year challenge

Romania Real Estate Market Overview H1 2019 #10yearchallenge TIMELINE few highlights

Project Management of UiPath offices in .

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 . 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 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. The according to our recent econometric evolution of the Romanian economy in Furthermore, the domestic industry deficit). early 1990s) to 4.2% in 2020 and 4.6% GDP rose by 0.2% QoQ and by 1.1% estimates. the short and mid-run we mention: the YoY past quarter, according to the contracted by 1.7% YoY in Q2 (the In our view the Administration would in 2021, as we expect the output gap to global and European macro-financial preliminary estimates of Eurostat. most severe decline since 2009), implement fiscal consolidation measures turn negative. In other words, the growth pace in dynamics (including the US-China given the global trade tensions and the in the short-run, in order to keep the The deceleration process continued in Romania would be higher compared Crossing to the financial side of the economic war and Brexit); the domestic deceleration across Eurozone. budget deficit below 3% of GDP. China in 2Q, the GDP advanced by only with the countries in the region economy we revised the forecasts policy-mix in an electoral context and 6.2% YoY (the slowest pace of the past However, the constructions during the following cycle, a scenario As regards the net foreign demand for the average annual inflation (HICP the deterioration of macroeconomic 27 years), an evolution influenced by the accelerated from 11.7% YoY in Q1 to dependent on the acceleration of we expect the narrowing of the gap basis), to 4% in 2019, 3.1% in 2020 and equilibria; the global and regional geo- global trade tensions. 31.3% YoY in Q2. the structural reforms (including between exports and imports (in terms 3.4% in 2021. political climate.

4 | ROMANIA MARKET OVERVIEW 5 | KNIGHTFRANK.COM.RO FORECAST projects like One Park OFFICE MARKET By the end of 2019, it is expected the phase I (33,000 sq m), AFI Tech Park more than 178,000 sq m of stock to phases II and III (20,000 sq m and #10yearchallenge be delivered across 12 projects in the 14,000 sq m respectively), Campus Our very survival depends on our Bucharest office market. Center West 6.3 building, The Light phase ability to stay awake, to adjust to new will be the main supply generator, II (24,700 sq m), etc. Noteworthy ideas, to remain vigilant and to face with 35% of the class A office space schemes in other areas include the challenge of change. planned for delivery, followed by @Expo Campus (49,000 sq m), MARTIN LUTHER KING JR. Presei Libere Square with 22%. If Fabrica de Paine (45,000 sq m), all office buildings scheduled for Ana Tower (32,000 sq m), Globalworth completion are delivered, total stock Square (29,700 sq m), etc. OVERVIEW of class A&B will exceed the threshold New supply will bring total stock in of 3 million sq m. The first half of 2019 welcomed a Center West to 850,000 sq m, in considerable improvement in the In the next three years there are Calea Floreasca/Barbu Vacarescu to occupier’s sentiment, registering a take expectations to see 915,000 sq 625,000 sq m, whereas Center/Center up of 196,000 sq m – compared with its m being delivered on the office South area jump directly to top three in correspondent in 2018 (131,000 sq m). market. Center West area is hosting term of stock per area with a 13% share Prime rent level remained stable at 35% of the future deliveries, with from the total stock. 18.5 €/sq m/month.

Total stock on the Bucharest office PRIME HEADLINE RENTS (€/SQ M/MONTH) market reached 2.93 mil sq m at the end of H1 2019 for class A&B office buildings. CBD 16–18 East 11–13 Presei Libere Square 14–16 Dimitrie Pompeiu 11–13 SUPPLY Calea Floreasca/ 14–16 West 11–12 The Bucharest office market registered Barbu Vacarescu in its first six months a large amount of Center West 13–15 South 10–11 deliveries (191,000 sq m), overcoming Baneasa 12–14 8–10 deliveries per entire 2018 with 14%. 68% of the supply was delivered Knight Frank in the center-west and west area, Source: mainly from Q1 deliveries, Renault Business Connected developed by last year (108), while the average size of This share exceeded 2018, when the MODERN OFFICE STOCK ANNUAL EVOLUTION (SQ M) Globalworth being the largest one transactions increased to 1,700 sq m sector accounted for a 35% share. (47,000 sq m). Among the schemes (from 1,250 sq m in 2018). In terms of size, Eight of the top ten transactions were delivered in Q2 2019 Business Garden, 3,000,000 Class A Class B larger transactions of over 5,000 sq m deals in this sector, and there was a developed by Vastint, is the largest were again dominant, their total area diverse range of transaction types (41,300 sq m), followed by the Oregon 2,500,000 accounting for a 48% share of the including pre-leases and renewals. Park C (24,600 sq m) and Timpuri Noi take-up. In terms of the number of Square third building (20,000 sq m). The retail came in second with 9% of 2,000,000 transactions, most numerous were the the total demand, followed by finance In terms of stock by submarkets, ones below 1,000 sq m, which accounted and banking sector and Manufacturing 1,500,000 at the end of H1 2019, Center West for almost 58% of the total take-up. Industrial&Energy with 8% each. area comes out on top with a total 1,000,000 modern office stock of approx. In terms of submarket activity, Center RENTS 466,000 sq m, followed closely by Business District area was the market 500,000 Rents were similar to previous years. Calea Floreasca/Barbu Vacarescu with leader, with 22% of the total leasing Prime headline rents remained 461,600 sq m and Central Business activity. Center/Center South and 0 unchanged and were reported at

District with approx. 442,000 sq m. Center West came next with 21% and H1 around €18–18.50/sq m/month. 2011 2017 2012 2013 2015 2019 2014 2016 2018 respectively 15%. 2010 DEMAND Service charges have followed the Knight Frank In Bucharest’s office sector there was The relocation and new demand activity same stable trend, ranging between Source: a solid performance in the last few was of particular significance, reaching €3.50–4.50/sq m/month. months, proved by the dynamic take-up a volume of 78,000 sq m in H1 (40% DEMAND BY LEASED AREA DEMAND BY NUMBER OF TRANSACTIONS standing already at 60% of the entire of the total take up). Renegotiations/ VACANCY H1 2019 (%) H1 2019 (%) last year level. Renewals came second with a 27% The vacancy rate for Class A and B market share while pre-leases came offices witnessed a slight increase to Total take-up in Bucharest reached >5,000 sq m 48 <1,000 sq m 58 third with 25% of the total leasing 9.7%, due to the substantial amount of 196,000 sq m for class A&B office activity. new supply delivered during H1 2019. 1,000–3,000 sq m 24 1,000–3,000 sq m 28 space. This volume already represents 3,000–5,000 sq m 14 >5,000 sq m 7 60% out of the total take up in 2018. As expected, the IT&C sector covered Despite continuing strong demand, The total number of transactions most of the demand of the market, significant supply additions are <1,000 sq m 14 3,000–5,000 sq m 7 concluded in the first six months (110) occupying approximately 106,000 sq m expected to lead to an increase in the was comparable to the same period of (54% of the entire take up in H1 2019). vacancy rate over the coming months. Source: Knight Frank Source: Knight Frank

6 | ROMANIA MARKET OVERVIEW 7 | KNIGHTFRANK.COM.RO STOCK BY SUBMARKET DELIVERIES BY SUBMARKET MAIN OFFICE HUBS IN BUCHAREST A+B H1 2019 (%) 2020–2022 (%) H1 2019 Center West 16 Center West 35 2. PIPERA Calea Floreasca/ 22 16 Presei Libere Square Barbu Vacarescu Stock 187,000 sq m Center & Center South 16 1. BANEASA CBD 15 Headline rent €8−10/sq m/month Calea Floreasca/ 15 203,000 sq m Dimitrie Pompeiu 14 Barbu Vacarescu Stock €12−14/sq m/month Center & Center South 13 West 4 Headline rent Baneasa 7 CBD 3 3. DIMITRIE POMPEIU

Pipera 6 Baneasa 2 Stock 408,000 sq m Presei Libere Square 5 Dimitrie Pompeiu 2 Headline rent €11−13/sq m/month West 4 East 1 East 2 Pipera 0 Straulesti 2 Straulesti 0 4. CF/BV 1 South 0 South 0 Stock 461,000 sq m Headline rent €14−16/sq m/month Source: Knight Frank Source: Knight Frank

2 DEMAND BY TENANT ACTIVITY SECTOR DEMAND BY SUBMARKET H1 2019 (%) H1 2019 (%) 3 6 IT & Communication 54 CBD 22 4 Retail 9 Center & Center South 21 Finance/Banking/ Center West 15 8 Insurance Calea Floreasca/ 10 Manufacturing Industrial Barbu Vacarescu 5 8 & Energy West 8 Other 6 Pipera 8 Professional services 5 Presei Libere Square 7 Consumer Services 4 & Leisure Dimitrie Pompeiu 6 9 8 11 Medical & Pharma 3 Baneasa 2 7 FMCG 1 East 0 Transport & Cargo 1 Construction 1 & Real Estate 10 5. CBD Source: Knight Frank Source: Knight Frank

Stock 442,000 sq m 6. PRESEI LIBERE SQUARE Headline rent €16−18/sq m/month DEMAND BY TYPE OF TRANSACTION SUPPLY VS DEMAND 136,000 sq m H1 2019 (%) H1 2019 (SQ M) Stock Headline rent €14−16/sq m/month 9. EAST Relocation 40 350,000 Supply Demand 71,000 sq m & New Demand Stock Headline rent €11−13/sq m/month Renegotiation/Renewal 27 300,000 7. WEST

Pre-lease 25 250,000 Stock 123,000 sq m Expansion 8 200,000 Headline rent €11−12/sq m/month Disposal 0 150,000

100,000 8. CENTER WEST 50,000 Stock 466,000 sq m 0 €13−15/sq m/month Headline rent 10. SOUTH H1 Knight Frank 2011 2017 2012 2013 2015 2019 2014 2016 2018 2010 Stock 5,000 sq m €10−11/sq m/month Source: Knight Frank Source: Knight Frank Headline rent Source:

8 | ROMANIA MARKET OVERVIEW 9 | KNIGHTFRANK.COM.RO large transaction reported was the CAPITAL MARKETS acquisition of Prime Kapital’s stake in 9 retail developments by MAS Real Estate for more than €110 million.

In the first half of 2019 there was a significant volume The industrial and logistics sector of transactions reported on the local market rather low volumes compared with which reached an overall level of almost €375 million other periods with only one transaction representing an increase of approximately 5% announced in this period (established compared with the first half of 2018. player CTP acquired A1 Bucharest Park from Vabeld Group for an estimate of €40 million). Although this segment only accounted for OVERVIEW Retail assets are still of high interest almost 11 % of the total investment Overall, H1 2019 relied mainly on the to existing and new investors which volume, the interest in this segment office and retail segments while the are likely to also be looking for new remains very high even though on industrial sector has not reported a opportunities in the following period. a short term it is not expected to significant activity. A significant part Nevertheless, in 2019 established report significant transactions as of the total transactions volume was developers/investors were also active most of the existing owners are and the additional liquidity provided #10yearchallenge generated from already established more interested in further expanding I don’t run away from a challenge because from the transaction between Prime players (Paval brothers with their their portfolio and consequently it I am afraid. Instead, I run towards it because Kapital and MAS Real Estate will acquisition of The Office project will likely the scarcity of available the only way to escape fear is to trample it allow further development potential. in Cluj and MAS Real Estate with products for sale will continue. beneath your foot. NADIA COMANECI their acquisition of Prime Kapital’s Also the industrial and logistics Considering the ongoing transactions share in 9 retail parks) – these segment maintains a strong growth which are likely to close by the end two transactions accounted for potential and there are a significant of the year it is expected that the slightly more than €240 million number of developments which will be total investment volumes in 2019 will (almost 65% of the total market). delivered in the following period hence be above €1 billion which will mean The second half of 2019 also it is likely that in the following years that we will see the largest volume of announces several other transactions, we will witness a significant number transactions in the past 10 years. with new and existing buyers showing of transactions in this segment as interest in the Romanian market as long as there will be a growing interest YIELDS demand continues to be boosted by from large institutional buyers. Given the only slightly improved levels the favorable economic environment PRIME YIELDS TRANSACTION DISTRIBUTION BY PROPERTY TYPE of activity registered in the first part of players are actively looking for and very competitive risk adjusted DEMAND H1 2019 (%) H1 2019 (%) 2019 compared with 2018, yields have acquisitions thus sending positive returns but also by the high quality The total investment volume reported not registered a significant decline but signals to the overall market. 7.25 Office 54 of the products developed and in H1 2019 was almost of €375 million nevertheless the overall compression Office transacted on the market. Overall, which is almost 5% higher compared trend seems to be maintained and Therefore, the sentiment remains Retail 30 2019 is expected to confirm the with the volume reported in the we might witness a compression positive, and an improved upward trend in terms of investment market activity is still expected 7 same period of last year. in yields in the following years. Retail volumes with total volume expected over the coming years. Industrial 11 to break the €1 billion threshold The office segment was the main The gap between the local market 8.25 along with a very sensible yield driver in terms of volume with and the leading markets in the Demand was mainly generated by Industrial Hotels & Residential 5 compression which is expected transactions slightly exceeding region (Prague and Warsow) is still already established investors looking for in most of the market sectors. €200 million (more than 50% of the above 150–200 bps indicating that high quality income generating assets. Source: Knight Frank Source: Knight Frank total market volume). The largest a moderate yield compression SUPPLY transaction reported on the market might be expected towards the ROMANIA INVESTMENT TRANSACTION VOLUMES The level of supply was not was the acquisition of The Office end of the year or early in 2020, The total investment volume reached ANNUAL EVOLUTION (€MN) significant in terms of products project in Cluj which set a record especially in the office sector. almost €375 million in the first two sold or available for sale however in terms of acquisitions in regional quarters of 2019, with potential to reach the size of the available products cities as the total value was around FORECAST more than €1 billion by end of the year. 2000 increased significantly (the average €130 million. The Paval brothers who 2019 will likely be a record year in deal size amounted to €27 million, acquired the property from NEPI and terms of investment volumes. In Local capital accounted for more 1,500 lower compared with the first half the local developer Ovidiu Sandor the first two quarters there was an than 50% of the total activity but it of last year but higher compared have steadily increased their real increased activity in the Romanian is expected that the weight of foreign with the first half of 2017). estate holdings on the local market real estate investment market 1,000 capital will increase towards the and they appear to be interested in indicating the growing confidence The office segment is expected end of the year. other long term investments which will in Romania’s macroeconomic to provide a significant number of 500 provide additional liquidity and also a environment and real estate market. quality products although due to likely downward pressure on yields. the high demand for this product Also investor demand remained Moderate yield compression is 0 a lot of these products will most The retail sector also reported a focused on top quality assets and expected on short to medium term H1 2011

however the risk adjusted returns are 2017 2012 2013 2015 2019 2014 2016 2018 2010 likely be transacted as forward significant volume accounting for already established investors 2007 2005 2009 2006 2008 2004 purchases a trend that was identified slightly more than 30% of the total continued acquisitions while still attractive compared with other for a number of months already. investment volume. The single a significant number of new regional markets. Source: Knight Frank

10 | ROMANIA MARKET OVERVIEW 11 | KNIGHTFRANK.COM.RO PROJECTS ANNOUNCEDTO BE DELIVERED H2 2019 & 2020

TARGU MURES

Project Shopping City Targu Mures Developer NEPI 2020 ZALAU Estimated delivery GLA (sq m) 33,000 Project Zalau Value Center Developer Prime Kapital Estimated delivery H2 2019 GLA (sq m) 19,000

ZALAU SFANTU GHEORGHE

Project Sepsi Value Center Developer Prime Kapital Estimated delivery 2020 TARGU MURES GLA (sq m) 16,000

SFANTU GHEORGHE TIMISOARA SIBIU BRASOV BRASOV Project AFI Palace Brasov Developer AFI Europe Estimated delivery 2020 PLOIESTI GLA (sq m) 45,000 TIMISOARA TARGOVISTE Project Prima Shopping Center Developer Oasis Retail & Supernova SUPPLY RENTS 2020 Estimated delivery BUCHAREST RETAIL MARKET During the first half of this year there In the first six months of 2019, prime GLA (sq m) 10,000 SHOPPING CENTERS was a delivery of approx. 63,500 sq m rents for the leading schemes in three projects, all of them located remained relatively constant. For OVERVIEW outside Bucharest. All three were 100 sq m units, rents were around represented by extensions of existing €65–75/sq m/month in shopping In the first six months of 2019, the projects: Iulius Town in Timisoara centers in Bucharest and between modern retail stock in Romania (47,000 sq m), Shopping City Buzau €30–40/sq m/month throughout the increased by approx. 63,500 sq m SIBIU (6,000 sq m) and Shopping City Sibiu rest of the country, in secondary cities. while several major projects outside Project Festival Sibiu PLOIESTI (10,600 sq m). Bucharest remained in the pipeline for NEPI FORECAST Developer Ploiesti Value Center the next two years. H2 2019 Project Estimated delivery Prime Kapital DEMAND By the end of 2019 another 42,000 Developer GLA (sq m) H2 2019 The increase in consumption and Occupier demand in H1 2019 34,000 sq m will be opened in Estimated delivery 25,000 consumer confidence have provided a continued to be generated by Bucharest, in two projects: extension GLA (sq m) strong incentive for retailers to continue well-known food and fashion of Veranda (6,000 sq m) and DN 1 their expansion plans, especially in the brands. Continuing the trend of last Balotesti (28,000 sq m) developed by countryside where the deliveries were years, many new entries were also Prime Kapital. registered. TARGOVISTE registered in the first six months of The developers plan to put another Dambovita mall 2019: Babylon Style, Victoria’s Secret, 275,000 sq m on the map of the Project Prime Kapital Atelier Cologne, Topshop, Xiaomi Mi, Romanian malls in the next 18 months. Developer 2020 Freestyle Motion. Nearly 90% of the spaces scheduled Estimated delivery 33,000 to be delivered during this period GLA (sq m) of time are new perojects and, with #10yearchallenge the exception of one new project Being challenged in life is inevitable, (DN1 Balotesti) and an extension BUCHAREST being defeated is optional. (Veranda Mall), totalling 34,000 sq m, Veranda (extension) DN 1 Balotesti Colloseum Retail Park ROGER CRAWFORD investments will go towards secondary Project Project Project

Prodplast Imobiliare Prime Kapital Nova Imobiliare Knight Frank and tertiary cities. The most active Developer Developer Developer H2 2019 H2 2019 2020 developers will remain NEPI Rockcastle Estimated delivery Estimated delivery Estimated delivery 6,000 28,000 16,500 and MAS-Real Estate-Prime Kapital. GLA (sq m) GLA (sq m) GLA (sq m) Source:

12 | ROMANIA MARKET OVERVIEW 13 | KNIGHTFRANK.COM.RO LAND TRANSACTIONS LAND MARKET H1 2019 (SELECTION) IASI

Buyer Private individual Location (area) Nicolina former factory site Use Residential MIERCUREA CIUC #10yearchallenge Size (sq m) 240.000 The greater the obstacle, Buyer RC Europe the more glory in overcoming it. Location (area) MOLIÈRE Use Retail Size (sq m) 37.000

IASI

MIERCUREA CIUC

TIMISOARA

OVERVIEW Speedwell concluded the acquisition announced in the past years are The first half of 2019 maintained the of the former Fabrica de Palarii factory, already under development. dynamic rhythm from last year, with in Timisoara, and are planning to several key transactions concluded for develop a mixed project, their first one PRICES future mixed developments. in the city. Prices remained mainly at a constant level as the previous period although in NEPI bought a 170,000 sq m land SUPPLY some area in Bucharest where interest plot in Craiova for a future retail BUCHAREST proved to be high and availability low, There were no notable changes to development. Craiova witnessed CRAIOVA some small increase in price were land supply, both Bucharest and the also some transactions destinated normal. secondary cities major land supply to industrial developments: Element is coming from the former factories’ Industrial acquired a 12 ha land plot FORECAST platforms, located in semi-central and P3 aslo secured some plots there. areas. The supply of land plots suitable for In Bucharest, the new emerging good projects is expected to decrease, TIMISOARA One essential aspect in selling a land area in north west part of the city with developers actively searching Speedwell plot is the Building Permit or PUZ. (Expozitiei – Bucurestii Noi) remained Buyer to secure the best available sites, Fabrica de palarii Paltim Investors are more interested into land of interest to developers in their Location (area) primarily land plots located in close Mixed plots with development documents attempt to decongest the existing proximity to metro stations that have Use 15.430 BUCHAREST issued, than to lose 2 years for approvals office hubs – residential constructions development and planning approval Size (sq m) and miss the trend. are becoming more and more frequent in place, given the lengthy process of Buyer AFI in the area after more office projects obtaining building permits. Location (area) Blvd. Timisoara Use Mixed DEMAND LAND PLOT PRICES BY USE 19.200 CRAIOVA Size (sq m) In H1 2019, demand for land continued (€/SQ M) Element Industrial the positive trend from last year with Buyer Buyer Global Logistics Office Barbu Vacarescu/Calea Floreasca 2,000 Craiova high volumes of activity witnessed Location (area) Location (area) Chitila Center-West 700–900 Industrial across all market segments. Use Use Industrial Residential Prime areas 1,500–2,000 120.000 140.000 Nationwide the regional cities Size (sq m) Size (sq m) Central Area 900–1,200 witnessed some important Periphery 250–300 NEPI Cordia transactions, mainly with former Buyer Buyer Bucharest 350–500 Craiova Laminorului Retail Knight Frank industrial sites. Well known developers Location (area) Location (area) Countryside 100–250 Retail Residential secured new sites for future Use Use 170.000 33.500

Size (sq m) Size (sq m) Source: developments. Source: Knight Frank

14 | ROMANIA MARKET OVERVIEW 15 | KNIGHTFRANK.COM.RO In terms of tenant profile, the BUCHAREST MODERN INDUSTRIAL STOCK BUCHAREST MODERN TAKE-UP ANNUAL EVOLUTION (SQ M) ANNUAL EVOLUTION (SQ M) INDUSTRIAL & LOGISTICS automotive sector was the most active, accounting for 59% of the total demand MARKET nationwide followed by logistics 2,500,000 350,000 and retail with 10% on each side. 300,000 2,000,000 The first half of 2019 witnessed a strong activity VACANCY 250,000 in terms of take-up in Bucharest, reaching As a result of the developer’s tendancy 1,500,000 200,000 approx. 100,000 sq m whereas the vacancy levels towards built-to-suit projects the continues to remain at low level. 150,000 vacancy rate remain at a low level 1,000,000 which is estimated around 5%–6%. 100,000 500,000 50,000 RENTS SUPPLY were larger than 15,000 sq m. During 0 0 Considering the low figures for The level of deliveries in H1 2019 the first half of this year, notable H1 H1

the vacancy rates and the quality 2011 2011 2017 2017 2012 2012 2013 2013 2015 2015 2019 2019 2014 2014 2016 2016 2018 2018 2010 2010 2007 2007 2003 2003 2005 2005 2009 2009 2006 2006 2008 2008 transactions included the built to suit 2004 2004 was around 200,000 sq m, bringing of the supply, rental levels for the nationwide stock to nearly signed by Pirelli with WDP in Slatina prime industrial and logistics Knight Frank Knight Frank (62,000 sq m) and the pre-lease signed Source: Source: 3.75 million. Around half of the space remained stable in the first by Arctic in Eli Park (20,000 sq m). new supply was in Bucharest. half of 2019, both in Bucharest DELIVERIES PIPELINE Although Bucharest accounted for and in the other regions across DEMAND H1 2019 (SELECTION) H2 2019 (SELECTION) 38% of total take-up, Slatina and the country. In Bucharest, prime In Bucharest, total take up in H1 2019 Oradea were the most sought-after rents for modern warehouses are was close to 100,000 sq m, representing regional locations accounting for Area Area Estimated approx. €4.0–4.2/sq m/month. Location Developer (sq m) City Project Developer (sq m) delivery a 38% increase compared to the same a further 29% and respectively Timisoara Global Vision 20,000 Bucharest Stefanesti WDP 24,500 Q3 2019 period of last year, while nationwide the 16%of the total volume. FORECAST Sibiu VGP 15,000 Sibiu Sibiu Zacaria 20,000 Q3 2019 take up reached approx. 214,000 sq m On the whole, the main source The second part of this year is of space absorbed, representing 48% Craiova Zacaria 30,000 Bucharest Chitila Element Development 20,000 Q3 2019 of demand was the new demand expected to register almost the same of the amount recorded in the Chitila MLP 12,500 Bucharest Dragomiresti WDP 14,000 Q3 2019 accounting for 78% from the total level of deliveries as H1 2019 with similar period of last year. Ploiesti Brazi WDP 11,000 Q3 2019 take-up. The other types of transactions 40% of them being in the Bucharest Knight Frank Source: Sibiu Sibiu WDP 4,000 Q3 2019 A total of 25 leasing transactions were rather evenly distributed area. However the vacancy rate is were recorded nationwide in H1 with expansions and pre-lease estimated to remain at low level as Deva Deva WDP 45,000 Q4 2019 2019 with an average lease size of registering 11% and respectively most of the future spaces being already Oradea Oradea WDP 34,000 Q4 2019 8,500 sq m and only 4 transactions 9%of the overall leasing volume. pre-leased in BTS transactions. Buzau Buzau WDP 21,000 Q4 2019 Bucharest Dragomiresti WDP 20,000 Q4 2019 Bucharest Chitila MLP Chitila 10,000 Q4 2019 TAKE-UP BY TYPE OF TRANSACTION TAKE-UP BY TYPE OF TRANSACTION RENT BUCHAREST REST OF Bucharest Stefanesti WDP 8,600 Q4 2019 H1 2019, ROMANIA (%) H1 2019, BUCHAREST (%) THE COUNTRY

Source: Knight Frank Logistics New Demand 78 New Demand 48 €4–4.20 €3.8–4.00 (<3,000 sq m) Expansion 11 Expansion 27 Logistics €3.75–4.00 €3.5–3.8 Pre-lease 9 Pre-lease 25 (3,000–10,000 sq m) Logistics Renewal/ Relocation 0 €3.3–3.75 €3–3.5 Renegotiation 2 >10,000 sq m) Renewal/ Manufacturing €3.50–4.25 €3.50–4 #10yearchallenge Relocation 0 Renegotiation 0 Service charge €0.5–0.95 To remain indifferent to the challenges we face is indefensible. If the goal is Source: Knight Frank Source: Knight Frank Source: Knight Frank noble, whether or not it is realized within our lifetime is largely irrelevant. What we must do therefore is to strive TAKE-UP BY TENANT ACTIVITY SECTOR TAKE-UP BY TENANT ACTIVITY SECTOR TAKE-UP BY REGION and persevere and never give up. H1 2019, ROMANIA (%) H1 2019, BUCHAREST (%) H1 2019 (%) DALAI LAMA

Automotive 59 Automotive 37 Bucharest 38 Logistics 10 Retail 26 Slatina 29 Retail 10 Production 13 Oradea 16 Storage 7 Logistics 12 Timisoara 10 Production 6 FMCG 5 Ploiesti 5 Distribution 5 Storage 4 Pitesti 1 FMCG 3 Distribution 3 Craiova 1

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

16 | ROMANIA MARKET OVERVIEW 17 | KNIGHTFRANK.COM.RO Union. At the same time, due to Therefore, the search phase of a house RESIDENTIAL MARKET media speculations regarding a new and the decision of a purchase is a recession, the enthusiasm of buyers longer waiting period in many cases. decreased along with the volume After reaching 1.6% in the last quarter of residential construction works of 2018 and 0.8% in the first three (13% decrease between April 2018– PRICES Aviatiei Park, located in Aviatiei months of 2019, prices growth rate March 2019) compared to the same neighbourhood, developed by for residential property in Romania In 2019, prices in Romania registered period of the previous year, while the Forte Partners delivered 176 halved to 0.4% in the second quarter a stable trend with no significant number of homes completed during apartments from phase one and of this year. In the same time, the increases, which is normal in a more 2018 was 12% higher than 2017. mature market such as in recent years. 195 apartments are scheduled to annual price growth rate decelerated be delivered in the second phase. The appetite for prime residential to 3.5% in Q2 2019, down from In H1, analysing the newly built properties has not changed and the 4.6% in the previous quarter. Arcadia Apartments, located properties in Bucharest, the medium interest in luxurious homes continued in Domenii area, delivered on Lessons learned from 2008? price for the central and northern in the same upward trend. Buyers on Q2 2019 193 apartments and are A sure thing is the fact that prices on area was approximately €1700/built this segment being less affected by scheduled to deliver more than 300 residential and commercial sectors sqm, starting from €925/built sq m the changes in the real estate market, apartments by the end of this year. haven’t exploded like they did ten years in Northern Baneasa to €4000/ but more concerned in identifying a ago, and Bucharest’s market seems built sqm in Aviatorilor as it can be Soho Unirii, developed by London unique location and the best views. to remain the most balanced, while observed in the graphic below. Partners announced that they sold #10yearchallenge Difficulties strengthen Cluj-Napoca rather lost its way on over 70% of the total finalized TRENDS The ranking of Bucharest the mind, as labor does housing market where rents and sales 236 apartments. The developer neighbourhoods with the most the body. SENECA By comparing official statistics on prices are higher than Bucharest. expensive apartments remained is focused on future projects, trading activity with market demand and essentially unchanged, the leading acquiring land in Expozitiei area supply data, an apparent contradiction Beyond the state’s weak administrative position being occupied by areas and Barbu Vacarescu area. can be observed: The number of real capacity, Romania should continue estate transactions in Romania is to grow, as it still benefits from one such Kiseleff, Aviatorilor, Primaverii One Mircea Eliade with its 247 CORPORATE RESIDENTIAL LETTINGS are the two-bedroom apartments – of the biggest differences in labour followed by areas such as Floreasca, design apartments in 3 towers lower than in the same period of last In comparison to 2018 the 2019 lettings whether we talk about a single tenant productivity and labour costs in Eastern Dorobanti, Nordului-Herastrau. (GF+15, GF+15, GF+20) and the year, but the demand for residential market is very similar.The growth of this or a young couple. In addition, most property is higher than 12 months ago. Europe. Internal migration will be Clients continue to be focused on the future residential project of Atenor segment is very stable in the major cities request include a terrace or outdoors This contradiction is explained by the another important factor in real estate balance between price and quality in Floreasca with its 270 luxurious like Bucharest, Cluj, Constanta or Iasi. space, as an alternative to a yard. uncertainties the clients had between market trends: the population of cities and the prices had to line up to the apartmens in 2 towers (GF+12, These two-bedroom apartments the end of 2018 and beginning of 2019, such as Cluj-Napoca, Timisoara, demanded quality, especially for the GF+25) give the start of a new In Q1 2019, the rental offer from the big can be rented for €600–750, due to media articles insinuating a new Iasi, Brasov or Sibiu should increase prime properties where high quality vertical development trend: mix regional centers increased compared in the up and coming areas and recession and political incertitude. significantly in the coming years. finishes and prime location are two of high end apartments (small to Q4 2018, without changes in the level the rent can reach €2300–2700 key factor in choosing properties. and big areas) with amazing views of the prices requested by the owners. per month in prime locations. MEDIUM PRICE/BUILD SQ M thanks to the glass façades. H1 2019 (€) Even though some real estate Also in Q1 2019, the number of older The residential market in Bucharest DEMAND publications were predicting a market homes (properties completed before Unirii 2,085 experienced growth and progress, From the credit institutions point of correction, for newly built apartments 2000) available for rent in the six major Timpuri Noi 1,650 especially from the development view, demand registered a marginal Tei 1,675 we are witnessing a small increase in cities of the country increased by about perspective. Quality buildings increase in the first quarter of 2019, Straulesti 1,000 prices compared to last year. Although 8% compared to the previous quarter. Stefan cel Mare 1,400 with modern technology and contrary to the expectations from price increases were also recorded According to the most recent reports, Razoare 2,050 cost optimizing solutions were Q4 2018, when a decrease was in the old housing segment, the the most consistent offer of rental Presei Libere Square 950 on the spotlight in H1 2019. registered and the purchase decision Pipera 1,193 most significant increases occurred housing is naturally found in Bucharest. took longer. For the second quarter of 1 Mai Square 2,000 in the newly built segment. On this Most developers are focused on In the past 6 months, the rental market 2019, credit institutions estimated a 1,350 segment the increase for Q1 & Q2 energy efficiency and comfort of the Mosilor 1,900 has remained at a stable level in terms relatively steady evolution of demand. 2019 was not more than 3–4% and occupants, therefore they apply for Kiseleff 3,000 of prices. On this market segment, In addition, the number of residential it could be due the fact that more green certifications and build with Iancu Nicolae 1,550 Cluj-Napoca ranks first place with real estate transactions decreased in Herastrau 2,225 apartments were delivered this year. the required standards. Projects the highest average prices. A slight the first quarter of 2019 (-26% in Q1 Hala Traian 1,500 Overall, the price stabilization is like Aviatiei Park, One Charles Grozavesti 1,400 decrease in homeowner’s claims 2019 compared to Q1 2018). However, de Gaulle, One Mircea Eliade, Afi Gara de Nord 1,433 going to mark also the next 12 in Q2 and Q3, Romania registered an City, Central District 4 Elements occurred in Bucharest due to a large Floreasca 2,875 months on the real estate market. increase of 23.3% in new development and others have already obtained supply of new developments. Domenii & Expozitiei 1,483 constructions, compared to the green building certification. Delea Veche 1,500 SUPPLY Corporate tenants with medium to same period last year. For example, Bucurestii Noi 1,150 In Bucharest, compared with 2018 high budgets showed interest in the in July 2019, 50.890 properties Batistei 2,350 same areas: Central (Universitate, Barbu Vacarescu 1,480 when there were delivered around Among the trends in H1 2019 for the were sold nationwide, with Victoriei) and North (Herastrau, Aviatiei, Baneasa Sisesti 1,267 11,272 new housing unist according launched medium-large residential 10.683 more than in June. Baneasa Jandarmeriei 1,383 to National Institute of Statistics, Floreasca, Aurel Vlaicu). Among projects, the key features capture the The number of houses, lands destined Baneasa North 925 around 30% more units are set to their searchong criteria, the most Baneasa Aviatiei 1,567 following: gated communities with for residential developments and be delivered by the end of 2019. required are amenities such as: green Aviatorilor 4,000 green spaces and leisure areas, indoor apartments sold, nationally, in July areras, gym, supermarkets, coffee Aviatiei 1,583 In the central and northern area of and outdoor playground, integrated this year is 6,460 higher than the 1,634 shops and proximity to their office. plaza, meeting and co-working areas, Bucharest, on the first semester of 2019 similar period of last year. This 0 there were delivered a great number gym, swimming & spa areas, dry The most requested solution from the value is the highest, compared to 500 1000 1,500 4000 3,500 2,500 3,000 of apartments in major projects: cleaning & concierge services. HR departments for the new employees the other countries of the European Source: Knight Frank 2,000

18 | ROMANIA MARKET OVERVIEW 19 | KNIGHTFRANK.COM.RO More importantly, property operators 1. ACQUISITION OF SHARES PROJECT MANAGEMENT must also attract new talent from the SHARE TRANSACTIONS TRANSACTION hospitality sector to meet the new THE FUTURE OF OFFICES: expectations of occupiers and their staff. A passive holding that does not carry AND THE VAT DEDUCTION RIGHT out any economic activity could not WHY HOTELS ARE THE UNLIKELY INSPIRATION Workers have to come to expect a be entitled to deduct the related FOR MODERN OFFICE SPACES certain level of service from their Diana Rosu Anca Macovei Emilia Danila input VAT on the costs related to an place of work. On-site amenities such Tax Senior Manager Tax Senior Manager TVA Tax Manager TVA acquisition of shares. as coffee-making facilities, a friendly PwC Romania PwC Romania PwC Romania Michael Lewis reception team, dry cleaning facilities, The CJEU has stated an important rule, Head of Property Asset Management showers and bike storage are just some however, according to which a holding of the perks that attract employees to a company that is actively involved in offers his insight into space as a service. Landlords and The Romanian real estate market might holding company, it is important to look particular company. the management of its subsidiaries corporate occupiers are increasingly aware of the changing have a record year in 2019, with real at the nature of its activities. becomes an active holding. For such needs of modern workers and he says the hospitality Workers and productivity estate transactions expected to exceed Specifically, from a VAT perspective, active holdings, the deduction of industry is the sector to turn to for inspiration. Wellness initiatives are also becoming €1 billion for the first time in five years. the mere acquisition and holding of the VAT related to the acquisition of popular with flexible offices. Some co- Attracted by high yields and the sector’s shares in other companies (defined shares may be allowed, even if the working operators, for example, offers great potential, investors are considering PROVIDING A BETTER SERVICE FOR ROOM FOR CHANGE as “pure holding”) or the issuance of transaction fails (according to case ‘craft on draft’ and ‘puppy therapy’ at everything from mergers and MODERN WORKERS new shares for the purpose of raising C‑249/17 – Ryanair Ltd). To compete in this changing its spaces to appeal to the employees acquisitions, even share acquisitions, Imagine receiving a warm welcome capital for financing the day-to-day environment, the real estate industry of fast-growing SMEs and start-ups. to issuing shares or contracting loans from the reception staff, taking a business activity do not constitute an should find new ways to adapt its for refinancing or developing new 2. SALE OF SHARES refreshing shower shortly after your Employers want their staff to work economic activity. office spaces. Inspiration can be projects. Although the European Court of The complexity of the transaction gym workout and then having your from dynamic, exciting spaces where found in coffee shops, hotels and Justice has provided some clarification Share transactions could be qualified should be analysed for a sale of dry cleaning delivered to you all in the they feel welcome, productive, happy leisure destinations that are highly regarding share transactions input VAT as economic activities, however, in comfort of your place of work. Sounds and healthy. Property managers must shares. Depending on the specific successful at attracting people and deduction by holding companies, in certain circumstances. The CJEU more like a hotel, right? evolve their approach to help landlords characteristics of the transaction and keeping them there. practice, the question of whether VAT decisions in cases C-4/94 BLP and meet these requirements, by focusing whether it qualifies as economic or But, perhaps it could be a new way of related to expenses incurred through C-29/08 AB SKF provide some clarity, If spaces are becoming more popular on people and service. non-economic activity, the expenses working in modern office spaces? share transactions is deductible is not as they established without any doubt incurred may be classified as direct based on the services they provide, There’s been a boom in flexible and always easy to answer. that the sale of shares is an ongoing Making strides in this sector is costs or as overheads for the holding then offices must evolve to be more co-working providers in recent years, economic activity. Moreover, any Knight Frank with a range of flexible company, thereby triggering different like hotels in the level of service that and many are now increasingly marketing direct or indirect involvement by a office spaces with a service that VAT implications. they provide. Workers and tenants themselves to corporate occupiers, OPERATIONS WITH SHARES holding company in the management accommodates the lifestyle needs of AS AN “ECONOMIC ACTIVITY” should be treated as ‘guests’ who can competing with ‘traditional’ office of its subsidiaries is also considered According to the CJEU decision stated the modern worker. OR A “NON-ECONOMIC ACTIVITY” easily choose an alternative location buildings on long leases. Landlords are an economic activity, under another in the Kretztechnik case (C-465/03), According to the Wealth Report 2019, to spend their time, meet and do responding by launching their own To establish whether and how the VAT CJEU decision (case C-320/17 – Marle we can draw the conclusion that, even business. co-working or flexible workspaces. deduction right can be exercised by a Participations SARL). if a share issue is not an economic “as wealthy individuals become more activity, but it is carried out in order to globally connected and more mobile, increase the company's capital for the they are not only planting roots in benefit of its economic activity, the traditional urban powerhouses but costs of the acquisitions performed looking for a well-rounded offering. should be considered part of the general expenses and, therefore, the High quality amenities and support company could benefit from the VAT facilitate a transient lifestyle, and so #10yearchallenge deduction right. The manager accepts the status prime, super-prime and ultra-prime quo; the leader challenges it. Alternatively, if the expenses are developments will become increasingly WARREN BENNIS common – and increasingly sought after.” linked to the sale of shares, they will be considered direct costs of a transaction exempt from VAT and, therefore, will In this case, should landlords and not give rise to the corresponding VAT corporate occupiers do more to deduction. provide better lifestyle amenities to attract businesses to settle in their If the expenses are treated as holding developments? company overheads, the right to deduct the input VAT depends on the FLEXIBLE WORKING characteristics of the transactions Improvements in technology and greater carried out by the taxable person access to flexible working means (i.e. VAT-taxable or VAT exempt employees don’t have to work nine to economic activities or non-economic five at the office. These days, they can activities). work in more flexible environments such Although the CJEU decisions as at home, in coffee shops or anywhere bring more clarity regarding the with WI-FI access. VAT deduction right, specific So, just how should developers meet situations should be analysed on the demands of modern workers today? a case-by-case basis.

20 | ROMANIA MARKET OVERVIEW 21 | KNIGHTFRANK.COM.RO While it goes without saying that this DO NOT STEP ON THE GRASS! legislation needs a major review, such legislative measure continues to be long A LEGAL VIEW OVER LANDSCAPING expected.

OBLIGATIONS IN REAL ESTATE DEVELOPMENT In this context, this year the Ministry of Regional Development and Public Administration published a Alexandra Huza Simona Chirica draft Government Decision for the 512 OFFICES Attorney at law, Bucharest | Real estate Ph.D, Partner, Bucharest | Real estate amendment and supplementing of Schoenherr si Asociatii SCA Schoenherr si Asociatii SCA the Government Decision 525/1996 approving the General Urban Planning 60 TERRITORIES Regulation. The draft Government Landscaping and real estate purpose, leased, encumbered, or sold. Decision also announces the need of 19,000 PEOPLE development go hand in hand. Until fulfilment, the building must be consolidating all normative acts that And we are not talking aesthetics conserved and cannot be inserted into regulate urbanism and construction in here. We are referring to the legal the civil circuit. Romania. obligations for owners to ensure green In addition, failure to develop the Among the changes to be introduced by areas upon development of the real green areas imposed under the the draft Government Decision there are estate projects. But what happens if building permit also represents an also provisions regarding the minimum these requirements are not met? offence under Law no. 50/1991 and mandatory green area corresponding can be sanctioned by fine in amount to certain types of buildings. For GREEN AREAS IN BUILDING example, according to the document PERMITS of RON 50,000 up to RON 100,000. Said sanctions may be applied by the published by the Ministry of Regional Amongst the elements included in specialised units of local and county Development and Public Administration building permits, there is an obligation councils, or the General Council of for public debate, a maximum surface for the owner to maintain or develop Bucharest, respectively. of 0.5 sq m/occupant in the case of green areas of a certain surface upon residential buildings, out of the minimum Independent, international, construction of a real estate project. WHAT TO EXPECT? 2 sq m/occupant, may be developed on The mandatory green area, which is green rooftops and green terraces. commercial, residential. generally expressed as percentage Regulated by a 17 years old law and a 23 years old Regulation, the It remains to be seen if, when and of the total land surface on which the . real estate project is built, depends Romanian urbanism legislation is far how these legal amendments will Locally expert, globally connected on the destination and size of the from reflecting the present market be eventually enacted. Meanwhile, construction. developments. The said legal framework it results that landscaping needs to needs to be unified and aligned with be considered by investors from the Thus, according to the applicable legal the current social, economic, urbanistic very early stages of their real estate provisions, green areas must occupy at and architectural development realities. developments. least 10% of the total land plot on which an office building is constructed, 2–5% in the case of commercial buildings, 20% in the case of industrial buildings, 25% in the case of hotels or other tourism units, and 2 sq m/occupant in the case of residential buildings. Other ABOUT THE GROUP examples of mandatory green areas include 10–15 sq m/patient or child, in At Knight Frank we build long-term relationships, which allow us to provide the case of health centres or nurseries, personalised, clear and considered advice on all areas of property in all key markets. or 10–20% of the total land surface in We believe personal interaction is a crucial part of ensuring every client is matched the case of cultural buildings. to the property that suits their needs best – be it commercial or residential.

SANCTIONS Operating in locations where our clients need us to be, we provide Failure to meet these requirements a worldwide service that’s locally expert and globally connected. until the reception at the completion of the construction works equals to non- We believe that inspired teams naturally provide excellent and dedicated client fulfilment of the building requirements service. Therefore, we’ve created a workplace where opinions are respected, where established under the building permit. everyone is invited to contribute to the success of our business and where they’re This triggers the impossibility for the rewarded for excellence. The result is that our people are more motivated, ensuring owner to obtain the required protocol your experience with us is the best that it can be. for reception upon completion of the works, and hence to proceed with the lawful registration formalities of its ownership title over the building within the Land Register. This means, the building cannot be used for its

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

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

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