ROMANIA MARKET OVERVIEW REFRESHED REAL-ESTATE PERSPECTIVES 2016 –2017 ROMANIA MARKET OVERVIEW 2016–2017

2016 was a record year for the Bucharest It takes approximately 10 years office market, with take�up reaching for a typical Bucharester to buy almost 350,000 sq m, 41% higher than a new two room apartment. in 2015. The year brought a significant There were approximately 10,000 volume of new deliveries – approximately residential transactions for new CONTENTS 300,000 sq m. Demand in 2016 was apartments in 2016 in Bucharest 50% higher than in the boom years. and surrounding areas. 04 ROMANIAN ECONOMIC OVERVIEW

Office space goes back to nature, where human 06 OFFICE MARKET beings feel most at The total investment OFFICE RESIDENTIAL MARKET MARKET home and can reach volume reached their most efficient and €705 million in 2016, effective states. 10 INVESTMENT MARKET almost 16% higher than 2015. Foreign funds accounted for more than 99% of the total activity. 12 RETAIL MARKET

14 LAND MARKET

INVESTMENT PROJECT MANAGEMENT MARKET 16 INDUSTRIAL & LOGISTICS MARKET HIGHLIGHTS 18 RESIDENTIAL MARKET

20 PROJECT MANAGEMENT

21 PROPERTY TAXATION INDUSTRIAL RETAIL MARKET MARKET 22 LEGAL ASPECTS

Industrial take�up across the country LAND Fashion retailers maintained in 2016 reached record levels with MARKET a competitive pace in 2016, 415,000 sq m of space absorbed. supported by the opening of In Bucharest, total take�up in 2016 new malls and the expansion was close to 280,000 sq m, which was of existing ones. approximately 85% increase compared with 2015, and a record year. The key players on the industrial market are looking to secure new land plots for development and their interest has moved to the northern areas: the DN1–A3 and A2–A3 city ring segments have land plots with all utilities in place and ready to start construction work.

3 ROMANIA MARKET OVERVIEW 2016–2017

ROMANIAN ECONOMY – HIGHER INTEREST RATES AHEAD by dr. Andrei Radulescu, Senior Economist Banca Transilvania

The global economy seems to be expansionary policy mix: the central Confidence indicators have recently gradually improving, after GDP growth bank (NBR) kept the monetary policy converged on pre-crisis levels, but slowed down to 3.1% in 2016, (the worst rate at the record low level of 1.75%, political tensions have contributed to performance since 2009), according to while the government cut VAT and volatility in risk perception, which is IMF estimates. increased public wages. reflected by the evolution of financing costs and of the FX markets. In the United States, leading indicators Fixed investments rose for the third have recently improved, pointing to year in a row, but the year-on-year In our core macroeconomic scenario we an acceleration in H1 2017, as the pace slowed in H2 2016, before several forecast that the domestic economy will Trump administration has signaled the new measures came into force: the slow down in the medium term, given implementation of expansionary fiscal elimination of the special construction global economic circumstances and the policy measures. tax and the VAT cut (from 20% to 19%) sluggish structural reforms in Romania. from 1 January 2017. There was an The dynamics of the Euro Area (the We expect annual GDP growth of 4.3% increase in foreign direct investment, main economic partner of Romania) are in 2017, 3.9% in 2018 and 3.2% in 2019, by over 30% year-on-year to €3.9 bn, consolidating, with the accommodative a scenario supported by the recent the highest level since 2008. monetary policy of the European Central dynamics of leading indicators. Bank counterbalancing the accumulation At the same time, private consumption In this scenario, fixed investments would of challenges, including the political accelerated in 2016, an evolution gradually accelerate, towards a 5% tensions associated with upcoming supported by the increased real annual pace of growth in 2017-2019, an elections in Germany, France and the disposable income of the population evolution supported by both exports and Netherlands. and by the recovery of the RON credit private consumption. The progression markets. The Romanian economy grew by 4.8% of the investment cycle would create a in 2016 (the highest pace since 2008), On the other hand, net foreign demand positive climate in the labor market, with as domestic demand accelerated. continued to provide a negative the annual average unemployment rate This trend was supported by the contribution to GDP growth in 2016. converging to 5.3% in 2019.

FIGURE 1 Romanian economy outlook (%, YoY) The improvement of labor market of inflation (measured on HICP) would bonds (annual average) would increase sentiment (diminishing unemployment increase from 1.8% in 2017 to 2.7% in from 3.3% in 2016 to 3.9% in 2017, 4.2% 10 60 FIXED INVESTMENTS (RHS) and increasing wages) together with 2018 and 2.6% in 2019. in 2018 and 4.1% in 2019. GDP 8 PRIVATE CONSUMPTION 50 the positive climate for credit markets In this context, we expect the NBR Last, but not least, the EUR/RON 40 would support private consumption. In to start a new monetary cycle in the exchange rate would consolidate in the 6 our scenario, private consumption, the 30 short term, a reaction that would short term and may gradually decrease main component of GDP, is forecast to 4 counterbalance expansionary fiscal and in the medium term, an evolution 20 increase on average by 4.7% YoY during income policies and the sluggishness supported by the outlook for the real 2 10 2017–2019. of structural reforms, in a context economy and the increasing interest rate 0 0 On the other hand, net foreign demand of intensifying geo-economic and gap (Romania vs. Euro Zone). -10 will present a negative contribution to geo-political challenges. -2 Among the main risk factors for our GDP growth in the medium term, but we -20 For sovereign financing costs (the yield scenario we mention: the macro-financial expect a gradual convergence of exports -4 on 10-year bonds), we forecast that the dynamics (including the policy mix) in the -30 and imports’ dynamics. recent upward trend will continue in the US and China; the economic and political -6 -40 With regard to the financial side of the medium term, an evolution determined climate in the Euro Area; the return of -8 -50 economy, we forecast that the annual by the Fed monetary cycle in the US and the twin deficits, the expansionary fiscal rate of inflation will converge on the by the growth prospects for the nominal and income policies and the delay of 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 NBR target in the following quarters. GDP in Romania. According to our structural reforms in Romania; and the Source: Eurostat and Statistics Office estimates, Banca Transilvania forecasts In our scenario, the annual average rate forecasts, the 10-year yield on sovereign regional geo-political climate.

4 5 ROMANIA MARKET OVERVIEW 2016–2017

FIGURE 3 FIGURE 4 FIGURE 5 HIGHLIGHTS OFFICE MARKET Demand by leased area Demand by type of transaction Demand by submarket 2016 2016 2016

2016 was a record year for Overview of which 75% is class A office space. the Bucharest office market, The stock figure is getting close to that of other developed CEE capitals such as with take-up reaching almost Bucharest’s office market experienced its most active year in the last decade, Budapest or Prague. The most important 350,000 sq m, 41% higher with the delivery of 15 new buildings office buildings delivered to the market than in 2015. in 12 projects, so that the new supply were: Globalworth Tower (51,000 sq m), of class A and B offices reached over AFI Park 4 & 5 (32,000 sq m), Hermes The year brought a significant 293,000 sq m. This compensated for the Business Campus II (24,900 sq m) volume of new deliveries – low delivery volume of 2015, when only & III (29,100 sq m), Oregon Park B approximately 300,000 sq m – approximately 60,000 sq m were delivered, (24,600 sq m) and The Landmark although 2009 remains the high and we foresee that the market will now (21,000 sq m). Among the new deliveries, point of the last 10 years with resume its normal growth rate, in line with there was only one refurbishment – 400,000 sq m delivered. the trend of the past 10 years, of between Valeriu Braniste (approx. 4,800 sq m). 46+21+1815g 35+312410g 35+16+87652g 150,000–200,000 sq m each year. By submarket, 42% of new supply was delivered in the Calea Floreasca/Barbu >5,000 SQ M 46% RELOCATION AND NEW DEMAND 35% CENTER-WEST 36% Demand in 2016 was 50% higher We also see a growing trend of 1,000–3,000 SQ M 21% RENEGOTIATION / RENEWAL 31% DIMITRIE POMPEIU 17% Vacarescu area, 25% in Dimitrie Pompeiu than in the boom years, with the companies consolidating the operations 3,000–5,000 SQ M 18% PRE-LEASE 24% CALEA FLOREASCA-BARBU VACARESCU 16% and the remaining 33% in popular central Center-West being the main focus of multiple offices into one single location, <1,000 SQ M 15% EXPANSION 10% CBD 8% areas (CBD, Center and Center-West). PRESEI LIBERE SQUARE 7% with take-up of 123,490 sq m. especially when relocating. The relocation Source: Knight Frank Source: Knight Frank CENTER 6% of BCR to The Bridge, Forte Partners’ At a national level, the most important PIPERA 5% project, which Knight Frank consulted, deliveries were recorded in Timisoara WEST 3% The IT sector dominated is a significant example. – United Business Center 2 BANEASA 2% demand in 2016, albeit with The IT&C sector was the most (18,000 sq m) and part of the Openville a 14% decrease in take-up important demand driver in 2016, project; and Iasi – United Business compared with 2015. Source: Knight Frank dominating the market in H1, but its Center 5 (15,000 sq m) & 6 (9,300 sq m). share of annual take-up decreased In 2017, demand is expected to from 2015, when it accounted for half flourish in the Center-West, CBD of activity, to 35% in 2016. FIGURE 6 FIGURE 7 FIGURE 8 Demand Demand by tenant sector Office stock by submarket Vacancy rates and even Expozitiei. Our forecast for 2017 is positive, with Bucharest office take-up for 2016 2016 2016 Class A&B offices , 2016 approximately 200,000 sq m of new reached almost 350,000 sq m of class space due to be delivered and vacancy A and B office space. This volume was rates of existing buildings expected to 41% higher than 2015, which was itself a fall. Activity is expected to be increasingly good year for office demand. The largest FIGURE 2 oriented towards the Center-West and the transactions of 2016 were Renault in the Modern office stock CBD, as well as the traditional northern Renault Office Building (39,000 sq m) Annual evolution (sq m) business hubs. and BCR in The Bridge (20,000 sq m), 2,500,000 in the West and Center-West areas. CLASS B 31% of the leasing activity was contract CLASS A Supply renewals/renegotiations but there was 2,000,000 In 2016, the Bucharest market saw also continued growth in the volume of its largest ever volume of new class pre-leases, which almost doubled in 32+15+111075321g 16+14+13118542g 27+14+138764g A & B offices – over 293,000 sq m 2016 compared with 2015 and included 1,500,000 IT&COMMUNICATION CALEA FLOREASCA-BARBU VACARESCU 17% SOUTH 27% spread across almost all major business the two largest transactions of the year. 34% FINANCE/BANKING/INSURANCE 16% CENTRAL BUSINESS DISTRICT 15% PIPERA 14% districts, especially Calea Floreasca/ The Renault pre-lease was the biggest AUTOMOTIVE 12% DIMITRIE POMPEIU 14% BANEASA 13% Barbu Vacarescu (123,000 sq m), ever office transaction in Bucharest, and 1,000,000 PROFESSIONAL SERVICES 10% CENTER-WEST 11% CALEA FLOREASCA-BARBU VACARESCU 8% Dimitrie Pompeiu (75,000 sq m) and was larger than any deals completed MEDICAL &PHARMA 7% CENTER 11% CENTER-WEST 8% Center-West (56,500 sq m). The high during 2016 in the more developed CEE FMCG 5% BANEASA 8% CENTER 7% volume of deliveries compensated for markets of Budapest, Prague or Warsaw. OTHER 5% PIPERA 8% EAST 7% 500,000 to the low levels in 2015, especially as MANUFACTURING INDUSTRIAL & ENERGY 5% PRESEI LIBERE SQUARE 5% DIMITRIE POMPEIU 6% By location, almost 70% of the total MEDIA &MARKETING 2% WEST 3% CENTRAL BUSINESS DISTRICT 6% some of the projects that had been take-up was in Center-West, Dimitrie RETAIL 1% EAST 3% PRESEI LIBERE SQUARE 4% scheduled for delivery in Q4 2015 were 0 Pompeiu and Calea Floreasca/Barbu CONSTRUCTION &REAL ESTATE 1% STRAULESTI 3% WEST 0% postponed to H1 2016. Vacarescu. While the last two areas have CONSUMER SERVICES&LEISURE 1% SOUTH 2% 2011 2014 2015 2010 2012 2013 TRANSPORT&CARGO 1%

2016 The total office stock of Bucharest been the most sought-after locations Source: Knight Frank reached a record level of 2.5 million sq m, in the past six years, demand is now Source: Knight Frank Source: Knight Frank Source: Knight Frank

6 7 ROMANIA MARKET OVERVIEW 2016–2017

growing for the Center-West and CBD. The highest vacancy rates are still in the Square areas remaining major focal In 2016, office requirements in the Rents South, Pipera and Baneasa areas, while points for activity. 50% of the deliveries Center-West area were 75% higher Even though there was a record volume at the opposite end are the West with announced for 2017 are in than in 2015. of new deliveries in 2016, rents were 0% vacancy and other areas with less the Center-West. similar to previous years. Prime headline than 10% vacancy including Piata Presei Bucharest’s Northern-Central region IT&C remained the most active sector in Libere, CBD and Dimitrie Pompeiu. rents remained stable at around remains the preferred area for 2016, but it generated 14% less leasing €18–18.50/sq m/month, but incentive We expect the vacancy rate to stabilize headquarters and BPO companies, while activity in comparison with 2015. Of the packages are expected to be impacted or slightly decrease in the coming Central-West has a similar tenant mix. ten largest transactions of 2016, six were by the large number of new office years, as it is anticipated that the from the IT&C sector, with the biggest of Demand is growing in the CBD buildings. pace of new deliveries will slow in these being the renewal of Telekom in and The Landmark office project Service charges were also unchanged, comparison with 2016 but that demand City Gate (13,000 sq m). In 2015 there (21,000 sq m) was delivered to meet ranging between €3.50–4.50/sq m/month. will continue to grow. were also six leasing transactions in the this demand, while further new CBD The prime yield for office properties developments are expected. IT&C sector, but with bigger leased areas remained stable at 7.5%. – Genpact (22,000 sq m) and Oracle Forecast Leasing activity is increasing in (20,000 sq m), both being intermediated secondary cities such as Timisoara, by Knight Frank. The finance sector was It is forecast that 350,000 sq m in Cluj and Iasi, as well as tertiary cities the next most active, with 16% of the total Vacancy 16 projects will be delivered to the like Craiova and Targu Mures, with leasing activity, followed very closely by The vacancy rate at the end of 2016 market in 2017–2018 in Bucharest. demand mainly driven by the BPO Some of the most significant the automotive sector with 12%, while the was 15% for class A & B buildings, sector and IT sectors. projects include: Globalworth professional services and pharmaceutical compared with 11.7% at the end of Outside of Bucharest, the most active Campus I & II (29,400 sq m & sectors dropped to fourth and fifth places 2015. The increase was primarily due development pipelines are in Cluj, 29,400 sq m), Anchor Plaza Metropol in the ranking. to the record level of new deliveries, Timisoara and Iasi. Important new (36,500 sq m), The Bridge (Building A which brought vacancy rates of 14% deliveries in these cities include the 5th While approximately 46% of the total 28,850 sq m), Timpuri Noi Project I & II for class A and 17% for class B offices. phase of United Business Center in Iasi (32,550 sq m) and Sema Parc Office 3 take-up came from deals of more Even though nearly 300,000 sq m office (approx. 15,000 sq m), Alcatel HQ in (A1 + A2 – 26,700 sq m). than 5,000 sq m, the average size of space was delivered to the market in Timisoara (approx. 15,000 sq m) and transactions was 1,800 sq m and the 2016, only 34% of it is vacant, which The Bucharest market will continue Coresi Business Park in Brasov (the average of renewals/renegotiations was demonstrates that the market is on the on an upward trend in 2017, with the 1st building of the 2nd phase of Coresi over 2,300 sq m. path of rapid growth. Center-West, CBD and Presei Libere Business Park with approx. 8,300 sq m).

TABLE 1 TABLE 2 Prime headline rents Top 10 office transactions in Bucharest 2016–2017 2016

SUBMARKET PRIME TENANT SUBMARKET TYPE OF DEAL LEASED HEADLINE RENT AREA (€/sq m/month) (sq m)

CBD 16–18 Renault Center West Pre-lease 39,000

Presei Libere Square 14–16 BCR Center West Pre-lease 20,000

Calea Floreasca Telekom Presei Libere Square Renegotiation/Renewal 13,000 14–17 -Barbu Vacarescu Teamnet Center West Renegotiation/Renewal 11,000 Center-West 13–15 Hadassah Hospital Dimitrie Pompeiu Relocation 11,000 Baneasa 12–14 Calea Floreasca/Barbu Oracle Renegotiation/Renewal 10,400 East 14.5 Vacarescu

Dimitrie Pompeiu 11–13 IT (Confidential) Center West Renegotiation/Renewal 10,000

West 11–12 Antena 1 Dimitrie Pompeiu Relocation 8,000

South 10 –11 Misys Center West Pre-lease 8,000

Pipera 8–10 Adobe Center West Renegotiation/Renewal 6,500

Center 13–17

Source: Knight Frank Source: Knight Frank The Landmark

8 9 ROMANIA MARKET OVERVIEW 2016–2017

Analyzing the above, increased demand stemmed from several investors FIGURE 9 FIGURE 10 HIGHLIGHTS INVESTMENT MARKET Romania investment Transaction distribution expanding their portfolios, including transaction volumes by property type investors that have been both active and Annual evolution (€mn) 2016 Demand was mainly generated are also likely to be looking for new inactive in the market in recent years. Overview opportunities in the next few years. by established investors Additionally, some new companies 2000 After a rather slow start to the year, Nevertheless, 2016 also saw new entrants expanding their real estate entered the Romanian market by making 2016 brought an overall increase in to the market, while some established portfolios but new entrants also significant acquisitions. As in recent transaction volumes compared with investors that have not been very active years, foreign investment was the main accounted for a significant share 1500 2015, with a total of €705 million invested in recent years made acquisitions in the driver of activity, accounting for almost of the investment volume. in the Romanian market. The largest industrial and office sectors. 99% of the investment volume. transactions were in the industrial The total investment volume sector with the acquisition of the P3 1000 reached €705 million in 2016, Logistic Parks for a consideration of Demand Yields almost 16% higher than 2015. approximately €190 million, followed by the retail sector with NEPI’s acquisitions The total investment volume of Despite the improved levels of activity of a minority share in Mega Mall €705 million in 2016 represented registered in 2016 compared with 2015, 500 Foreign funds accounted for Shopping Centre and Sibiu Shopping approximately a 16% increase compared there was no significant hardening of 38+31+g more than 99% of the total City which together totaled slightly more with 2015. Despite a rather slow start to prime yields. However, a general trend of activity. 2016, investment activity subsequently RETAIL 38% than €170 million. yield compression appears to have been 0

4 5 6 7 8 9 OFFICE 31% increased with several large deals closed maintained. 16 Overall, 2016 relied heavily on the retail 20 10 20 11 20 12 20 13 20 14 20 15 20 0 20 0 20 0 20 0 20 0 20 0 INDUSTRIAL 31% in the last three quarters of the year. 20 Yields had only a moderate sector but the office and industrial The gap between the local market and the compression in 2016 and this sectors also reported significant levels In 2017, it is expected that investor leading markets in the region (Prague and Source: Knight Frank Source: Knight Frank trend is expected to continue in of activity to drive up total investment sentiment will remain positive, mainly due Warsaw) is still above 200 bps, indicating the following 12 months. volumes. Established players familiar to the favorable economic conditions and that moderate yield compression might be with the market expanded their portfolios competitive risk-adjusted returns. expected in 2017, especially in the office by acquiring income-producing assets and industrial sectors. The retail sector was the main driver and new entrants made their first of activity in 2016 with approximately acquisitions, mainly income-producing a 37% market share. Major transactions assets but also some investments with in this sector included the sale of Sibiu Forecast value-add potential. 2017 has already Shopping City (79,000 sq m) by Argo seen several other transactions, with The increased activity in the Romanian Group and the 30% equity share owned new players showing interest in the real estate investment market indicates by Real4You in the Mega Mall shopping Romanian market as demand continues the growing confidence in Romania’s center (75,000 sqm), which were both to be boosted by the favorable economic macroeconomic environment. In 2016, acquired by the South African fund NEPI environment and very competitive investor demand remained focused on for a combined total of over €170 million. risk-adjusted returns. top quality assets. New investors entered The office sector came in second, with the market in 2016 and other already 31% of the total investment volume. established investors have resumed Major transactions concluded were acquisitions thus sending positive signals Supply the acquisition of Metropolis Center to other potential investors who were In 2016, there was a significant level of (a building of approximately 19,000 sq m reluctant to enter the market. located very close to Piata Victoriei) by new supply compared with the previous Therefore, sentiment remains positive the Czech fund PPF Real Estate and year, with the office market being the and market activity is expected to the acquisition of a minority stake in most active in terms of new deliveries improve over the coming years. (new office space delivered on the market City Gate (41.1% shareholding in the was five times higher compared with approximately 46,000 sq m building 2015). Banks have become more willing at Piata Presei Libere) by GTC from to provide financing for both development Bluehouse Capital. and acquisitions in most sectors and TABLE 3 Despite the slow start in the first the investment market now features a Bucharest prime yields half of the year, investment activity 2016–2017 (%) wide range of opportunities for investors, in the industrial sector recovered including income-producing, value-add significantly towards the end of the and distressed assets. OFFICE RETAIL INDUSTRIAL year and accounted for approximately Retail assets were the most sought-after 30% of total investment in 2016. 7.5 7.25 8.75 asset type in 2016, followed by prime The main transaction was the sale of office projects and industrial assets. The the P3 Logistic Parks to a new market strongest demand came from established entrant, the Singaporean sovereign Source: Knight Frank Hermes Business Campus investors with expansion plans, which wealth fund GIC.

10 11 ROMANIA MARKET OVERVIEW 2016–2017

RETAIL MARKET SHOPPING CENTERS

In addition, the refurbishment of Mercur Overview Craiova (20,000 sq m) has been Rents Fashion retailers remained on the completed while Coresi Shopping City In 2016, prime rents for the leading offensive in 2016, supported by the in Brasov was extended with a leasable schemes remained relatively stable. opening of new malls and the expansion area of 13,500 sq m. For 100 sq m units, rents were of existing ones. around €60/sq m/month in shopping centers in Bucharest and between Demand €25–35/sq m/month throughout the rest of the country. Supply Occupier demand continued to be 2016 had the greatest volume of generated by well-known food and new deliveries since 2009, with fashion brands in 2016. New deliveries Forecast such as ParkLake Plaza and Veranda 229,000 sq m of new space, a 40% In 2017, the focus will be directed to Mall brought new brands to the market. increase on 2015. About 40% of this secondary and tertiary cities where The mass-market brands that have volume was in Bucharest, where there are either no modern retail opened their first stores in Romania in the shopping center stock reached schemes or an undersupply of space. approximately 1.16 million sq m. these projects include Forever 21, which opened its first store in ParkLake Plaza Developers are turning to retail park The Bucharest market saw two new and Tati, a French brand that launched in projects, which are more suited to deliveries: ParkLake Plaza (70,000 sq m) Veranda Mall. Other new market entrants smaller cities. The delivery of such and Veranda Mall (25,000 sq m), while include Pupa Milano, Tezenis, Takumi, projects is scheduled for next year in two others were relaunched after being Motiko, 4F, Lanidor, Play Park, Lynne cities like Satu Mare. redesigned and reconfigured: Bucharest and Bulgarini. Considering the good results Mall and Plaza Romania. Premium brands choosing to open announced by the brands active in In the rest of the country, NEPI opened their first stores in Romania in 2016 the local market which have closed the second phase of Timisoara Shopping also targeted shopping centers such as 2016 with estimated sales growth of City (40,500 sq m), extension in City Baneasa Shopping City (except for COS between 20% and 30%, we expect Park Constanta (19,500 sq m) and new which chose to open on Calea Victoriei). they will continue their expansion in malls in Piatra Neamt – Shopping City Among the premium brands which the upcoming period. (28,000 sq m) and in Satu Mare – Satu entered the market in Romania in 2016 New brands from other countries in Mare Shopping Plaza (12,500 sq m). were Max & Co, Chopard and Boggi. the region are looking to expand in Romania over the next year as the country benefits from strong financial TABLE 4 indicators and the outlook for growth TABLE 5 Retail schemes delivered in 2016 is very promising. Retailers from Projects announced to be delivered in 2017 and 2018 countries such as Poland and Turkey PROJECT CITY DEVELOPER GLA (sq m) are targeting Romania in an effort to PROJECT CITY DEVELOPER GLA (sq m) DELIVERY diversify their portfolio and spread Sonae Sierra/ the risk in other markets. ParkLake Plaza Bucharest 70,000 AFI Cotroceni extension Bucharest AFI Europe 8,000 2017 Caelum Development Veranda Mall Bucharest Prodplast 25,000 Ramnicul Valcea Mall Ramnicul Valcea NEPI 28,000 2017

Timisoara Shopping City (II) Timisoara NEPI 40,500 Satu Mare Mall Satu Mare NEPI 17,400 2017

Mercur (refurbishment) Craiova Local company 20,000 Shopping City Sibiu extension Sibiu NEPI n.a. 2017 City Park extension Constanta NEPI 19,500 Shopping City Galati extension Galati NEPI n.a. 2017 Coresi Shopping City (II) Brasov Immochan 13,500 AFI Palace Brasov Brasov AFI Europe 45,000 2018 Shopping City Piatra Neamt Piatra Neamt NEPI 28,000 Timisoara Plaza Timisoara Plaza Centers 39,800 2018 Satu Mare Shopping Plaza Satu Mare NEPI 12,500

Source: Knight Frank Source: Knight Frank

12 13 ROMANIA MARKET OVERVIEW 2016–2017

MAP 1 LAND MARKET Land opportunities

office hubs, suitable for mid-market Hanner Holding expanded its presence Overview projects in areas such as Calea in the local market by acquiring an 2016 maintained the dynamic pace Floreasca, Barbu Vacarescu, Aviatiei 11,000 sq m land plot from Forte Office Residential of the previous year, with several key and for low-to-mid market projects in Partners located in the Grozavesti 3 sites available 1 site available transactions concluded for future mixed the Center-West area. For these types area, close to Grozavesti and Basarab 86,000 sq m 13,000 sq m developments. of developments, the most suitable size metro stations. This transaction marks 235,000 sq m 40,000 sq m Office potential development potential development of land plots is between 1,000 sq m Hanner’s entrance into the Romanian 2 sites available €500–850/sq m €550/sq m and 5,000 sq m. For high-end projects, office sector, and highlights its continued 150,000 sq m Supply interest remains positive in areas such growth plans following the success of 235,000 sq m as Primaverii, Kiseleff and ultra-central its residential developments – The Park, potential development €750-1,000/sq m There were no notable changes to land areas of Bucharest. Carol Park Residence and City Center. supply, however we have identified Knight Frank Romania intermediated the Demand for land plots suitable for office BUCURESTII NOI several opportunities that show the €5 million transaction. development is still an important part of potential of the market – data is total market activity. Even if well-known EXPOZITIEI included in the map below. Banks’ developers already own appropriate offers are less attractive as they land plots and their focus is now on Prices FLOREASCA remained only with some low quality Office Residential developing them, they are still interested Prices were unaffected by the increased BARBU-VACARESCU products after selling NPLs in small 4 sites available 4 sites available in land opportunities located in the CBD demand for residential and office land packages of properties. Companies 28,000 sq m 40 ha or northern area, suitable for smaller plots, and remained at stable levels that bought this type of assets are not 112,000 sq m 1,200,000 sq m office projects of 10,000–15,000 sq m, throughout 2016. CENTER−WEST potential development potential development yet visible on the market with good which are currently in high demand. €1,200-1,400/sq m €550-650/sq m offers. There are also some developers Office Residential that own large land portfolios who want The key players on the industrial market to sell them as package deals. are looking to secure new land plots Forecast 2 sites available 3 sites available 41,000 sq m 43,000 sq m for development and their interest The supply of land plots suited to good TINERETULUI 164,000 sq m 112,000 sq m has moved to the northern areas: the development projects is expected to potential development potential development Demand DN1–A3 and A2–A3 city ring segments decrease, while demand is growing for €800-900/sq m €400-500/sq m have land plots with all utilities in place land plots suitable for residential and In 2016, demand trends were positive, and ready to start construction work. office use, and as a result, we expect Office Residential with high volumes of activity witnessed 2 sites available 2 sites available Two of the highlights of 2016 were some upward pressure on prices. across all market segments. The office 37,000 sq m 11,000 sq m acquisitions announced by Vastint Taking into consideration the deliveries and residential sectors were still the 111,000 sq m 33,000 sq m Romania and Hanner Holding. The first to the office sector, and also the fact that main drivers of demand for land for potential development potential development of these was the purchase of a 48 ha site companies need to expand in secondary €800-900/sq m €600-700/sq m development, while companies were in Sisesti by Vastint Romania, as part of cities, office developers will look to buy the most active buyers. a strategic long-term investment, with a land and develop in cities where their In the residential sector, interest is high view to build a mixed-use development tenants want to expand and open new for land plots located close to the new (predominantly residential). offices, such as Timisoara, Cluj and Iasi.

TABLE 6 TABLE 7 Relevant land transaction Land plot prices by use (ha, sq m) (€/sq m)

LOCATION BUYER SIZE USE Barbu Vacarescu/ 1,000 OFFICE Floreasca Center-West 700–900 Sisesti Vastint 48 ha Residential Prime areas 1,000–1,200 Grozavesti Hanner Holding 1.1 ha Mixed RESIDENTIAL Periphery 200–250 Barbu Vacarescu One United Properties 8,400 sq m Residential Bucharest 350–500 Verzisori Developer 7,300 sq m Residential RETAIL Countryside 100–250 Aviatiei One United Properties 5,300 sq m Mixed

Tudor Arghezi Developer 1,800 sq m Hotel

Source: Knight Frank Source: Knight Frank

14 15 ROMANIA MARKET OVERVIEW 2016–2017

Vacancy FIGURE 11 FIGURE 12 INDUSTRIAL Take-up by region Take-up by tenant activity sector As of end of 2016, the vacancy 2016 2016 rate was estimated at below 5% in & LOGISTICS MARKET Bucharest and below 10% in the rest of the country.

Logistic Park (90,000 sq m), Log Center the lease renewals and pre-leases Overview Mogosoaia (45,000 sq m) and the signed by Carrefour in P3 Bucharest A brief review of the final statistics for extension of CTPark Bucharest West Logistic Park (75,000 sq m overall), Rents 2016 reveals the significant growth of (30,000 sq m). the expansion signed by Yazaki in Due to growing demand and the the industrial sector compared with Braila (29,000 sq m) and the renewal decrease in space availability, rental previous years. Supply additions came signed by eMag in Ruukki Building levels registered a small increase. both from new phases of existing (25,000 sq m). developments and from new entries. Demand While Bucharest accounted for 68% of In terms of demand, 2016 continued Industrial take-up across the country total take-up, Timisoara and Cluj were 65+14+721g 36+23+1613642g to be dominated by retailers, followed in 2016 reached record levels with Forecast BUCHAREST 68% RETAIL 37% the most sought-after regional locations closely by logistics companies. 415,000 sq m of space absorbed. Assuming that the positive economic TIMISOARA 14% LOGISTICS 23% accounting for a further 14% and 7% CLUJ 7% AUTOMOTIVE 16% In Bucharest, total take-up in 2016 conditions prevail, we expect that respectively of the total volume. BRAILA 7% STORAGE 13% was close to 280,000 sq m, which demand for industrial space will continue ARAD 1% PRODUCTION 5% Supply was approximately an 85% increase In general, the main sources of the same positive trend as in 2016. IASI 1% OTHER 4% compared with 2015, and a record year. demand were pre-leases and renewals/ ORADEA 1% INDUSTRIAL/MANUFACTURING 2% The total stock of industrial space is During 2016, new deliveries amounted BRASOV 1% renegotiations, accounting for 37% and to 350,000 sq m, of which 60% were in A total of 45 leasing transactions expected to increase by approximately 36% respectively of the total take-up. Source: Knight Frank Source: Knight Frank Bucharest. Thus, the current modern were recorded in 2016 with an 500,000 sq m by the end of 2017. stock located in and around the capital average lease size of 9,500 sq m In terms of tenant profile, the retail sector increased to over 1.2 million sq m. and only seven transactions were was the most active, accounting for 37% FIGURE 13 FIGURE 14 The largest projects completed in 2016 larger than 15,000 sq m. During of total demand followed by logistics Bucharest modern take-up Bucharest modern industrial stock Annual evolution (sq m) Annual evolution (sq m) include the extension of P3 Bucharest 2016 notable transactions included with 23% and automotive with 16%.

300,000 1,400,000

250,000 1,200,000

1,000,000 200,000 800,000 150,000 600,000 100,000 400,000

50,000 200,000

0 0 4 5 6 7 8 9 4 5 6 7 8 9 3 3 16 16 20 10 20 11 20 12 20 13 20 14 20 10 20 11 20 12 20 13 20 14 20 15 20 15 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20 0 20 20

Source: Knight Frank Source: Knight Frank

TABLE 8 TABLE 9 Relevant industrial transaction Prime rental and service charge ranges

TENANT AREA PROPERTY TRANSACTION TYPE RENT REST (SQ M) (€/sq m/ BUCHAREST OF THE month) COUNTRY

Carrefour 75,000 P3 Bucharest Logistic Park Renewal & Pre-lease Logistics 4.00–4.20 3.80–4.00 (<3,000 sq m) € € Yazaki 29,000 WDP Braila Expansion Logistics (3,000 3.75–4.00 3.50–3.80 –10,000 sq m) € € Decathlon 28,000 WDP Bucharest Pre-lease Logistics €3.30–3.75 €3.00–3.50 eMag 25,000 Ruukki Building Renewal (>10,000 sq m) Manufacturing €3.50–4.25 €3.50–4.00 OTZ Logistics 15,000 CTPark Bucharest West Pre-lease Service charge €0.50–0.95

Source: Knight Frank Source: Knight Frank

16 17 ROMANIA MARKET OVERVIEW 2016–2017

Exclusive City Center. This project Prima Casa, the loan instalments are some owners decreasing their prices RESIDENTIAL MARKET is the company’s second residential equal to, or sometimes less than, quite substantially, this will influence the HIGHLIGHTS development, as previously it has been monthly rents. market for the upcoming years. mainly active in the office sector. Premio Projects that had stagnated or been In H2 2016, more corporations requested Impact, one of the largest residential Exclusive City Center will include 32 It takes approximately 10 years Supply left unfinished because of the crisis are apartments in residential parks, rather developers in the Bucharest market, apartments with 46 parking places for a typical Bucharester to buy being now bought by developers in order than hotels, for short-term expat 2016 was the best year in terms of sold over 560 apartments in Greenfield spread across two buildings of eight a new two bedroom apartment, to be finalized. Some examples of this relocations (6–9 months). residential market performance in the (Baneasa) in 2016, with a total of 433 and six floors. In 2016, the Cosmopolis considering the medium net salary are in the northern part of the capital past 10 years, continuing a trend that contracts and 130 pre-contracts. project brought to the market in the capital and the average (Pipera, Barbu Vacarescu) and this began in 2015, when the market showed The same developer is currently additional 600 units, while Anchor square meter price of a new indicates an increased appetite for the clear signs of revival. This was based on expanding the project with 39 block Group delivered a new building in their Forecast apartment. the number of new deliveries, stabilizing units in the Platanilor neighborhood, mid-market and Prima Casa segments. already-successful development, InCity We expect to see prices increase in prices and very good financing solutions. totalling over 900 apartments with two, Residence. The new building consists the mid-market segment, due to wage The enactment of the Commissioning three and four bedrooms, half of which There were approximately 10,000 of 18 levels and will offer 12 types of growth and general improvements in payment law (Legea darii in plata) will be delivered this spring and the residential transactions for new apartments from studios to triplex and Prices the economy, but also because those helped to significantly increase demand rest by the end of 2017. penthouses. Morad Group delivered apartments in 2016 in Bucharest Prices started to pick up in Bucharest, who were the first to buy apartments for Prima Casa loans, and 2016 was buildings 3 and 4 of the Onix Residence and surrounding areas. One United Properties will deliver especially for old apartments, although through the Prima Casa scheme can a record year since the scheme’s in 2016, bringing the total number of a new luxury residential complex located prices for new apartments were already sell these units and may be in a commencement in 2009. Even though apartments to 430. In H1 2017 the same in the Charles de Gaulle area, on the relatively stable at €800–1,000/usable position to upgrade to better properties. most banks registered a decrease in the developer is expected to deliver the fifth edge of the Primaverii neighborhood. sq m for mass market apartments The announced Prima Casa amount for number of mortgages, because of the building of the project. Gafencu 49, The project, named One Charles de and €1,000–1,700/usable sq m for 2017 is 2 billion Lei. aforementioned law, they revised their a landmark project comprising 90 Gaulle, comprises two buildings with mid-market apartments. Regional strategies towards the end of the year, apartments and 210 parking places Regional markets are expected to a total of 33 apartments, on a land plot markets also experienced price as the law did not have the very negative designed to offer the highest standards experience growth in both deliveries of 8,000 sq m. The living space will be growth with Cluj Napoca currently side effects that some had expected. of quality and facilities, is expected and prices, with Cluj Napoca, Timisoara, 4,000 sq m and the delivery is scheduled being the most expensive market for Constanta, Iasi and Brasov leading The apartment supply in Bucharest to be delivered in H1 2017. for the second half of 2017. The project new apartments. Sibiu, Constanta these trends. Lettings in Bucharest for has decreased to 7,000–8,000 units, will be a green one with a high level of and Brasov each had over 1,500 new 2017 are not expected to show a notable 35% lower than in 2015, and most of energy efficiency. One United Properties apartments delivered in 2016, while Iasi, increase compared with 2016. this is represented by projects finalized also began work last summer on One Demand Timisoara, Oradea and Craiova all had before 2015. There was a 20% increase Herastrau Park, a project that will bring over 750 apartments delivered. During 2016 there was a record number in deliveries in 2016; however, an even to the market 106 new apartments. of transactions on the residential higher number of apartments had The development is located on Nicolae market, with developers adapting well been announced by developers for the Caramfil street and will be delivered in to market demand. year, but almost 10% of these were March 2017. The same developer has Corporate not delivered due to miscalculations announced a new project, to be started Most demand is still generated through Residential Lettings by developers, decreasing demand at the beginning of 2017, One Herastrau the Prima Casa program, for mass market Although rental prices remained broadly because of Legea darii in plata and Towers, which will be delivered in H2 dwellings, however due to economic stable in 2016, landlords showed the rapid exhaustion of the first Prima 2019. Previous projects of the developer improvements and wage growth, there is greater flexibility towards tenants in Casa funds, which created a material include: Madrigal Residence and One also increased demand in the mid-market the second half of the year, and a shortage for developers, especially at Floreasca Lake totalling 82 apartments. segment. In addition, in 2016 there was premium 3-bedroom apartment in a the beginning of the year. a clear switch of preferences towards Belvedere Development will start residential complex that rented for The increased buying power of residents new apartments rather than older ones. selling at the beginning of 2017 the €2,200/month in H1 2016 decreased encouraged the delivery of more mid- Second-hand apartments still account apartments of the largest residential to €1,800–2,200/month in H2 2016. for the majority of transactions, as their market apartments, with approximately project in the Aviatiei, Barbu Vacarescu We are expecting the same trend to locations and general infrastructure are 5,000 units delivered, but there was area, Belvedere Residences. The first continue at the beginning of 2017, also an increase on the premium/high- often preferable to new apartments and phase of the project, consisting of 238 especially for properties that have been end market, with approximately 1,000 they are generally more affordable. apartments in two buildings, is planned unoccupied since 2016. new apartments. Most of the capital’s to be delivered at the beginning of 2018. Tenant budgets for projects completed areas have the potential to absorb new Among residential owners, the most The project is right next to the Pipera in 2016 varied between €450–600/month residential developments, but the largest preferred clients are those with metro station and it will bring to the for a 2-bedroom apartment in Baneasa volumes of new projects are in the diplomatic status and expats working market a total of 1,556 apartments of to €3,500–5,000/month for a 4 or Center-West (Grozavesti, Politehnica) and for companies in mid-to-top level different types in 13 buildings: double 5-bedroom apartment in Primaverii Northern/Semi-central areas (Barbu- management positions. In order to studios, 2-bedrooms and 3-bedrooms. or Dorobanti Capitale. Vacarescu, Pipera Sud), as more people attract such clients, owners are willing are moving to these neighborhoods in Several other projects, both larger and There is an increasing trend towards to be more flexible than would otherwise order to be close to their workplaces. smaller, were delivered in Bucharest: acquisitions, with more people be the case. Multinational companies The Southern and Central areas are also for example, Nusco Group delivered choosing to buy apartments instead of and embassies will calculate their active, while the East is the least dynamic a luxury residential compound in renting them, taking into consideration annual rent budgets based on the for new deliveries. downtown Bucharest, named Premio that in many cases, especially through previous years’ contracts and, with

18 19 ROMANIA MARKET OVERVIEW 2016–2017

HIGHLIGHTS PROJECT PROPERTY TAXES MANAGEMENT – HIGHLIGHTS FOR 2017 Office space goes back to nature, where human beings feel by Alexandra Smedoiu, CFA, Director Plants as a must in the office most at home and can reach Overview PricewaterhouseCoopers Romania their most efficient and effective One doesn’t usually notice plants in an states: natural light, bright colors, The trend of feeling at home in the office office, but as soon as they are taken away, not only are the visually pleasing effects intimacy, feeling the sun, seeing is reaching new heights as the workplace While 2016 brought significant changes and consultancy as its main activity) repaid to shareholders via dividends removed, but an abundance of other green plants (both inside and turns simultaneously to nature and to the tax legislation applicable to and to the risk of reclassification into with a 5% tax cost. As of 1 February benefits are also lost. Plants protect staff outside windows) all adapted to technology. Companies want to meet the real estate investments (including VAT dependent activity, assimilated to salary. 2017, dividend income is not subject to against the effects of spending a lot of the local necessities. needs of their employees by providing a simplification measures and changes In this case, one needs to carefully a health contribution (5.5%), assuming time indoors and act like natural mini air space that is fresh and healthy, but also to the calculation of property tax rates assess the specifics of each case to the individual has other income. The 5% conditioners. There have been increased very practical for the tech-savvy times in depending on the nature and usage make an informed decision. dividend tax rate is likely to remain in requests for greenery and we expect this which we are living; a rather productive of a property), we try to summarise force for the near foreseeable future. trend to grow in the upcoming year. Plants In terms of VAT, 2017 brings a change well-being approach. below additional provisions applicable help the acoustics of office space, are in the registration/re-registration process Also, sale of property by individuals from 2017 that may impact investment inexpensive, low-maintenance and help for VAT payers, which is currently quite becomes tax exempt as of 2017 for decisions. employees to reduce stress and become burdensome. The detailed form ‘088’ properties below the RON equivalent happier. It’s no surprise to us that even the To start with, one needs to mention the (i.e. statement regarding commercial of €100,000. abolition of construction tax (1% of Color of the Year follows the same path. activity intention) has been abolished. Watch out for the following potential gross book value of constructions other In essence however, the procedure Sustainable carpets developments in 2017: than buildings – a tax specific to certain remains the same for non-resident Office carpet patterns are inspired by capital intensive industries), a measure shareholders and administrators Potential exemption from building tax nature – sea waves, grass with earth – and that was already announced in 2016 and (i.e. provision of data regarding foreign for developers until the first sale of they are made out of recyclable materials we are happy it is being confirmed in income etc.). Also, the VAT rate has buildings. instead of petrochemical compounds. practice. been decreased to 19%, a measure This translates into a healthier environment, Administrative reclassification of cities impacting real estate transactions which because the carpet is no longer glued The wider macro-economic context, within Romania, with consequences do not already benefit from the VAT with toxic adhesives, plus it retains dust, in conjunction with the increase in the on building tax values for residential allergens and bacteria much better in minimum wage as of 2017, will cause reverse charge mechanism (supply of properties. buildings and certain types of land), one place so that they can be more easily the micro-company tax regime to Potential new substance requirements such as construction costs. removed. Patterns also have decorative have more far-reaching applicability. for foreign holding companies, rhythm breaks which give them a more In essence, small companies (with a Other factors influencing the real estate as a result of the larger context of natural and human look, it brings the turnover of less than €500,000 per year) market include a controversial new law greater fiscal transparency within imperfections of nature to office interiors. pay a 1% turnover tax instead of 16% enacted in 2016 which allows debtors the European Union. tax on corporate profits. The 1% tax is Integrated Technology in mortgage agreements with banks dependent on a company having at least Potential renegotiation of the double tax Wireless charging devices on desks, to return the property to the bank as one employee. We note that the turnover treaty with US (affecting US investors). office furniture with built-in power a means to repay their debts in kind. tax regime becomes compulsory, which Potential introduction of legislation for adapters and multimedia capabilities The Constitutional Court ruled at the may impact companies that are in the real estate funds/real estate investment are going to be the norm. Another end of 2016 that the payment in kind investment stage and accumulating trusts (legislation draft in progress). logical trend in 2017 is smart modular law can be applied retroactively to losses, as they would still have to pay furniture that allows mobility or provides contracts already signed, but that the tax on their revenues, even if they multi-usage of a space. right to repay the debt in kind has to have not started to generate profits. be appreciated by its merits on a case To opt out of this regime, the company Designing strategies by case basis; the mere decrease in needs to increase its share capital Companies request and acknowledge value of the mortgaged property does the need and the added value of strategic from the minimum 200 RON to the EUR not constitute sufficient evidence of project management when it comes to equivalent of 10,000. Opting in and hardship and the bank is thus not reshaping a new or old office space. Needs out of the turnover tax regime should obliged to accept the payment in kind. are always changing and the challenge is allow the company to carry forward its This decision is likely to influence the to adapt those needs to the brand values tax losses from the previous 7 years offer on the residential market. of the company, while integrating the latest (even if the count was interrupted by the developments, for the best market costs applicability of a compulsory turnover In terms of real estate investment and intelligent planning. A well thought-out tax regime). Note that the turnover tax structures for new investors, the office space brings results, even in the regime, although it may be more cost most common structure remains the P&Ls of companies, which is a satisfying efficient for entrepreneurs, is still subject special purpose vehicle (a limited result of the strategic and focused efforts to activity restrictions (a micro-company liability company owning the specific towards this objective. cannot have general management real estate property). Cash can be

20 21 NEW REGULATIONS TO IMPROVE CMS_LawTQUALITYax_CMYK_19-27.eps AND DISCIPLINE FORECAST IN CONSTRUCTION SECTOR 2017 by Roxana Fratila, Managing Associate, CMS Cameron McKenna

In an effort to reduce the bureaucracy Increased sanctions and transparency will now be valid for up to 24 months, of the construction permitting process requirements instead of 12 months. and support both investors and local Fines for violations of the construction The State Inspectorate in Construction now authorities, the Romanian parliament permitting law were significantly increased. has the capacity to pursue proceedings enacted Law no. 197/2016, which Public authorities have until December 2019 against illegal planning or construction came into effect on 4 November to procure the necessary capabilities for permits in court. Previously, only the 2016 and the government issued receiving documentation for the issuance prefect had such authority, which often Government Emergency Ordinance of planning certificates and building permits led to abuses. Moreover, the Inspectorate no. 100/2016, which came into effect on online. To fight corruption, guidelines for is obliged to stop the execution of OFFICE MARKET 27 December 2016. planning and land-use planning policies construction work that does not meet legal must be made public knowledge. It is forecast that 350,000 sq m in A number of useful amendments from requirements. 16 projects will be delivered to the these new regulations are expected to New powers of the State Inspectorate in Constructions The improvements are part of a broader market in 2017–2018 in Bucharest, overcome the delays and hindrances that To help investment, the concept of “tacit legislative package launched in 2016, 50% of the deliveries announced for have plagued the construction permitting consent” has been eliminated. Now, if the which aims to increase the quality of 2017 are in the Center�West. RETAIL MARKET process in Romania. Below, the most issuers of building permits and underlying the construction market in Romania. notable changes concerning: In 2017, the focus will be directed to endorsements do not respond by the We expect further changes, at least to secondary and tertiary cities where legal deadlines, the State Inspectorate Government Emergency Ordinance no. Constructions INVESTMENT MARKET there are either no modern retail in Construction has the authority to fine 100/2016 upon its approval by the recently In urgent cases, upon justified request, schemes or an undersupply construction permits can be issued within them. Furthermore, construction permits elected parliament. The increased activity in the of space while developers are 15 days, instead of the usual 30 day term. Romanian real estate investment turning to retail park projects, which market indicates the growing Before the completion of construction are more suited to smaller cities. confidence in Romania’s works, investors can now request macroeconomic environment. a certificate attesting the stage of execution and current legal status of the construction. The certificate can be RESIDENTIAL MARKET used to register the construction with the LAND MARKET Land Registry, thus correcting a major We expect to see prices increase Taking into consideration the shortcoming of the previous provisions in the mid�market segment, deliveries to the office sector, and which did not allow for the registration due to wage growth and general also the fact that companies need of unfinished constructions. This change improvements in the economy. to expand in secondary cities, office will make it easier for investors to sell or developers will look to buy land and mortgage a partially constructed building. develop in cities where their tenants Zoning want to expand and open new offices, INDUSTRIAL MARKET Zoning plans (PUZs) aimed to change such as Timisoara, Cluj and Iasi. Assuming that the positive the urbanism regime for only one land economic conditions prevail, plot located within city borders will be we expect that demand for allowed if the land plot is surrounded by industrial space will continue the at least three public roads or other natural same positive trend as in 2016. environment elements. This is intended to restrain the attempts to pass PUZs for individual small plots and rather allow it only if documented for larger areas.

Approval of PUZs for land outside of city borders has been limited to parcels of at least 5,000 sq. m. which are already adjacent to land within city borders. COMMERCIAL BRIEFING For the latest news, views and analysis of the commercial property market, visit knightfrankblog.com/commercial-briefing/

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