The Investment Market

The Bucharest office market in 2007 has been characterized by increased supply, rental growth, strengthening demand and further improvements in the quality of stock. The supply is expected to reach 1 mil. sq m of modern office space early in 2008. More than 50% of the new supply scheduled for delivery by the end of this year has already been completed and was entirely leased before completion. The under-supply situation, with vacancy rates at under 3% for existing stock, will result in landlords maintaining a strong position in negotiation with tenants, continuing into 2008. The availability of offices to be delivered in the following 6-8 months stands at 45%. It is estimated that by the end of 2007 the total office take-up will exceed 200,000 sq m. More than half of this has already been closed. The poor of supply for immediate occupation (less than 6-12 months) restricts the growth of the demand. The investment market in Romania in 2007 has been characterized by continued compression of yields and the start of the first "re-sale" deals of properties acquired in the period pre-2007. If 2006 was considered a record year in terms on investment into property, the market has set another new precedent in 2007. At the time of writing (September 2007) approximately ?1.5 billion has been transacted in 2007 to date. A large proportion of the transactions have been closed by Immoeast, who remain the largest investor (in terms of investment volume) on the Romanian market. Two thirds of the total investment volume is linked to major cities around the country. As such cities are just starting to develop and do not have good quality product yet, most of these deals are forward-purchase agreements. The cities/areas outside the capital are seeing the most development are: Constanta, Cluj-Napoca, Arad, Timisoara, Brasov, Suceava, Iasi, Targu-Mures, Oradea,Bacau. The industrial market in Bucharest will double its stock by the end of the year, reaching a total stock of over 600,000 sq m.

GE Real Estate and Helios Properties will develop a chain of 7 warehouses around the country - the Olympian Parks - starting with 2008. Immoeast is also involved in the development of another logistic warehousing chain in 10 major cities around the country. The west part of the country is most developed. Nearly 40% of the modern industrial stock outside Bucharest is located in Timisoara and the surrounding areas, due to the vicinity with the Hungarian border and the specific of foreign investors who have come to the market. Rents for office space have experienced a slight increase over the last 12 months and are expected to stay high in the following 12 months. Retail shopping centre rents are decreasing slowly as more competition shows up and projects under construction are approaching their completion. Industrial rents are rather stable but also decreasing.