Costin Nistor, Managing Director of Fortim Trusted Advisors, member of the BNP Paribas Real Estate Alliance, detailed for Property Forum the real estate consultancy’s development plans for this year, also talking about the segments that will propel the investment market to over €1 billion in 2022.
This interview was first published in Property Forum’s annual listing of "The 50 most influential people on Romania’s real estate market”.
What is the pulse of the Romanian real estate market at present from Fortim’s perspective? And how do you think it will evolve in the coming period?
We are optimistic and believe that from the second part of this year, at the latest in 2023, we will leave behind the period of speculation and caution in the commercial property market, caused by the COVID-19 pandemic and the geopolitical conflict. Real estate investment is moving forward, but from 2023 it will be well above pre-pandemic levels. And this is a trend that will be felt across the European Union, according to the European Property Market Outlook H1 2022 study by our colleagues at BNP Paribas Real Estate Alliance. In Romania, the office space rental market is now in favour of tenants, getting more incentives and facilities than in previous years, but we expect that from 2023, this trend in the Bucharest office market will reverse, becoming a landlord’s market, as demand is currently growing, while deliveries are slowing during 2022-2023. The beginning of 2022 was a good year for office rentals, primarily because demand for new space increased, mostly from companies in the IT&C or Professional Services sectors, so this year’s result could exceed that of 2021. On the other hand, the supply of new space is falling significantly. Last year, 246,437 sqm were leased in Bucharest, while in 2022 office buildings totalling around 140,000 sqm are announced – a 40% reduction in new stock. Almost all of these new office buildings have received planning permission and started work before the pandemic starts before 2020. In the last two years, very few new projects have been authorised and those that have received the green light are small, with small exceptions that do not substantially change the future office supply. We expect this situation to be exacerbated by the increase in the price of building materials this year and, in particular, the lack of predictability of construction costs in the immediate future due to the conflict in Ukraine, which is being felt across all real estate markets in Europe where our colleagues in the BNP Paribas Real Estate Alliance operate.
The biggest risks at the moment are rising inflation and rising prices for building materials, which are common across the European Union. However, the fact that we are a member of the EU and NATO gives us stability and peace of mind in terms of geopolitical conflicts. The stability of the country is confirmed by the volume of real estate investments in the first months of this year and a large number of investors looking for opportunities in the market. Thus, at the end of 2022, we could exceed €1 billion worth of property investments in Romania. As the first half of the year has been foreshadowed, most acquisitions will be in the office sector, but the retail area will come in strongly behind. This is the result of a growing interest in this segment and the cyclicality of this market segment, which is coming back into the trend at the European level. The logistics segment has accelerated in 2021, both in terms of the level of investment in industrial parks with a total volume of 284 million euros, second only to office, and rentals, driven by the high demand for warehouse space. This year, the industrial sector got off to a slower start, but the coming quarters will see record deliveries of industrial space, which could lead to a resumption of acquisitions in the industrial segment. As a trend, there is also a diversification of portfolios, with more functions and types of real estate investments. For example, the Hungarian company Kesz entered Romania as a construction company, then developed its own office project in Cluj-Napoca, Hexagon Offices, and is now planning a large-scale residential project in Bucharest, in the Casa Presei Libere - Petrom City area. Last year, the most active investors were from Austria, the Czech Republic and Hungary. This year, investors from South Africa, Hungary and Belgium stand out. Shopping centres and office buildings are the most sought-after. Among the biggest deals are the acquisition by S Immo, which bought the Expo Business Park project at a yield of 6.8-7.1% for around €100 million, and the acquisition by MAS Real Estate, which bought a portfolio of six regional shopping centres for €320 million. But there are also other deals in the pipeline or negotiations with investors in Austria, South Africa or Asia, USA. The trend is for the attention of investors and tenants alike to shift towards buildings that meet green and sustainability standards across all property segments. Strategic investors are now also interested in Environment, Society and Governance (ESG) principles.
We are extremely proud that in a process under the direction of our property management team, America House, a project owned by Morgan Stanley and David Hay with ADD Value Management, has achieved the first BREAM Outstanding certificate after an investment of over €6.5 million.
You have talked extensively about the real estate market in Bucharest. What other regions and cities are you considering nationally?
After Bucharest, we focused on the central area of the country. We have local branches in Cluj-Napoca and Târgu Mureș. Our company has the largest portfolio of property management services in Cluj County in terms of the number of projects, managing both Class A office buildings and commercial premises and an industrial park. In Cluj-Napoca, we managed to take over on an exclusive basis a brand-new office project, delivered in December 2019, Hexagon Offices, with a total area of 21,600 sqm, which we managed to fully lease during a difficult period, during the pandemic. Naturally, we continued our collaboration with the landlord and now have this office project under Property Management services. Companies that we have assisted in renting office space in Bucharest, we have also helped to expand in Cluj-Napoca. And if companies usually expand from the capital to regional cities, we did the opposite, we brought a strategic client to Bucharest, which will invest in a residential project. We assisted Kesz Group, a Hungarian investor present in Cluj- Napoca, to identify and acquire land for the development of a residential complex in Bucharest. This is also the strategy we want to follow, to be a “one-stop-shop” for our clients.
What are your plans for the next period?
At present, we have under management commercial spaces – from all real estate segments - office, industrial and retail – totalling 115,000 sqm, but we intend to increase this area and reach at least 150,000 sqm by the end of this year. In Advisory Services, activity this year is above initial estimates, and we will exceed revenues in 2021 by at least 30%. This year, we also aimed to grow horizontally, and we have been able to develop our Real Estate range of services a lot. At the beginning of the year, we were active in the Property Management, Office Advisory, Valuation and Capital Market service segments. In the meantime, we have also entered the Industrial Advisory and Retail Advisory segments and will soon start our first Marketing&PR projects for office buildings and Residential Advisory. As a result, we are constantly expanding our team and recruiting professionals in the field to ensure an optimal flow of these complex projects.
