Report: Real estate investments up 18% in Romania in first quarter, difficult conditions ahead

The real estate investment volume for Q1 2013 in Romania was of EUR 116 million, 18 percent higher than in same period last year, according to real estate agency's DTZ Echinox' report. The office sector accounted for 65.7 percent of the quarterly volume, while the retail sector made-up a further 21.4 percent. Prime yields remained steady from the previous quarter, according to DTZ Echinox, at 8.5 percent for both the office and retail sectors. “In light of the low investment volume recorded in 2012 at around EUR 300 million, coupled with the relatively strong activity reported for Q1 2013, a slight improvement is predictable by the end of the year, when the total volume might reach over EUR 300 million,” said Cristian Ustinescu, Director of Investment Department DTZ Echinox. However, DTZ Echinox expects difficult market conditions for investors in real estate over the rest of the year. Total investments volume in 2012 reached EUR 299 million, excluding undisclosed transaction values. Lending capacities of banks are expected to be “tight” over 2013, which will clearly have an impact on investment activity. Equity players are likely to take advantage of the credit drought and the stronger negotiating position the market conditions will gift them, according to DTZ Echinox. These conditions are in all likelihood going to cause a lot of safe play in the real estate market and a strong trend towards prime assets in top locations, DTZ Echinox predicts. International investors will continue to play a key role and the overall market will follow their preference for prime assets and office assets with blue-chip tenants. DTZ Echinox does not foresee any major new players entering the Romanian market over the short to medium term. However, the effect of the Cyprus banking crisis and a lack of confidence even in sovereign bonds may encourage the redirection of capital to real estate assets, which could help the market to recover. DTZ Echinox noted some significant transactions over the first quarter of 2013 in Romania including the purchase of the Lakeview office complex by South-African investment fund New Europe Property Investments (NEPI) for EUR 61.5 million and the sale of eight InterCora retail parks for EUR 25 million. editor@romania-insider.com