Price and yield moves on the Romanian property market will be influenced in the near future by both the availability and the cost of capital, while the overall volume of deals is likely to fall this year after reaching a 15-year high during 2022, suggest Colliers’ consultants.
Furthermore, the gap between prime assets located in Bucharest and those located in other major neighboring capitals has shrunk during 2022, when the investment turnover reached €1.25 billion.
Prime yield levels for retail and industrial remained at 6.75% and 7.5%, respectively, while for offices the yield on prime properties increased by 25 basis points to 6.75%.
“Banks remain available to fund good income producing assets, but there are some emerging signs of cautiousness. The loan margin for a prime asset has moved a bit higher, towards 300 basis points, whereas a year ago, it was around 250 basis points. At present, there are no clear signs of economically distressed projects, however, an all-in cost for EUR denominated loans, currently at c.6%, will create a heavy burden in the financial calculations of any leveraged investor. In terms of demand, we still see good liquidity, especially from equity buyers, who are not affected by the increase in financing costs, but who will be even more selective about the assets they choose. In 2023, we expect to see an increased interest in prime commercial real estate assets or properties that are suitable for conversion,” said Anca Merdescu, Director for Investments Services at Colliers.
This year, yields will remain under some upside pressures, at least through the first half of the year. However, Romania’s economic growth is likely to support growing investments in the commercial real estate sector, including transactions made by foreign players.
