Emma Toma, Head of Office Division at AFI Europe Romania, talked to Property Forum about the company’s investment plans in the office, retail and residential areas, as well as the solutions implemented in all projects in the area of sustainability.
This interview was first published in Property Forum’s annual listing of "The 50 most influential people on Romania’s real estate market”.
How did AFI Europe Romania end 2022 in terms of operational office stock and what are your plans for 2023?
2022 was a challenging but successful year for AFI Europe Romania, we leased 47,000 sqm of office space, 80% of which to new tenants, we completed the AFI City Bucharest Noi shopping gallery, we laid the cornerstone for AFI Arad, the first commercial park realized by AFI Europe in Romania, and we inaugurated the second phase of the AFI Tech Park office project. We also successfully completed the refurbishment of common spaces in the AFI Lakeview office building and the installation of ionization air purifiers across our portfolio and obtained WELL Health & Safety certifications for all office projects. In 2022, we also began the LEED Zero Carbon certification process for all of our office projects.
At the same time, this year we started construction work on our new AFI Loft office project, located above the AFI Cotroceni shopping centre. This is a boutique office project we are building at the Far Entrance in AFI Cotroceni that will have a surface area of 16,000 sqm and we aim to complete it by the end of 2024.
In addition to office and retail projects, we are expanding our portfolio in Romania with residential projects for rent, the first being AFI Home in the north of Bucharest. This project will offer 450 apartments available for rent.
Which industries predominate in the tenant mix present in your office projects?
The IT&C sector is and will continue to be the most dominant industry in our client portfolio, with companies in the sector needing to expand their offices or lease to open new branches locally. Most of the space in our office projects is leased to multinational companies, mainly IT&C, BPO or banks, but we also have successful Romanian companies in our portfolio.
The logistics sector has developed a lot lately, along with the pharmaceutical and gaming industries, bringing new tenants to our portfolio and expanding regularly. We have welcomed new tenants in our office projects and the rental rate is over 90% in all our projects.
How important are regional cities for AFI Europe Romania and what are the prospects for new office demand in these areas?
We have always been interested in developing as many projects as possible outside Bucharest, and due to the current crisis in the capital related to the blocking of Urban Zoning Plans (PUZs), this interest has increased significantly.
Furthermore, as employees return to their offices and multinational companies expand their operations nationwide, we see an increase in demand for modern, energy-efficient and sustainable offices to ensure lower operational costs, but also spaces that ensure the health, safety and well-being of their employees.
For example, AFI Park Timișoara and AFI Park Brașov are both Class A regional projects with excellent locations and high technical standards.
AFI Europe aims to achieve zero carbon emissions for all its projects by 2025. What measures have you implemented or are you planning in the office segment to achieve the target?
As part of our sustainability strategy, we consider it extremely important to achieve LEED Zero Carbon certification for all existing office projects, as well as future projects to be developed in Romania. We have already been working for more than half a year with the consultancy company Colliers to achieve this goal and we already expect to achieve certification by the end of 2024. Specifically, we are now actively implementing a number of measures, such as increasing energy efficiency, using green energy and planning measures to reduce carbon emissions from fossil fuels.
How important is the ESG agenda in the context of negotiations with financiers and companies interested in occupying offices in the AFI Europe Romania portfolio?
We are indeed noticing a growing concern from tenants in our office projects about the sustainability of the buildings in which they operate but also related to the safety and health of the occupants in the buildings.
In our view, the offices of the future are sustainable. This is why all our actions in recent years are moving towards sustainability, both in the construction phase of the buildings, through the purchase of sustainable materials and the reduction of the carbon footprint of the construction process, and in the way, the buildings are operated and used.
We invest significantly in the latest solutions to reduce water and energy consumption, use renewable resources, selective waste collection, and encourage sustainable employee transport through the use of bicycles and electric cars.
In terms of measures related to the well-being and safety of building occupants, we have already invested more than €1 million since 2021 to date in the latest bipolar ionization air purification system, which has been installed in all office buildings and shopping centres in our portfolio.
In 2022, we also announced the achievement of Well Health & Safety certification for our entire portfolio of office buildings in Romania. This covered five key areas including cleaning procedures, air quality management and health services.
Will we see a further increase in rents for quality offices in the most sought-after areas of Bucharest? Will the trend continue in regional cities?
The evolution of rents per sqm for office buildings is influenced by rising costs for building materials, the energy crisis, economic instability and general inflation. This trend will continue this year.
Especially when we talk about Bucharest, we are facing a decrease in stock due to the lack of new construction and the blocking of PUZs, which will also lead to an increase in rents for the coming period, but we are confident that high-performing projects will offer tenants fair value for money.
Regional cities will be affected to the same extent by rising rents, but we are confident that relocation decisions will continue to be based on the quality of the projects, the services offered and an optimal ratio between the financial package and the product offered by the developers.
Will there be any changes to the demand structure for office space in the coming years?
We are already seeing increased interest from our clients in mixed-use, residential and office buildings with commercial, retail, food, pharmacy, medical or other service space on the ground floor. The aim of these types of projects is to increase the well-being of employees and provide them with everything they need near the office, and we see a clear trend in this direction.
More and more multinational or listed companies are obliged to comply with ESG standards, and this will be reflected in the way all developers think about their office projects.
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