THE CONSTRUCTION SECTOR IN ROMANIA THE CONSTRUCTION SECTOR IN ROMANIA September 2013 A study by Nicoleta Chirila Flanders Investment & Trade Intr. Bitolia 62, sector 1, Bucuresti +40 21 231 56 07 [email protected] www.flandersinvestmentandtrade.com TABLE OF CONTENTS 1. General economic overview .................................................................................................................... 3 1.1 GDP development ............................................................................................................................... 3 1.2 Employment & earnings ..................................................................................................................... 5 1.3 Inflation & fiscal situation ................................................................................................................... 7 1.4 Macro indicators ................................................................................................................................. 8 2. Construction sector (2007 – present) ....................................................................................................... 9 2.1 Rule system ......................................................................................................................................... 9 2.2. Leading companies ........................................................................................................................... 13 2.3. Construction work evolution ............................................................................................................ 13 2.4. Construction investments ................................................................................................................. 16 2.5. Top developers and major projects .................................................................................................. 19 3. Subsectors ............................................................................................................................................. 21 3.1. Residential ........................................................................................................................................ 21 3.2. Office ................................................................................................................................................. 27 3.3. Retail ................................................................................................................................................. 31 3.4. Industrial ........................................................................................................................................... 42 4. Main national trade fairs ....................................................................................................................... 47 5. Construction organizations .................................................................................................................... 48 6. References ............................................................................................................................................ 49 The construction sector in Romania | September 2013 __________________________________________________ 2 1. GENERAL ECONOMIC OVERVIEW 1.1 GDP DEVELOPMENT Romania’s economy is slowly recovering, after withstanding a two year recession, as a result of the global economic and financial turbulences. After having been one of the fastest-growing economies in Europe in the mid-2000s, producing a 6.3% GDP growth in 2007 and 7.3% in 2008, the global economic downturn revealed Romania’s structural weaknesses and imbalances. In 2009 the economy shrank by 7.1%, followed by a 1.9% contraction in 2010. Although the year 2011 brought an exceptional agricultural harvest and an export-led industrial recovery with a GDP increase of up to 2.5%, the year 2012 recorded a growth of only 0.2%, growth determined mostly by increases in professional activities, scientific and technical and administrative services of the real estate. The most significant workload reductions were recorded in agriculture, public administration and defense, social security, education, health and social care. The difficulties of the economic environment were also amplified by the internal political situation that was dominated by tensions and uncertainty regarding the general economic policy adopted by the government. 3 _________________________________________________________________ Gross Domestic Product (lei¹ million current prices) 2009 2010 2011’ 2012’’ Agriculture, hunting, forestry & fishery 32297.8 29874.2 36438.6 30897.7 Industry + energy / gas / water 120637.4 148553.1 160927.9 167081.0 Construction 52809.4 47762.3 47563.4 50448.9 Services 245234.5 240207.4 242396.9 265375.2 Gross Value Added (GVA) 450979.1 466397.0 487326.8 513802.8 Net taxes on products 50160.3 57296.3 69381.6 73696.6 Gross Domestic Product (GDP) 501139.4 523693.3 556708.4 587499.4 ‘ semidefinite data ‘’ provisional data Source: Romanian National Institute of Statistics ¹ 1 LEU = 0,23 EUR (exchange rate at 02.09.2013) Contribution of the main activities to GDP (%) 2009 2010 2011’ 2012’’ Agriculture, hunting, forestry & fishery 6.5 5.7 6.6 5.3 Industry + energy / gas / water 24.1 28.4 28.9 28.4 Construction 10.5 9.1 8.5 8.6 Services 48.9 45.8 43.5 45.2 Gross Value Added (GVA) 90.0 89.0 87.5 87.5 Net taxes on products 10.0 11.0 12.5 12.5 Gross Domestic Product (GDP) 100.0 100.0 100.0 100.0 ‘ semidefinite data ‘’ provisional data Source: Romanian National Institute of Statistics The construction sector in Romania | September 2013 __________________________________________________ 4 GDP was also influenced by the evolution of activity volume from the private sector. Share of private sector (%) 2008 2009 2010’ 2011’’ Gross Domestic Product (GDP) 71.1 69.9 71.3 70.8 Gross Value Added (GVA) Agriculture, hunting, forestry & fishery 92.7 88.5 92.7 93.4 Industry + energy / gas / water 86.1 81.8 82.2 81.9 Construction 91.5 96.8 95.9 95.7 Services 72.4 70.1 72.1 74.3 ‘ semidefinite data ‘’ provisional data Source: Romanian National Institute of Statistics The Romanian economy is projected to recover gradually in 2013, helped by local and international factors that look more promising compared to last year. Additional public resources injected by the government into the economy, a normal agricultural crop after the severe drought of last year and a minor recovery in external demand will lift real GDP growth to 1.3%, down from some previous estimates of a growth of 1.9%. 1.2 EMPLOYMENT & EARNINGS The economic crisis started in the second half of 2008 affected both the average number of employees and the salaries, the most accentuated falls being registered in manufacturing, construction and trade. Economically active population (thou persons) 2009 2010 2011 2012 Total 9924 9965 9868 9964 Employed 9243 9240 9138 9263 Unemployed 681 725 730 701 Source: Romanian National Institute of Statistics 5 _________________________________________________________________ Unemployment rate (%) 2008 2009 2010 2011 2012’ 2013’ 5,8 6,9 7,3 7,4 7,2 7,1 ‘ forecast Source: Romanian National Institute of Statistics Employment by main activity of national economy (thou persons) 2009 2010 2011 2012’ Construction 726 705 681 696 Total 9243 9240 9138 9263 ‘ provisional data Source: Romanian National Institute of Statistics As in any market economy the highest share of employees is active in the private sector, the share of employment in the private sector has remained during 2008 - 2011 around 80%. Monthly average net nominal earnings (lei¹/employee) 2009 2010 2011 2012 Construction 1069 1125 1247 1250 Total 1361 1391 1444 1547 Source: Romanian National Institute of Statistics ¹ 1 LEU = 0, 23 EUR (exchange rate at 02.09.2013) The construction sector in Romania | September 2013 __________________________________________________ 6 1.3 INFLATION & FISCAL SITUATION The Romanian economic environment faced major imbalances caused by inflation. During 2008- 2011, in spite of a significant decline of economic activity, the inflation had a new persistent character entailed to a great extent by shocks on internal and international markets as well as a higher price for petroleum and raw materials or changes and evolution of exchange rate. Food prices and also the significant depreciation of the leu against the euro have led to a monthly average rate of inflation of 0.3% for the first nine months of 2012. The general government deficit decreased from 6.8% in 2010 to 5.2% of GDP in 2011. The deficit is expected to come down to 2.8% of GDP in 2012. For 2013 the budget deficit is expected to fall to 2.2% of GDP due to the measures implemented by the authorities to continue fiscal consolidation: a freeze in public wages and further employment cuts in the public sector; a pension freeze; the introduction of a new social assistance code; excise rate hikes for cigarettes and diesel; and an increase in royalties for the use of resources necessary to produce construction material. 7 _________________________________________________________________ 1.4 MACRO INDICATORS The construction sector in Romania | September 2013 __________________________________________________ 8 2. CONSTRUCTION SECTOR (2007 – PRESENT) 2.1 RULE SYSTEM The construction regulatory system in Romania is a traditional one where the majority of the laws, standards and norms are adopted and enforced from the central government level. The local public authorities can intervene