by Property Forum | Investment

In the past five years, Colliers International has performed valuation for a total of over 500,000 commercial and residential properties worth €40 billion in Romania. The most complex and comprehensive appraising process in Colliers International’s portfolio was for BCR Palace on University Square in Bucharest.


Owned by BCR, the historical building located in the heart of Bucharest was finalized in 1906, based on Oscar Maughsch’s architectural plans, and before becoming BCR’s property it was the headquarters of “Generala” Insurance Society. Today, BCR Palace occupies 4,000 square meters of land, including the former garden of the Sutu Palace, currently the Bucharest Municipality Museum, and has 12,000 useful square meters distributed in two buildings with five levels each, of which one is underground, and an attic on only one of the buildings.

The valuation of the property was carried out in stages throughout a period of four months, which is atypical considering that a classic valuation process for a building, based on ANEVAR standards, generally requires no more than two weeks. “Such a unique building required specialists with experience and expertise in similar properties, in areas including architecture, valuation of artistical components, engineering and reconstruction cost estimates. Once the team was formed, the next step was collecting all the data about the property’s history, construction and renovation works, measurements and cadastral layouts and structure surveys, all requiring extensive efforts which took several weeks”, explains Raluca Buciuc, Head of Valuation and Hospitality Advisory Services within Colliers International.

The most complex part of BCR’s historical building appraisal was to complete the highest and best use analysis of the property, considering the perspectives of a potential investor: the physical possibility of transformation, legal limitation from urbanistic point of view and economic feasibility. “Fully understanding the limitations of the building in terms of interventions it may support and repartitioning for future economic purposes was very important, as it shows potential investors how much time and money are needed for the renovation and reconversion of the building, anticipating possible technical difficulties and delays that might occur, for an accurate and well-founded investment decision”, explained Mihai Pana, Associate Director in the valuation department at Colliers who was involved in the appraising process.

The valuation team worked with two scenarios for the building’s reconversion, either into office spaces or a hotel. “The reconversion of the property into other type of properties was also possible but was excluded from real estate market point of view”, says Raluca Buciuc. Turning the BCR Palace into office space would mean bringing a unique format to the market - office spaces dedicated to companies with small teams that need a premium location and are willing to share common areas. “However, the Romanian office space market is not really ready to meet the supply for this scenario, considering that the demand for such spaces dedicated to startups and companies with few employees is already met by co-working spaces and hubs”, adds Colliers International’s Head of Valuation Services and Hospitality Advisory Services department.

The analysis of the potential income, occupancy and exit value lead to the conclusion that transforming the building into a luxury hotel is more feasible, with final calculations showing that this scenario would be 15% more profitable for an investor comparing with the office scenario. In order to accommodate an international chain affiliated luxury hotel, a building must offer at least 100 rooms, while BCR Palace could accommodate around 150 rooms.

“The investment is, however, significant, as can be expected for a historical building with such a unique heritage like BCR Palace. But the market shows that it can absorb an offer for a hotel of this kind. Generally, buildings with a solid structure that can be preserved, but with renovations needed in all other areas in order for them to be reconverted, require an investment of about 900 euro per square meter, without considering the investment for furniture and all other specific equipment needed. An upper-medium hotel adds another 10,000 - 15,000 euro per room for FF&E, while a luxury hotel can invest even double per room”, explains Raluca Buciuc.

BCR Palace is not the first historical building valuated by Colliers International. The real estate consultancy company has been involved in the valuation of buildings such as the one now hosting the Hilton Garden Inn hotel in Bucharest’s city center, the old Marmorosch Blank building, which is currently being reconverted in the Autograph by Marriott hotel or Unirea Hotel from Iasi. All valuations were conducted strictly for determining the economic potential of those buildings.

Colliers International has developed a solid valuation and consultancy department that generates about 15% of the company’s turnover. In the past five years, the company has valued a total of 500,000 properties worth €40 billion in the past five years.

“An important peculiarity of the real estate market in Romania is the lack of transparency, both in terms of past transactions, as well as in terms of public databases with the transformation history of buildings. Valuation is generally done by comparison with preceding cases, so there is a need to be able to rely on previous valuations of similar properties. When it comes to valuations of historical buildings, it is even more difficult because all old records and completed technical surveys are not collected and made available in a public archive”, emphasizes Raluca Buciuc.

Colliers International’s valuation and hospitality advisory department has a dynamic team of 13 professionals, of which 10 are accredited valuation professionals, with an average experience of 8 years in valuation both in local and regional markets. The team can provide services for all real estate segments - retail, offices, residential, hospitality or industrial buildings, for any purpose. Colliers International has a 50% market share in valuations of commercial modern schemes in Romania and 60% for class A office spaces in Bucharest.