Dennis Selinas, Globalworth Group CEO, spoke with Property Forum about the investment plans in the industrial segment, the outlook for rents in Bucharest and the efforts to enhance the value of its office portfolio on the Polish and Romanian markets
This interview was first published in Property Forum’s annual listing of "The 50 most influential people on Romania’s real estate market”.
What are Globalworth’s financial goals for 2023 and what were some of the key results of the company during 2022?
Given challenging and volatile market conditions, our primary financial objective for 2023 is to maintain a stable level of rental income through sustainable leasing and operational initiatives.
Additionally, we will be focusing on maintaining the value of our properties through CAPEX investment, and continuously making our properties best-in-class. In the current year, our company will prioritize preserving liquidity and addressing debt maturities through targeted financial initiatives.
In terms of key outcomes for 2022, despite challenging market conditions, we were able to maintain leasing activity levels consistent with previous years. Moreover, we established a new strategic partnership targeting the “small business units” segment of the logistics and warehouse facilities market in Romania, completed the construction of six logistic facilities, and expanded into a new market, Târgu Mureș.
What is the outlook for the office portfolio in Poland and Romania? Is hybrid work becoming mainstream among the companies in your buildings?
We maintain our steadfast conviction that, for most companies in both Poland and Romania, the office will persist as the principal workplace. Nonetheless, hybrid solutions will continue to influence demand due to the COVID-19 pandemic’s temporary work-from-home measures, which are now regarded as the new normal. To accommodate both physical and remote work arrangements, we are trying to achieve the most effective output in efficiency and operations for our tenants.
How important are ESG principles for a listed company? What are the expectations of your shareholders regarding Globalworth’s sustainability strategy?
In recent years, ESG has gained tremendous importance among listed companies and corporations alike. Apart from acquiring green certifications for 89.9% of our standing commercial properties, we have devised an ESG strategy that is in accordance with the expectations of all our stakeholders, and which is exhaustively documented in our annual Sustainable Development Reports.
At Globalworth, we are dedicated to providing environmentally friendly structures that meet the diverse needs of our tenants, all while ensuring that we continue to have a constructive influence on the communities that we serve.
As a company, Globalworth has pledged to reduce carbon emissions by more than 40% by 2030 compared to the baseline in 2019.
What are your investment plans for 2023 both for the existing portfolio and potential new projects?
In the coming year, our company is committed to embarking on an ambitious CAPEX program of investment that will focus on both preserving and enhancing the value and efficiency of our existing office portfolio, spanning across both Romania and Poland. Alongside this initiative, we also plan to deliver several new industrial projects to the Romanian market, in a bid to further expand our footprint within this sector. By prioritizing these objectives, we aim to continue delivering strong returns to our stakeholders while remaining at the forefront of innovation and market leadership.
Are you looking to expand your industrial footprint in Romania? What industries are driving demand for warehouse space in your portfolio?
Indeed, Globalworth’s commitment to the logistics and light industry sector in Romania remains steadfast, with ongoing developments scheduled for delivery in 2023 and plans to invest in new opportunities in this sector. The growth of e-commerce has been a significant driver in the logistics market, with online shopping becoming increasingly prevalent, resulting in a heightened demand for small business units.
To address this, Globalworth has recently formed a new partnership and currently operates two parks in the metropolitan area of Bucharest, providing a wide range of modern facilities tailored to the needs of companies operating in Romania, with greater flexibility and capacity for expansion.
Additionally, the company has noticed an increased interest in temperature-controlled spaces, which it plans to expand further in 2023. Furthermore, Globalworth has identified the potential for establishing long-term partnerships with tenants operating light industrial production facilities, and it intends to pursue such opportunities.
How are you motivating your team to pursue the vision of Globalworth? How is this helping your client portfolio?
Our most important asset is our team of dedicated professionals. Over the past few years, this team has been working under exceptionally challenging circumstances (the COVID-19 pandemic and the war in Ukraine). Throughout, however, they have all maintained a positive attitude, together with resilience, commitment and efficiency, and have been offering premium services to our partners. One of our key objectives is for our team to meet the highest standards, and to achieve this we improved our team’s skillset, knowledge, operational experience, and interaction with our stakeholders through in-house and third-party training.
All our team members also receive a wide array of benefits that include, inter alia, private health insurance, and experience and sport activities vouchers.
What is the occupancy rate across your portfolio and which industries have a bigger share in your portfolio of tenants?
As of December 2022, the like-for-like standing occupancy of our portfolio stands at 9 0.5%, reflecting an uptick of 0.2% when compared to the figures recorded on 31 December 2021. Our extensive and diverse community of occupants comprises more than 660 local and international entities.
We have long-term partnerships established and maintained since the inception of Globalworth with high-quality national and multinational tenants, which have helped us minimize the impact of higher economic uncertainty and ensure sustainable cash flow generation. 77.5% of contracted rent is from multinational tenants.
What is the outlook for the prime rent environment for offices in Bucharest? Will the rents remain on a growth path?
Considering the current market conditions, we hold the view that in the short term, the prime rental rates in Bucharest are likely to remain stable, although under upside pressures, correlated with the inflation indexation. Still, we anticipate that within 18-24 months, the inflation levels would abate and return to more normalized levels, culminating in a stabilization of the prime rental rates.
How important are the certifications of buildings in attracting new tenants in your projects?
As previously stated, the ESG initiative has gained immense importance in the real estate industry. In the current climate, having a green certified building has become a necessity in the eyes of potential tenants. Our strategy is focused on developing an unparalleled and high-performing portfolio that caters to tenants with strict environmental standards and appeals to employees who seek to return to their workplaces. This is demonstrated by our ongoing commitment to sustainability, as all our office buildings in Romania are green certified. In addition, in 2022 we successfully recertified all our office buildings in Romania with the Well Health-Safety Rating and in September 2022, Globalworth obtained the European certification mark “access4you” for 10 of the office buildings in Bucharest. These are the first buildings to obtain such a certification in Romania.
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