more detail,” she says. “That may require more “For investors, cutting real estate management and personnel – but carbon emissions before regulation could ultimately prove beneficial.” kicks is imperative – but getting to that point requires serious commitment,” Ongoing commitments says Schneider. Retrofitting is not a one-off box-ticking Evaluating risk exercise; it’s a continual process, says Schneider, pointing to ongoing work Undergoing the initial energy on New York’s Empire State Building performance data study of a building is after an extensive $550 million retrofit both time-consuming and potentially in 2009. expensive. But the risk of an asset becoming obsolete from inaction “The work is never complete and while outweighs the cost, says Schneider. results were evident within three years “It’s really a small part of the overall of the work being carried out, there’s budget and if you’re able to cut costs always room for improvement via new and make a building both cheaper to tools and methods,” she says. run and a better place for occupants, landlords are more likely to keep Today’s green accreditations such tenants while reducing outgoings.” as BREEAM and LEED, as well as While simple measures such as benchmarking such as GRESB, are installing LED lighting or upgrading helping to ensure that quality retrofitted the boiler can offer incremental buildings stand out from the crowd. savings, minor improvements alone won’t result in a low or zero carbon Nevertheless, legislation – at city rather building, explains Sonal Jain, JLL UK than federal level – will have the most sustainability director. significant impact, says Schneider. Investors look to retrofitting “It’s city level legislation that’s giving Although expensive start-of-the-art investors most food for thought.” eal estate is responsible for innovations are getting cheaper as they As things stand, a new office Raround 40 percent of global carbon become more mainstream, investors development may be more carbon for a low carbon future emissions, according to the World still face the risk that buildings neutral than its retrofitted neighbour. Economic Forum and cities around the undergoing retrofitting in 2019 could But if embodied carbon is one day world have made pledges to play their be out of date by 2025. considered; the reverse may be true. Government and city level regulation and greater environmental awareness among occupiers are part in reduction. As more regulation combining to make green retrofitting an increasing priority for investors. Ambitious new regulations is implemented, landlords are under “Technological advances mean that “That would make it even harder for on carbon emissions and a growing focus on sustainability are driving real estate investors to increasing scrutiny over their buildings. modifications such as LED lighting or a new building to be deemed truly For investors with inefficient buildings HVAC controls now meet return on carbon neutral,” says Jain. “In the consider future-proofing their assets through retrofitting. in their portfolios, carrying out investment expectations,” Jain says. meantime, there’s a firm need for modifications now is “a smarter choice “However, for glazing and façade investors to take steps to cut current than not acting”, says Dana Robbins modification, these projects are still carbon emissions and ensure tenants Schneider, managing director of JLL considerably expensive and tricky remain attracted and their buildings By JLL Energy and Sustainability Projects in to implement, making it harder for don’t become obsolete.” the U.S. investors to justify.” www.jll.ro 30 31 Romania R. E. Shaped | 2021 distributed solar PV applications.

The interest of the investors in Romanian green energy production is currently focusing mainly on Solar Why renewable PV parks, with Wind power having already a strong presence in the South-East area of Dobrogea.

energy is fueling Given the reluctance of the local network operators and Transelectrica, the national grid operator, towards approving investor interest additional production capacity in this area, the wind projects that are currently being planned are relatively reduced in size.

Industrial facility design will need to evolve to address the The focus on large projects is being challenge of companies of today - attracting and retaining good channeled towards Solar power, in areas that allow large capacities to be people. Designing and building attractive, productive, healthy introduced in the national grid. and comfortable industrial buildings incorporating similar A faster or slower recovery would amenities to those typically expected in office buildings is have limited effects on renewable inevitable and so is automation. electricity production in 2020, with year-on-year growth expected under most conditions. By Valentin Achim However, the impacts on the renewable energy industry could be very large, as the regions most affected by the Covid-19 crisis could see a sharp reduction in construction activity.

The production of renewable enewable energy has been 1% in 2020 in comparison with 2019. nearly 28% in Q1 2020 from 26% in Investors are mainly focusing on In our estimation for 2020, global electricity largely depends on the Rthe energy source most resilient The Romanian authorities are also Q1 2019. The increase in renewables areas in central-south or south- renewable energy demand increases availability of natural resources, as to Covid-19 lockdown measures. looking towards measures that would came mainly at the cost of coal and western Romania, where also the by about 1% from 2019 levels, in weather is the main determinant for Renewable electricity has been largely support the green energy production. gas, though those two sources still geography is more friendly for such contrast to all other energy sources. hydropower, wind and solar PV, which unaffected while demand has fallen for They have in plan for 2021 the green represent close to 60% of global investment types. Renewable electricity generation together account for about 90% of all other uses of energy. certificates support scheme that would electricity supply. grows by nearly 5% despite the supply renewable electricity generation. be available for such investments. Nevertheless, there are only a few chain and construction delays caused Although Romania has also been In Q1 2020, the global use of renewable The recently growing interest in locations where large capacities can by the Covid-19 crisis. affected by lockdown measures, the energy was 1.5% higher than in Q1 such energy production will start be introduced in the energy grid interest in investments in this type of 2019. In addition, wind availability was producing effects starting with H2 2021 with reasonable connection costs, or In doing so, renewables almost reach energy producing has increased. This high in Europe and the United States in in Romania, as for the moment only where network reinforcements are not 30% of electricity supply globally, situation is mainly due to the prospect Q1 2020. locations and network capacities are needed at a large scale. halving the gap with coal (from 10 of Romania having to close more coal being secured. percentage points in 2019). The output fueled power plants, as they do not Renewables are also resilient to lower Renewables almost reach 30% of hydropower remains the largest meet the environmental requirements electricity demand because they are We are witnessing a growing interest in of electricity supply globally uncertainty in 2020, as it accounts of the European Union anymore. generally dispatched before other geographical areas that were not very for almost 60% of all renewable electricity sources due to their low sought after in the past. The investors The investors are on a tight schedule generation globally and is dependent Once lockdown measures were put operating costs or regulations that give are attempting to stay away from the to secure good locations and network on rainfall and temperature patterns. in place, electricity demand fell while them priority. south-east area of Dobrogea, where capacity, being aware that the first Solar PV is set to increase the fastest of levels of wind and solar PV held steady. the network capacity remaining is quite ones to secure good locations will all renewable energy sources in 2020. The estimation is that total global use The share of renewables in global reduced due to the high share of Wind most likely also be the first ones to However, uncertainty remains over of renewable energy will rise by about electricity generation jumped to and Solar production. develop projects. capacity growth in 2020, especially for

www.jll.ro 32 33 Romania R. E. Shaped | 2021 What makes a residential development high-end? Tangible vs. Emotional vs. Experiential

While the definition of luxury might be different for every person, the a generous entrance hall, one guest high-end residential market has some clear traits. We have identified toilet located close to the entrance, a seven distinct qualities revolving around the high-end homes which living area of 35+ sqm which should can be consider a standard in Luxury residential. include a dining distinctive place, a heating and cooling green facades strategically illuminated number of apartments accessed large kitchen (15+ sqm). Each bedroom • think wooden floors and wooden through exterior lighting. by a single-entry point such as the should have its own bathroom, while decks for terraces elevator or staircase. The higher the By Andreea Hamza the master bedroom should have a • natural stone for the “wet areas” The entrance has a crucial role in density of the project, the lower the master bathroom and a generous • highest quality sanitary objects in line creating and defining the identity of the selling price goes. dressing. The master bathroom should with the latest interior design trends building establishing a desirability for particular . Prime locations are often include both a shower and a bathtub, a • top-of-the-line equipment for heating, the high-end residential development. Technology and sustainability located a long distance from lower double sink and a separate closet and cooling & electrical appliances The entrance should create the feeling economic regions; the wealthier the should have the look and feel of a spa • last generation smart home of a boutique hotel reception and be High-end buyers want it all when area the higher quality the housing is. bathroom. Moreover, a distinctive area technology functionable, accessible and safe, it comes to technology, and the ll these qualities finally • Area characteristics - The area for storage and laundry should be in • sustainable and low-maintenance providing a good shelter and lighting. developers that cater to this tech-trend Areflect in the sale or rental price of a itself is highly important when place in each unit, while an office room landscaping for terraces and roof tops are the ones who have a competitive property. The seven criteria that we establishing what defines an area as and a hobby room are also elements to • other amenities such as fireplace, Amenities advantage on this market segment. consider when we are talking about a prime location. Areas which have be fit-in. sauna, outdoor kitchen / barbecue area With a touch of a button on the Luxury Residential are: prime location, well known and established features Luxury homes blur the lines between phone the buyer / tenant can now units’ sizes & internal partitioning, high such as retail and leisure facilities Large and wide terraces are another Construction execution is an essential private and public life, offering lock the doors, control the home construction quality & finishes level, are likely to be more favorable. imperative characteristic of the high- part, as high-end buyers expect residents a slide of decadent amenities. climate, control lights and alarm unique design & architectural concept Neighborhoods which have historical end units. These terraces should over-the-top attention to all details, The features of these high-end homes system, from any place. These are the design, amenities, privacy / low features or unique landscapes are serve the day living-dining area and alongside some basic Feng Shui provide comfort and pleasure ranging built-in features that today’s high- density, technology & sustainability. often considered to add to the preferably the master bedroom space. elements to be considered. from concierge & private security, gym end homebuyers are looking for. On distinctiveness of an area making it room, swimming pool, spa, business / the opposite end of the technology Prime location is the key factor even more of a prime location. High construction quality and Unique design & architectural meeting lounge, cinema room, etc. spectrum is a growing trend for for high-end properties, the main finishes level concept reclaimed materials. determinant of the property value Units sizes and internal partitioning Privacy / low density are also determinant features for the For high-end homes, quality is just The exterior of a high-end home is as Sustainability can also be a good There are several factors which may high-end look and feel. The size range as important as quantity. If the entire important as its interior. Homes that High-end development also means selling point on the high-end contribute to a position, excelling to for high-end units on the Bucharest property is not constructed and appear distinctive are held in higher low density and high privacy. High- residential market, and it has recently become a Prime location: market can be defined as following: finished with premium materials, it regards than the standard units of lower end buyers want privacy and security, started to be implemented on the • Transport links - It is crucial for doesn’t matter how many rooms it has or mid-market developments. Therefore, sometimes to the point of seclusion. It is Romanian market by developers who a central location to have good • 1 bedroom – 70-90 usable sqm or how the areas are divided. High- high-end homes come in unique shapes essential for a high-end property to find aim to deliver projects at international transport links. Better accessibility • 2 bedroom – 100 – 150 usable sqm end homes should use only the finest and styles under renowned architectural the right balance between density and standards and to innovate. ensured by public transportation • 3 bedroom – 160 – 200 usable sqm construction materials and opulent and designer names. security, meaning that the denser the facilities increase the value of the • 4 bedroom – 200+ usable sqm finishes, such as: development is, the higher the security Meeting fully or partially the above location to the highest levels. • ventilated facades The distinctive elements that transform facilities should be put in place. traits convert in the end in the property • Buying power in the area - The In terms of internal partitioning, • aluminum exterior joinery with floor the project into a landmark itself, can selling or rental price, which ultimately disposable income of a person living the high-end units must meet the to ceiling windows be highlighted through the usage of In addition, a proper intimacy design determines the unit place in the high- in an area is a vital characteristic; in following requirements: among others, • centralized ventilation system for natural elements like rock, wood or feature is related to limiting the end market segment. www.jll.ro 34 35 Romania R. E. Shaped | 2021 timely delivery, e-commerce companies must hold more inventory in locations Increased vacancy How the closer to their customers. To mitigate the risk of disruption, many occupiers will seek to rely on more than one location in a certain region or more and the main e-commerce boom than one company as a supply source, thus making the number of distribution centers and supply chains necessarily higher, in order to cover the needs of all factors leading to it during COVID-19 the customers. The vacancy rate serves as an important indicator for the overall minimize rental payments for a space Investing in distribution centers closer health of the real estate market. It reflects market appetite for office they will no longer be using. The most to parcel hubs and implementing port space and the desirability of a particular city or location. It provides a cost-effective solution lies in getting is changing the diversification strategies are ways to a replacement tenant to take over the ensure that there is minimal disruption the hint which areas experience difficulties in attracting tenants. lease as soon as possible. next time a major global crisis happens. From surrender / sublease offices Increasing transportation options, so can benefit both parties involved: the industrial real estate that that there is less reliance on trucks, By Mădălina Marinescu business who needs to leave the space, including inter-modal rail, and more and businesses looking for space. During the Covid-19 pandemic, people started to buy essentials online automated facilities, can also reduce New deliveries Especially during this period of economic more than ever, forcing producers of all types of goods to scramble for impact during major events. New buildings seem to be preferred by uncertainty, new tenants can save a additional warehouse capacity and rethink supply chain strategies in he volume of future demand for office tenants. They might even be able great deal in costs with subleased / Development pipeline T order to respond to this. office space is now in doubt because to negotiate a better deal compared to surrendered offices. The growth in online grocery orders is the Covid-19 pandemic. Analysis of the period before the medical crisis. More In some cases, if the landlords will accept expected to continue, thus making the the mechanism of vacancy formation and more tenants are looking for Green to take back part of those spaces, a By Ionuț Grigoraș need for cold storage space to increase in is thus important because different certified office buildings, with new state significant additional stock will become the Romanian and European markets, in underlying contributors of vacancy of the art systems that offer comfort and available in the market. pessimistic, estimating the country’s order to facilitate this growing demand. rates may have different implications safety to their employees. If a building already has vacant space economic growth for 2020 to -5.7%. This For both cold storage and fulfillment for market participants: For the buildings that are not Class A, if and several of the existing tenants have Online sales increased by 28% is to be followed by a 4.9% growth rate in centers, the complexities of direct-to- the landlords will invest and bring them the right and decide to sub-lease, the in 2020, when compared with 2019 2021. Also, in October, the International consumer facilities require either new Demand to the latest standards, they will remain landlord will face a real challenge to according to Retail.ro. The FMCG Monetary Fund expected Romania’s construction or renovations. We can anticipate a negative effect attractive for the tenants. rent all the additional space in a short sector was the most active during real GDP growth rate to fall to -4.8% in We are seeing increased interest from on office demand due to the spread Considering the pipeline for 2021, timeframe and his income will suffer. this time, followed by the logistics 2020. The EU Commission’s Summer traditional and even non-traditional of telework and working from home, when approximately 300,000 sqm sector, largely fueled by the lockdown 2020 Economic Forecast released in July, developers who want to focus on which results in fewer workers are expected to be delivered to the Unemployment rate imposed in Romania. estimates for Romania a GDP contraction industrial, as other sectors are suffering commuting to offices. market, only 45% out of it is pre-leased, The vacancy rate is also quite sensitive This shift has increased both short and -6% in 2020, followed by a 4% recovery due to the current situation. On the other hand, the need to secure meaning that circa 150,000 sqm will to changes in the unemployment rate. long-term demand for the industrial real- in 2021. The industrial sector in Romania has adequate space for social distancing become available for lease. As many businesses slowed down their estate properties that allow companies The sudden increase of e-commerce proved to be resilient in the face of the could be a plus factor for office demand, Considering that an end for the Covid-19 activity because of the pandemic, the to deliver orders faster by being closer to adoption, particularly for food, fast- Covid-19 pandemic and most real estate since organizations will need more floor pandemic is not foreseeable in the unemployment rate rapidly increased their customer base. The consumption moving consumer goods, health and developers carry on with their plans. space per person. immediate future, combined with a low in Romania. has driven demand for industrial real pharmaceutical products, is happening If it is proven that some business take-up of office space and new buildings The decrease in the number of employed estate for the last 5 years, and the sudden regionally. This is causing a strong take-up functions can be run successfully expected to be delivered on the market, people will cause an inevitable decline in spike in online activity since the start of of short-term overflow warehousing and through remote working, therefore we estimate that the vacancy rate will overall demand for office space. the health crisis, in March last year, has lease consolidations in the whole country. tenants might decide not to house continue to increase. Over the medium to long term, it seems slightly accelerated that demand. such operations in their office space likely that the role of offices will be The second wave of the Covid-19 Supply chain in the spotlight any longer. Other functions have yet Sublease / surrender redefined as each company is forced pandemic hit Europe and Romania hard The surge in demand for online goods to prove that they can be managed The pandemic has negatively impacted to reassess which business functions towards the end of 2020 year and its during the pandemic highlights the need remotely, or even the exact opposite the operations and revenue of many strictly requires their own office space, economic impact was seen in a drastic to rethink aspects of the supply chain might be proven in the end. businesses, big or small. The big driver for and which have more flexible office reduction of the official GDP growth management. Retailers are seeking to Furthermore, the co-working spaces sublease / surrender (landlords take back requirements and see what alternatives projections (according to the National bolster inventories of high-demand were affected at the beginning of the possession of part or full premises earlier could be considered. The future shape of Commission for Strategy and Prognosis) products from now on. pandemic, but in the next period they than stipulated in the lease agreement) is the office market is not yet clear, but what from -1.9% in April, to -3.8% in August. Building up the ‘buffer stock’ to quickly might be preferred by the companies the cost-saving effort. seems certain is that a change is coming, The latest prognosis supplied by the meet demand surges increases the need that are looking for flexibility, in order to The businesses who need to vacate which could be labeled the post-Covid-19 World Bank, in October, is even more for industrial space. In order to have not be “stacked” into a long-term lease. their space early are motivated to office demand. www.jll.ro 36 37 Romania R. E. Shaped | 2021 Retail in the 60% post-COVID era 40% 20% Y)

The retail sector was extensively hit by the COVID-19 outbreak. o- 0% Shopping centres in Romania were reopened on June 15th, after ( Y- being compelled to stay closed for almost three months, starting -20% on March 22nd. There were, however, some exceptions: food stores, Chan ge pharmacies and laundry services inside shopping centres were -40% allowed to operate during this time.

-60%

By Alina Cojocaru -80% Feb - Oct Mar - Nov Feb - Oct Mar - Nov Feb - Oct Mar - Nov Feb - Oct 2020 2020 2020 2020 2020 2020 2020

uncertainty in the short to medium EU27 Romania term. Uncertainty related to possible With the unemployment rate new governmental measures, people’s having risen affecting households change in behavior amidst concerns some tenants, many retailers and In 2021 we expect to see more declines around Casa Radio project or the developed in undersupplied cities in purchasing power and uncertainty with over job security, wages being frozen, operators sought a way to arrive at in rental values, with an increased Romexpo project, however the terms of retail, and where the catchment regard to job security, people are more economic forecasts and inflationary an equitable solution with owners. As movement towards flexible leases on situation is unclear at the moment on area & purchasing power will be enough cautious when it comes to what they buy pressures increasing the cost of livingetc. there is increasing uncertainty around turnover rent-based rents. Expectations when/if these mixed projects will be to support the new development. so we will see changes in the shopping Therefore, consumers spendinghas the sustainability of retail rental levels are that we start see some stability in implemented and the structure of the Our expectations are more for small basket size. beenimpacted, and we see this in sales especially whilst we start to witness rental income by the second half of 2021, shopping centre component. developments of under 20,000 sqm GLA having declined post-pandemic outburst. the economic impact of the Pandemic, with a muted recovery set for 2022, when and less for medium schemes of 20,000- Leaving the material thought to one there is a greater focus on the future we will also expect to see a positive Outside of Bucharest: Outside of 39,999 sqm. Given the structural changes side, the situation is not black and white sustainable levels of rent rather than effect of COVID-19 vaccines having been Bucharest, during 2019 and 2020 we saw the retail sector is facing with online sale when it comes to changing behaviors. Footfall levels & Sales what is technically secured today by rolled-out. four deliveries of shopping centres with penetration increasing,developers will be There will be people more risk-adverse lease contract. Many leases were and GLA between 40,000-47,000 sqm GLA more cautious when targeting their new who would rather shop online, from the Footfall levels in shopping centres some are still in negotiations, tenants Future hotspots for retail schemes in cities of 135,000-300,000 inhabitants investments in brick & mortar. comfort of their homes, order take-away started to recover progressively, month having been offered several discounts or On the retail side we have seen (Timișoara, Sibiu, Târgu Mureș, Brașov) food and so on. Others will miss the by month, since July 2020, however other incentives, depending on the sub- resilience shown during this period by and 33,000 sqm GLA in Târgoviște. Out of the main active developers in the overall experience a shopping centre towards the year end the figures still sector of activity and how the tenant was the grocery sector with supermarkets The other completions represented retail market currently we mention NEPI offers and will be eager to go shop. With show on average 25-35% lower affected by restrictions. We have seen and discounters expanding and either extensions of existing schemes Rockcastle, Prime Kapital together with still a high number of COVID cases and compared to pre-COVID levels. Sales and some of the more recent leases agreed to continuing to open new stand- or deliveries of smaller schemes, the MAS Real Estate, Mitiska, Afi Europe, uncertainty around how the threat of additional income (to include turnover be on flexible terms with higher elements alone units across the country. With majority under 20,000 sqm GLA. For Iulius& Atterbury Europe, Ceetrus. the virus will progress, even with several rents) also declined by the same amount of turnover rent instead of base rent.With consumer behavior adapting and 2021 and 2022 there are announced for vaccines on the roll, I believe we will on average, some shopping centres more flexible leases including at least focusing more on basic needs, the food delivery retail parks in particular, with According to JLL, Retail Warehouses still see lower dwell times in centres but showing even higher decreases. an element of turnover rent there is also sector will continue to be resilient. areas of 5,000 – 20,000. On the retail park (Parks) have a positive outlook, also in higher conversion rates, as people will the need for more transparency on sales Bucharest: In Bucharest we saw front we see also new developers such terms of investmentshould they prove no longer browse as a leisure pursuitbut Fashion sector was one of the most data disclosed by tenants. Investors one retail park delivery of 28,000 as the Polish Scallier, which announced to have asset management potential shop more purposefully. affected, and this can be seen in want to look at the robustness of the sqm GLA in 2019 and only one small their interest to develop 6 facilities with a as well. Low rental levels areappealing the sales graphic below, where we retailers, understand their operating extension of ~6,000 sqm GLA in 2020. total leasable area of 40,000 sqm by 2022. but redevelopment/ re-use potential Prior to the COVID-19 pandemic there present a comparison at European and models, get comfort atthe appropriate Short to medium term we will see The only two larger shopping centres in is a key driver, and retail warehousing was an increased move towards Romanian level. rental levels. Additionally, the basis some extensions of existing schemes plan (of around 55,000 sqm GLA) were is easier to re-convert than a purpose- experiential retail, with significant of sales levels in a post-Pandemic (ex. extensions of Colosseum and announced by NEPI Rockcastle and built shopping centre. Last mile logistics investment in leisure uses & F&B, Rental Values world iscurrently an unknown factor Promenada Mall), whilst in the long Prime Kapital in Craiova and Pitești. use gives inner city retail park locations putting an emphasis on the customer and should only be based upon pre- termwe may see at least one more increased attractiveness and we may experience. We now see this being With sales decreasing and rental Pandemic levels with caution. shopping centre development in On top of what was announced already, see this develop further in Romania in affected and still overshadowed by levels becoming unsustainable for Bucharest, having in mind discussions we should see some retail schemes top tier cities. www.jll.ro 38 39 Romania R. E. Shaped | 2021 the local authorities, developing the to deliver such turnkey projects. Tetris in technical design, and concludes with Romania aims to be provider of choice for TURNKEY DESIGN the execution and delivery process to any occupier in the Real Estate market. the Client. Our market differentiators will be ethics and top quality of provided services, For tertiary and industrial transfers alike, next to commitment on costs and AND BUILD, the the process may include the analyses deadlines, all these under insurances of our customers’ requirements and and warranties umbrella that Tetris can help them to plan their new premises by present to its Clients. Presently, Tetris implementing all the move management Romania is working on several projects way to make a processes. In order to ensure a that we are confident will bring full successful transfer, is very important to satisfaction to our Clients. communicate with the employees and be advised throughout the project. Thus, the future of design and build Client’s life easy Although there are several varieties is promising and as a method of of design and build contracts and procurement is here to stay provided different categories of design and build that, the design and build organizations organizations, the design and build form acknowledge the challenges which lay of contract is primarily structured in the ahead as a nature of design and build, Although Design and Build is far from being a new concept on the interest of the Client. continue to meet the ever demanding real estate market, Romanian or worldwide, it is thought to be the Client’s requirements in a satisfactory easiest way to develop a project with as few hassles as possible for Design & Build services are being manner and respond positively to the Client. provided by JLL via its fully owned changes in order to be able to provide the subsidiary named Tetris. kind of services which the construction Tetris Design & Build is present in 19 industry and the Client of the future will countries, spread on 3 continents, demand, and to remain in business in By Laura Vîrzob compliance with local rules and providing state-of-the-art projects to our this competitive market for the year 2020 regulations, performing any Clients. Romania has joined this year the and beyond. administrative processes requested by select group of countries which are able deadline. Last but not least, a turnkey of a project by overlapping its main 2 delivery eases a Client’s life during phases: design and construction. This warranty period, when a single point of eventually leads to a reduced cost for contact is essential for getting a swift Clients developing a project, be it office he traditional approach for and efficient resolution to the problem. fit-out, residential or hotel development. Tconstruction projects consists of the It has been shown that a Design and appointment of a designer on one side, In the end, one entity is held Build developed project may lead to and the appointment of a contractor accountable for cost, schedule up to 20% financial saving and 30% on the other side. The design–build and performance, the contractor time saving and arguably, time is more procurement route changes the being solely responsible and wholly precious than money. traditional way of delivering the projects. accountable to the Client. It answers the Client’s wishes for a single The project’s owner benefits, as if The Turnkey Design and Build approach point of responsibility in the attempt to something turns out to be wrong for developing projects covers every reduce risks and overall costs, as well as within the project, one single entity stage of the project: consultancy, optimize delivery timeframes. It is now is responsible for fixing the problem, programming, interior design concept, commonly used in many countries and rather than a separate designer and workspace, space-planning, costing, forms of contracts are widely available. contractor each blaming the other. technical design development, Design and Build is mainly about This single point responsibility, which contracting with all subcontractors, getting all execution stages of a distinguishes this form of procurement administrative procedures, coordination project under a single contract, with from the others, provide a clear line of and receipt of works. One entity, one a single point representative. This redress if technological and contractual contract, one unified flow of work from project delivery method offers several difficulties arise. initial concept through completion. advantages compared with traditional The process starts with understanding approaches: a single point of Relying on a single point of responsibility the Client’s requirements and needs, responsibility, a single point of contact, is massively minimizing risks to the continues with conceptual design and invoices from one single provider or project’s owner. A major second benefit preliminary drawings preparation, firm commitment to a price and a is the possibility to reduce the time span approval of brief and costs, ensuring

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Capital Markets Valuation & Consultancy www.jll.ro Andrei Văcaru Alina Cojocaru, MRICS www.jll.com [email protected] [email protected] www.officefinder.ro www.cautabirouri.ro Office Project & Development Services Marius Șcuta, MRICS Cezar Florea [email protected] [email protected] Maria Florea © 2021 Jones Lang LaSalle IP, Inc. [email protected] Residential/Living All rights reserved. No part of this Andreea Hamza publication may be reproduced or Industrial [email protected] transmitted in any form or by any means Costin Bănică without prior written consent of Jones [email protected] Development & Land Lang LaSalle. It is based on material that Flavius Pop we believe to be reliable. Whilst every effort Business Development [email protected] has been made to ensure its accuracy, we Viorel Opaiț cannot offer any warranty that it contains [email protected] no factual errors. We would like to be told of any such errors in order to correct them.

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