Lavinia Ioniță Rasmussen, Partner at NNDKP's Real Estate practice, spoke with Property Forum about the increasing investor interest in the renewable energy sector, the outlook for the real estate transaction market in 2023 and the law firm’s performance in the real estate segment.
This interview was first published in Property Forum’s annual listing of "The 50 most influential people on Romania’s real estate market”.
How has NNDKP’s real estate practice performed during 2022 and what are your expectations for this year?
For NNDKP, 2022 meant numerous medium and large projects across all segments of real estate. Some important transactions we have started to work on of the scale of the major projects we have witnessed so far on the Romanian market have not been completed. We hope that these deals will be resumed and completed in 2023. From a financial perspective, the real estate practice ended 2022 with results that far exceeded expectations at the beginning of the year.
Which will be the most sought-after property assets by investors this year?
In recent years, the logistics sector has been popular with investors, and we expect this trend to continue in 2023. The office segment in Romania will always remain strong, for two main reasons. It has the most mature market and at the same time, product availability plays in its favor. The retail segment is back on investors’ radar as the worst-case scenarios regarding the trend of moving online have not materialized. However, product availability is limited. For the residential segment, the evolution is interesting in Bucharest. Despite the increase in lending rates, the pressure generated by the lack of permitting of new projects has kept the supply of residential products at a level that has allowed prices to stabilize at a still high level.
In addition, we have noted relevant investor interest in renewable energy projects. Although the recently legislative changes implemented in 2022 did not support this segment as intended by the initiators of the legislative proposal, we see an increased appetite for investment given the needs in the market. logistics and industrial, office and residential segments as well as in renewable energy.
How can developers navigate Bucharest’s complex permitting framework?
Developers have shown, throughout 2022, solidarity and maturity in dealing with the complex issues in Bucharest, both in urban planning and in authorizing new real estate projects. The only correct way to overcome these difficulties remains the legal one, and there are already several legal tools available in this respect, which developers have used so far. Any action or inaction outside the legal limits can be sanctioned and remedied through legal action. It should be noted, however, that this tool, however noble, has significant implications for the time and cost of real estate projects.
What were the most important real estate transactions in which NNDKP provided assistance during the past year?
The NNDKP team has been involved in several important transactions in the real estate market over the past year as well. For example, we assisted in a transaction involving a land plot in Bucharest of approximately 90,000 sqm and developments estimated at over €500 million in a mixed residential, office and retail project. Also in the land segment, we assisted the seller in a transaction involving a land plot of approximately 170,000 sqm for the development of a mixed residential and commercial project. This project will probably be one of the largest developments in the region. We have been involved in a series of transactions with estimated values of more than €50 million (each) which, although not finalized, are on track to resume in 2023. In terms of Warranty Indemnity Insurance, we have contributed to the consolidation of this product in the Romanian market through the assistance offered to both insurers and investors. We also continued to support our traditional clients in the
How attractive is the Romanian real estate market compared to other Central and Eastern European (CEE) countries, given the economic prospects and the legislative framework?
The country has one of the most attractive real estate markets in the CEE region, given the prospects for economic growth. Romania, including the real estate market in the country, has long lagged behind other countries in the region, which is now an advantage, due to the limited supply of real estate coupled with the favourable economic outlook (both in relative and absolute terms).
The main challenges for Romania are often higher borrowing costs, poor infrastructure (although we can now see improvements taking place at a pace never seen before in Romania) and a relatively immature investment market (which has not generated the pressure on yields seen in other CEE countries).
The growth potential of the real estate market is significant for our country, given that Romania has one of the largest populations, but also one of the largest surface areas in Eastern Europe, and the fact that, if we look at the number of square metres available in various sectors (office, logistics, retail), we are still behind other countries. Hence the potential for exponential growth, plus a number of other Romanian strengths (widespread use of English, a high number of IT professionals, etc.).
What are the most important recent legislative changes real estate investors should be aware of?
2022 brought legislative changes in real estate that, while intended to simplify the permitting process, did not always achieve their purpose. In 2022, the authorities implemented the rule that building permit extensions can be granted once for up to 24 months, compared to the 12-month period applicable until 13 June 2022.
As far as the development of renewable energy projects is concerned, 2022 brought several legislative changes in this area, given the energy crisis caused by the armed conflict in Europe, as well as the acceleration of the transition to green energy and the increasing energy independence of the European Union.
Thus, while the development of such projects previously required the approval of a zoning plan (PUZ) to transfer the project land from outside the built-up area (extravilan) within the built-up area (intravilan), the need to obtain a PUZ is no longer a condition. With the amendments adopted in mid-2022 and early 2023, projects of this type can be built outside the urban area (without the need to transfer the land to the urban area), based on a building permit and after the area required for the location of the project has been taken out of agricultural use, but within a maximum limit of 50 ha per project. It should be noted that there are different interpretations of the area limit for projects of this t ype. The possibility of developing such projects within the urban area has also generated much debate.
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