Rüdiger Dany, CEO of NEPI Rockcastle, talked to Property Forum about the group’s €650 million development pipeline, demand trends in Central and Eastern Europe (CEE) and its investments in photovoltaic panels across the portfolio of assets.
This interview was first published in Property Forum’s annual listing of "The 50 most influential people on Romania’s real estate market”.
What were some of NEPI Rockcastle’s financial and operational highlights from 2023 and what are your core objectives for 2024?
Last year was marked by solid growth in all the nine markets where NEPI Rockcastle, the largest owner, operator and developer of shopping centres in CEE, is active. The record results were supported by an increased level of sales by tenants, on the back of a high level of consumer confidence in Central and Eastern Europe.
Group net operating income reached a record €491 million, 21% higher than in 2022.
In 2023, we saw other major highlights including tenant sales rising by 12.6%. The value of the average shopping basket was 7.8% higher and the number of visitors increased by 4.6% over the same period.
I would also like to highlight that 2023 was one of the best years for NEPI Rockcastle in terms of increasing the pace of our development activities. We rolled out several important expansion and refurbishment projects for properties in Romania, Bulgaria, and Poland. One of last year’s crowning highlights was the opening of our newest asset Promenada in Craiova, Romania.
In 2024, we plan to continue growing and enhancing our portfolio by expanding, constructing, and refurbishing. This year will be dedicated to strengthening our leading position in the CEE region retail market and becoming a stronger presence at a European level, as well as maintaining a laser focus on our ESG investment strategies.
Our sustainability targets include reducing the company’s carbon footprint from operations by 70% and our embodied carbon footprint from construction by 30% by 2030, compared with 2019 levels. A priority is also the expansion of the successful Romanian solar energy programme across NEPI Rockcastle’s entire CEE portfolio.
We also remain committed to investing in further developing our shopping centres as social ecosystems offering an all-round experience beyond retail to the communities they serve and bring together.
Rüdiger Dany
CEO
NEPI Rockcastle
How did the market receive your new shopping mall in Craiova?
Promenada is one of NEPI Rockcastle’s most ambitious projects as a 63,700 sqm GLA retail scheme in one of Romania’s largest regional cities, and it was very well received by regional and international retailers in the market and just as importantly, by the local community in Craiova.
We inaugurated this scheme following a €136 million greenfield investment which brought multiple firsts for both the Romanian market and at a portfolio level for NEPI Rockcastle.
This was the largest retail development by size and investment value opening in CEE in 2023. Promenada brought a breath of fresh air and a much-needed boost to the local region, where there was a lack of large development projects in the post-pandemic years and also the entire commercial retail market in Romania. Promenada directly and indirectly created more than 1,500 new jobs for the city and surrounding region.
This is the first development by our Group where renewable energy production was integrated over the parking areas, which together with PV panels on the roofs supply 70% of the energy needed by the shopping centre and its tenants.
Promenada has also aroused a lot of interest from retailers, highlighting the retail market growth potential that second-tier cities such as Craiova have.
What is the size of your development pipeline in the region and when do you expect to fully deliver the new projects?
NEPI Rockcastle has a budget of over €650 million for 168,800 sqm of development and refurbishment projects underway, or planned, this year in Bulgaria, Hungary, Poland and Romania. The program will extend for different time periods, depending on the complexity of each project.
What is your forecast for retail demand in CEE this year? How competitive is the Romanian market from this perspective?
Retail demand in CEE remains strong. In our markets, the consumer has proven to be resilient, and we have seen robust growth in retailers’ sales.
Romania’s economic growth rate is above the European average and household income and consumer spending are holding up well, despite macroeconomic challenges.
We see a lot of international brands and big regional retailers moving into CEE now, particularly into Romania. They are attracted by higher margins due to lower costs and higher forecast growth in sales in the region.
What are some of the regional trends you are seeing in the regional retail industry?
The CEE retail market will continue to offer good opportunities. We have recently seen an influx of international retailers into our markets, which are becoming ever more attractive due to higher growth prospects and lower operating costs.
Another trend is the acceleration of digital transformation and the use of AI technologies. This translates into reshaping consumer habits, compelling us to rethink traditional retail models.
Let us not forget about people-friendly developments. Shopping centres are becoming places for high-quality experiences that gather communities around them. A focus on ESG remains an important trend and, more than that, a necessity, with the energy transition presenting us with commercial opportunities too. Working together as an industry on sustainable initiatives is a win-win scenario for us, but also for our business partners and communities.
What is the size of NEPI Rockcastle’s portfolio in Romania and what is your opinion on the potential of regional cities?
NEPI Rockcastle’s largest market is in Romania, where some 38% of our total €6.8 billion CEE portfolio is located. We own a total of 28 assets (including seven regional strip centres) here, both in Bucharest and many regional cities. We strongly believe in the regional hubs that can act as real engines of economic and social development.
Are you looking to expand your renewable energy generation programme across the real estate portfolio?
Definitely. This project came about in 2020 when we started to think about how we could realistically hit zero carbon emissions by 2028. We began implementing it across our Romanian portfolio in 2022 and by the end of 2023, we completed the installation of solar panels in almost all our Romanian properties. I can tell you now that the results exceeded our original expectations.
After the initial trial and some €30 million of investment, 27% of the company’s and its tenants’ total energy consumption in Romania is now met by on-site production of renewable energy from photovoltaic panels. The great thing about this renewable energy generation programme is that it not only helps us reduce our carbon footprint, but it also brings an additional line of revenue.
