Bucharest City Report, Q3 2012

Report Summary:

ECONOMY/INVESTMENT

conomic Climate: A modest recovery of household consumption appears to have brought the Romanian economy back to expansion in the second quarter, but challenges remain in the following 18 months given a poor outlook for key export markets and a continued need for domestic austerity. GDP grew by 0.5% q/q in the second quarter of 2012, compared with modest declines q/q recorded in the two preceding quarters. Growth for 2012 is expected to fall back to the neighbourhood of 1.3% with a further, modest deceleration to 1.0% in 2013, due to the recession in Western Europe and turmoil in capital markets. Growth is, however, expected to accelerate to 2.7% in 2014 and to 3.5% in 2015.

OFFICE MARKET

Supply: In the 3rd quarter of the year we have witnessed the delivery of 3 new buildings totalling ca. 20,000m2. The majority of the newly completed supply is composed of AFI Business Park (13,700m2) followed by Aviatorilor Plaza (3,300m2) and Monolit Square (2,100m2). New stock, delivered in the first 9 months of the year, reached approximately 44,000m2, a decrease of only 14.4% compared with that of the same period of 2011. Unexpectedly, larger projects including Hermes Business Campus and Green Gate have resumed construction activity and increased the 2013-2014 pipeline. Other projects have also confirmed delivery earlier than initially announced on the market.

RETAIL MARKET

Supply: No new projects were completed in Romania in Q3 2012. In Bucharest, the opening of 3 hypermarkets with small shopping galleries attached will mark the year’s end activity: Auchan City in Giulesti (developed by Immocahan), Cora on Şoseaua Alexandriei (developed by Cora) and Kaufland on Şoseaua Mihai Bravu (developed by Intercora). On a country level, we expect the openings of Ploieşti Shopping City (developed by NEPI), Cora in Bacau (developed by Cora) and Uvertura mall in Botoşani (local developer). 2012’s retail supply will represent slightly over 50% of the supply completed in 2011 (including extensions).

INDUSTRIAL MARKET

There is limited speculative development in Bucharest. The new supply, currently under construction, is either pre-leased or BTS. Completions in Q3 2012 included; the BTS unit of Danone in Bucharest (10,000m2), two owner occupied units in Timisoara, totalling 15,000m2 and an additional 20,000m2 in Ploiesti West Park representing the extension of the unit occupied by BAT and OTZ.

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