ACROSS: Which key sectors of the Romanian market do you expect to generate the highest growth within the next years?
LIVIU TUDOR: When we look at the Romanian commercial property market over the past years, we can see notable growth in the office, industrial and residential segments. Driven by the promising market situation and increasing demand, developers have ramped up business in all sectors.
In 2018 and onward, the industrial sector will continue the positive trend with new projects and expansions of the existing space dominated by logistics companies and retailers. Also, the office market is maintaining its growth trend which is nonetheless expected to decrease in the following years.
As in previous years, the main demand drivers are the IT&C industry, the energy, manufacturing and automotive sector, followed by FMCG and services. Bucharest is the dominant location for commercial real estate investment, offering good infrastructure facilities and an established business environment that keeps investor’s and tenant’s focus.
ACROSS: Regarding the retail real estate sector, can you point out some of the main challenges and opportunities of the Romanian retail real estate market?
TUDOR: We can outline two key areas for retail developments: the construction of retail parks in small cities and the extension of existing commercial areas in larger cities. While the rise of e-commerce may affect the need for retail space, Romania continues to be highly competitive in the region.
Investors’ interest in retail real estate in Romania has increased in the past years as the positive economic conditions, beneficial capital flows, good macro performance increased market liquidity and generated great financing opportunities. All of that creates an suitable environment for investment and development. With high consumption, the retail segment will continue to attract investments.
The Romanian Association of Building Owners (RABO) is promoting this effort by working in close collaboration with industry leaders and EU organizations to ensure a harmonized framework for property investments, urban rehabilitation, new developments, real estate financing, energy efficiency, social inclusion, and environmental protection. As a member of the European Property Federation (EPF), RABO’s goal is to represent real estate owners, investors, and developers while taking advantage of great resources and know-how from property markets across the EU.
ACROSS: For how long do you expect the ongoing trend for construction and investment in the retail real estate sector to continue?
TUDOR: In Romania, shopping centers are fast-growing and highly popular destinations for shopping. Given the economic growth and market potential, retailers are given a powerful incentive to expand to Romania. We expect new brands to enter the market and existing brands to focus on consolidating their market position or increasing their presence.
The stable growth trend, which started in Romania in 2015, will most likely continue in 2018 and 2019 unless extraordinary circumstances occur. We expect new investors and investment opportunities to arise all across office, industrial, and retail segments.
ACROSS: What is your prediction regarding new investors entering the market in 2018?
TUDOR: At this moment, Romania attracts great interest from many international investors in the manufacturing and agro-industrial sector, but also from research, development, and innovation projects as well as electric and thermal energy production and delivery (energy efficiency and use of renewable energy resources) industries. We expect 2018 to become the best year of the last 5-10 years in terms of new investors entering the Romanian market.
By choosing Romania as a destination for developing businesses, investors gain access to many advantages particular to our country. Some of these advantages are closely related to the market and location, human resources, good macro performance, and last but not least, the yields for the local market are very attractive from a regional perspective which support the positive vibe of the Romania real estate market.
ACROSS: The EU’s General Data Protection Regulation will take effect on May 25, 2018. How will this regulation affect the Romanian retail real estate market?
TUDOR: Adoption of the GDPR marks a milestone in data protection laws in the EU. The above-mentioned regulation enters into force on May 25, 2018 and it is directly applicable in all current 28 member-states, including Romania. All companies, irrespective of their field of activity, thus including real estate companies, have to comply with the stricter rules on personal data processing introduced by the GDPR.
GDPR is viewed by many as one of the most important pieces of legislation issued at European Union level in the last years because the protection of natural persons in relation to the processing of personal data is a fundamental right on which the EU stands. The regulation lays down rules for the protection of natural persons with regards to processing personal data and the movement of personal data. The difference between the current maximum fines imposed under Law no. 677 / 2001, which cannot exceed EUR 22,000, and the fines under GDPR, which can go as high as €20,000,000 or 4% of the annual worldwide turnover, are of relevance to any company–including those from the real estate industry.
Although real estate companies are not the main targets when it comes to the impact of the GDPR, they will have to pay more attention to data protection for their marketing strategies and, in case of companies from the residential sector, the manner in which they attract potential clients and/or use their personal data.