Romania Market Report
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year challenge Romania Real Estate Market Overview H1 2019 #10yearchallenge TIMELINE few highlights Project Management of UiPath offices in Bucharest. Pre-lease of PwC, 8,000 sq m, in Ana Tower. Photograph by Central Cecil Chubb buys 2015 Aerophoto Co., Ltd., courtesy National Geographic Stonehenge through Office lease of Stefanini, Pre-lease of Genpact, Knight Frank & Rutley 7,000 sq m, 22,000 sq m in Hermes for £6,600 as a present in Globalworth Campus. Business Campus III. for his wife. She gifts 2009 2019 Sale of @Expo Campus it to the nation three 2013 Pre-lease of Oracle, land plot (11,600 sq m) years later. Knight Frank enters 20,000 sq m 10 year CDG Plaza to Atenor. the Romanian market in Oregon Park. anniversary (11,300 sq m) fully through The Advisers, 2011 Knight Frank leased – exclusive Office lease of Oracle, firm set-up by Romania. Launch of Project office leasing 10,400 sq m, Horatiu Florescu. 1915 Management Division. mandate. in Sky Tower. 2017 1896 1922 2010 2012 2014 2016 2018 Knight Frank & Rutley The firm sells Winston ORACLE’s pre-lease Floreasca Park Biggest profit in the Residential Sales Team is founded as a valuations, Churchill’s house of 25,000 sq m in (37,000 sq m) fully market out of all real estate is set-up. surveying and auctions and sells Chartwell to him. Floreasca Park. leased – exclusive consultancy firms. The Shard, Wikipedia Shard, The Expands the European business. office mandate. Pre-lease of BCR, network with the AFI Park I, II, III. 17,000 sq m, in The Bridge. opening of the – exclusive office Hungarian office, Hermes Business Campus Knight Frank is appointed mandate. managed by Knight (72,000 sq m) fully leased on London’s new Frank Romania. skyscraper, The Shard, – exclusive office leasing set to be the tallest mandate. Oregon Park landmark building in Europe. (75,000 sq m) fully Sale of Dacia One’s land leased – exclusive office plot (5,000 sq m) to Atenor. Sale of Floreasca Park’s leasing mandate. land plot (20,000 sq m) to Portland Trust. The Landmark (21,000 sq m) fully leased – exclusive office leasing mandate. Expansion of Deloitte Technology (reaching a total of ~10,000 sq m) in Oregon Park. Office lease of 70% of The Mark (Deloitte – ~9,000 sq m, WPP – 6,000 sq m, Dentons – 1,100 sq m, eSky – 800 sq m). 3 | KNIGHTFRANK.COM.RO During H1 2019 the Romanian economy In other words, inflation would gradually THE GLOBAL TRADE TENSIONS grew by 4.7% YoY. converge towards the target of the central bank in the following quarters, The performance of the construction an evolution influenced by the end of AND THE DOMESTIC TWIN DEFICITS sector and the significant increase the post-crisis cycle (global, European) of the FDIs during January–June and the expected rebalancing of the Dr. Andrei Radulescu confirm the relaunch of the fixed domestic policy-mix. Director Macroeconomic Analysis investments, despite the deterioration Banca Transilvania of the macroeconomic climate in The deceleration of inflation Euroland and the widening twin deficits corroborated with the monetary policy in Romania (in H1 their weight in GDP The global economic growth In Romania the YoY dynamics of the outlook in US, Euroland and CEE are stood at the highest level since 2010). pace slightly improved in July, as GDP decelerated from 5% in Q1 to factors that express a high probability the acceleration of the services 4.4% in Q2 (the weakest pace since Q4 At the same time, the private for the consolidation of the reference counterbalanced the decline of the 2018), according to the flash estimate consumption continued to increase by interest rate in Romania in the following manufacturing for the third month in a of the National Institute of Statistics a strong pace in H1 2019, an evolution quarters. row, given the intensifying economic (NIS). supported by the positive climate However, the central bank would be tensions (US–China). across labour and credit markets. In our view this evolution was influenced active with other instruments to counter However, the PMI Composite indicator by the foreign factors (the global trade Furthermore, the public consumption the inflationary pressures and the computed by JPMorgan and Markit tensions and the negative output gap was recently supported by the challenges in terms of macro-financial Economics continued close to the in Euroland) and domestic issues (the expansionary fiscal and income stability, in our view. lowest level since 2016, as can be challenges in terms of macroeconomic policies. In this context, we expect the central noticed in the following chart. equilibria). On the other hand, the net foreign bank to take into account several GLOBAL PMI COMPOSITE INDICATOR ROMANIAN GDP demand deteriorated during January– factors for the calibration of the (POINTS) (%, YoY) June, given the global trade tensions monetary policy in the short-run: and the unfavourable dynamics of the the evolution of the inflationary 56 10 international competitiveness. expectations, the dynamics of the 55 8 fixed investments, the twin deficits and According to the core macroeconomic 54 6 the global/European/regional macro- scenario of Banca Transylvania the 53 4 THE POTENTIAL OUTPUT ANNUAL AVERAGE INFLATION financial climate. 52 2 Romanian economy would increase (%, YoY) (%) 51 0 by YoY paces of 3.8% in 2019, 3.3% in Last, but not least, we forecast an 50 -2 2020 and 3.7% in 2021. 7 BG CZ HU PO RO SK 7 increase of the sovereign financing 49 -4 6 6 costs and the gradual appreciation of 48 -6 In this scenario the private 5 5 the €/RON in the following quarters. consumption may advance YoY by 4 2Q11 4Q11 2Q17 4Q17 2Q12 2Q13 2Q15 2Q19 2Q16 2Q14 2Q18 4Q12 4Q13 4Q15 2Q10 4Q16 4Q14 4Q18 4Q10 Jul 17 Jul 13 Jul 15 4 Jul 19 Jul 16 Jul 14 Jul 18 3 Mar 17 Nov 17 Mar 15 Mar 19 Mar 16 Mar 14 Nov 13 Mar 18 Nov 15 Nov 16 Nov Nov 14 Nov 18 6.3% in 2019, 5% in 2020 and 5.2% in For the yield on 10YR TBonds (annual 2021, an evolution determined by the 3 2 average) we see an increase from 4.7% Bloomberg National Institute of Statistics (NIS) 1 Source: Source: low level of the unemployment rate and 2 in 2018 to 4.8% in 2019 and 5.1% in 0 the affordable level of the real financing 2020, given the challenges in terms of 1 -1 costs. According to the recent forecasts of the According to the supply-side analysis 0 -2 public finance (the increasing risks to International Monetary Fund (IMF) the the economic slowdown during Q2 was breach the Stability and Growth Pact). 2011 2011 2017 2017 2012 2012 2013 2013 2021 2015 2015 2019 2016 2016 2014 2014 2018 2018 2010 2010 At the same time, we forecast the 2001 2007 2020 2002 2003 2005 2009 2009 2006 2008 2004 2000 dynamics of the global economy would determined by the deterioration of the increase of the gross fixed capital However, an adjustment to 4.7% is slowdown from 3.6% in 2018 to 3.2% in retail sales and manufacturing. formation by 3.6% YoY on average expected in 2021. BT, using Eurostat database BT, using Eurostat database 2019, but may accelerate to 3.5% in 2020. during 2019–2021, given the Source: Source: On the one hand, the retail sales (a As regards the €/RON (annual average) The US GDP grew by 2.3% YoY in Q2 positive credit market climate, the proxy for the private consumption, the investments in infrastructure, the of YoY dynamics), due to the end of the new forecasts indicate a gradual 2019 (the slowest pace since 2017), organisation of the Euro 2020 and main component of the GDP) grew incorporation of the Digital Revolution the global post-crisis cycle and the increase, from 4.65 in 2018 to 4.75 in given the deceleration of the fixed the mid-run favourable outlook for the by only 5.4% YoY in Q2 (decelerating and the increase of R&D) and the domestic factors (a prudent attitude of 2019, 4.81 in 2020 and 4.88 in 2021, a investments and the deterioration of Romanian economy (also supported from 8.5% YoY in Q1), the weakest adjustment of the twin deficits (a crucial the consumers, the gradual increase scenario supported by the high level the net foreign demand. In H1 2019 the by the prospects to enter OECD and pace since Q3 2018. This evolution aspect for the macro-financial stability). of the real financing costs and the of the twin deficits (divergent trend largest economy of the world climbed Euroland). corroborated with the upward trend prospects for the depreciation of the compared with the countries in the by 2.5% YoY. For the public consumption we forecast for the real disposable income of the region) and the slow dynamics of the In this context we emphasize that the a deceleration from 2% YoY in 2019 to RON real effective exchange rate). On the other hand, the output gap population and the affordable level YoY dynamics of potential output is structural reforms. 1.4% YoY in 2020 and 1.3% YoY in 2021, For the annual average rate of continued negative in the Eurozone (the of the real financing costs express a higher in Romania compared with given the challenges in terms of public unemployment we forecast an increase main economic partner of Romania), prudent attitude of the consumers. the other EU countries in the region, Among the main risk factors for the finance (the widening of the budget from 4.1% in 2019 (the minimum since for the third quarter in a row in Q2.