Alina Necula, Country Manager Romania Lion’s Head, talked to Property Forum about the company’s plans to develop its first logistics projects in Romania and the strategic leasing transactions closed in the company’s flagship office project, Oregon Park in Bucharest.
This interview was first published in Property Forum’s annual listing of "The 50 most influential people on Romania’s real estate market”.
How was 2023 for Lion’s Head in terms of office occupancy and leasing deals?
We take pride in having extended our partnerships with our two flagship tenants in Oregon Park, market leaders in the IT and financial services sectors. The recent prolongation agreements prove our ability to extend our business partnership, as space and service providers.
Over 43,000 sqm out of an overall 70,000 sqm leasable area in Oregon Park was involved in new lease contracts, the equivalent of 62,5% of the project’s leasable area. We are glad to announce that we managed to secure all existing tenants close to termination by signing prolongation contracts and occupying vacant spaces with new tenants entering the Oregon Park community. Thus, Oregon Park is currently in a favourable position with a 100% occupancy rate.
Being able to ensure a suitable working environment for companies coming from different industries, different cultures and different needs concurrently shows the versatility of our premises.
What are your priorities as Country Manager of Lion’s Head?
My top priorities revolve around two main pillars – business and team development. You have to build a stable business to which your team will be fully dedicated and you also have to build a strong team of professionals for your business to succeed. We have managed to create compact local problem-solving teams made up of senior-level professionals, adaptable people, having a corporate background and an easy understanding of our partners’ needs. My major objective as manager is to preserve, motivate and expand this team at the local level.
In terms of business development, we are paying special attention to launching the first logistics project in the Lion’s Head portfolio in Romania. At the moment, however, we are in the planning phase and analysing the feasibility of several work options.
What are your plans for your flagship office project Oregon Park in Bucharest?
Our key objective is maintaining a 100% occupancy rate for Oregon Park and intend to also secure the spaces that are close to termination in the upcoming period. What is more, we consider the relationship with our tenants not just a “one-time shot” so we permanently strive to improve the community and to provide not just an office space, but an enlarged palette of customised services, generally known as the “space as a service” concept.
What is your sustainability strategy for Oregon Park?
Lion’s Head continuously aims to improve the ESG performance of the business park. Most of the time, it is more difficult to implement measures increasing the ESG factor of an existing building than having them in mind when erecting a building from scratch. Thus, in order to successfully achieve such a target for an existing portfolio, as in the case of Oregon Park, I think it is necessary to find a balance between understanding the technical side of this action and the limitations of your building, as well as choosing those improvement measures that are relevant to your tenants. In terms of energy consumption, we are very ESG compliant. We are quite cost-oriented and optimise everything. We have all the technical instruments to do that.
How aware are your tenant companies of the ESG topic?
Not only are they aware, but it comes in the tenant description, so to speak. When targeting future tenant companies, we try to keep the existing profile mix – international blue chip companies that should align to our values, to be very ESG-oriented. There will be an increasing trend in companies searching for a value-add experience that nurtures productivity, collaboration, and wellbeing and this is the business mantra Lion’s Head is eager to embrace.
Which industries hold the biggest share in your tenant portfolio present in Oregon Park? Have you recorded any changes compared to 2023?
Due to our recent lease prolongations, we maintain broadly the same tenant configuration compared to 2023 with our two flagship tenants coming from the IT and financial services industries.
How are your companies in your Bucharest-based building structuring their work arrangements? Is hybrid work becoming mainstream?
At the moment, around 65 to 75% of the 5,000 professionals on the premises are coming to the office. The setup is three days per week for most of the tenants: Tuesday, Wednesday and Thursday, while Monday and Friday they work from home, with the hybrid work situation still due to stabilise in 2024.
What is your outlook for the Bucharest office market on rent and new demand?
In the office sector, it is a new approach for players who have understood that a workspace should no longer be about raised floors and modular partitions. We are moving from space providers to service providers, and companies that occupy these spaces are not just tenants, but permanently assisted customers.
Thankfully, this year seems to be looking up even more than the previous one, although economic and geopolitical factors serve as complications. While new buildings will probably be sparse with only one new project announced, demand has not taken as big of a hit. In fact, well-located ESG-compliant office spaces will be in much higher demand.
How competitive is Romania’s office market compared to other countries in CEE?
The prime yields have shifted upward across all segments due to the increasing financing costs, in line with the trend registered in the entire CEE region. Even though the increasing interest rates will continue to put pressure on the exit yields, Romania remains an attractive market, as the gap between the local benchmarks and the other CEE markets, such as the Czech Republic, Poland or Hungary is still relatively high in all market segments.
In terms of rent, Bucharest has some of the lowest prime rents across the region. If we look at the CEE market more closely, in Q3 year-on-year, there was a decrease in gross take-up in Prague (by 34%) and Bratislava (by 23%), whereas it rose in Budapest (by 34.2%) and Bucharest (by 95%).
While foreign investors from mature markets, such as the United States, Germany or Sweden, remained dominant in the Polish market in 2023, we have noticed an increasing activity of the domestic capital in the other markets. This comes as a result of a better understanding of the market particularities, with the local investors having a higher appetite for risk.
