Real estate developers optimistic even as market is expected to stagnate in 2023

More than half of real estate companies in Central and Eastern Europe expect market activity and investment volumes to decrease amid uncertainties related to the conflict in Ukraine, but a similar share (46 percent) estimate current investment average yields to increase, according to the Deloitte 2023 Real Estate Confidence Survey for Central Europe, conducted in Poland, the Czech Republic, and Romania.

By Aurel Constantin

Regarding the evolution of yields, players in Romania are the most optimistic, with only 10 percent expecting earnings to decrease during the target period, compared to 14 percent in the Czech Republic and 36 percent in Poland.

According to the study, 61 percent of participants expect the overall economic climate to deteriorate this year. However, most investors said they were going to buy more (44 percent), while 39 percent were considering freezing their investment activities. The lower availability of debt financing and the uncertain economic climate are the main rea- sons companies are considering a reduction of their activity. However, if immediately after the outbreak of the war more than 50 percent of participants expected it to have long-term consequences, with a significant impact on the regional economy, while only 34 percent anticipated a medium-term effect, by the end of last year, the proportion had reversed, with 58 percent expecting medium-term effects and 31 percent foreseeing a long-term impact.

“The study reveals that the Romanian market is strongly connected with the Central and Eastern European region, with several specific features. For example, local players are more pessimistic about the overall market activity this year, but 90 percent expect the current investment yields to be stable or to increase,” says Alexandra Smedoiu, Partner at Deloitte Romania and Real Estate Industry Leader. “Romanians are less pessimistic about the overall economic climate in their country compared to the other participants, but on the other hand, they are concerned about the tax climate prospects, namely about higher taxes, given the recently announced property tax reform, which has been postponed for the time being. However, in the current context, the results of the study indicate a balanced position among real estate players, characterised by caution and a consolidation of market activities in the countries in which they operate," she added.

Fewer New Homes In Bucharest

The downward trend is visible in the residential sector as well. Approximately 19,000 homes could be delivered in 2023 in Bucharest and its surroundings, according to the “Romania Residential Market Genome” report published by real estate consultancy SVN Romania.

This figure is about 11 percent lower compared to last year’s, when 21,328 homes were completed in the city and its surroundings, following a 21,000 forecast made by SVN a year ago. The record was established in 2021, when 22,010 homes were delivered in the region. Another 8,000+ homes are currently in various development stages and could be delivered in 2024 and 2025, depending on compliance with construction schedules and on the reception speed for completed residential units.

”The supply is shrinking, both as a result of the new macroeconomic context as well as due to the difficult urbanistic regime, but the decline is not as significant as we would have expected. We believe that interest rates are going to reach a plateau soon—those on the target the mass market segment, while about 41 percent target the middle market segment. The premium and luxury segment will record its best deliveries result of recent years, with an estimated total of 800 units this year, or about 4.4 percent of the supply.

Offices For Hybrid Work

Over 40 percent of Romanians believe that a hybrid system, with 3-4 days per week of working from the office, will dominate

90 percent of respondents believe that office facilities make internal communication more efficient. The same figure (90 percent) is associated with people who believe that the existence of spaces dedicated to socialisation and free time make integration easier and strengthen teams, but also with providing a better balance between the professional and personal lives. Furthermore, 8 out of 10 respondents believe that such spaces can save them time.

Projects Awaiting Approval

The development of new projects is still on the table. This year, Speedwell started sales for the third building of its premium residential project THE IVY, located in north Bucharest. Also in the Capital, on the east side, the developer is preparing to start the works on the third phase of its TRIAMA Residence project. Speedwell is also preparing to begin sales for the MEADOWS project in June.

ROBOR segment are already more than 1 percent lower compared to their autumn peak— and while analysing transaction results, which are decreasing, we must take into account the fact that home sales in Bucharest and its surroundings have increased by over 56 percent over the last three years compared to pre-pandemic levels, according to official statistics,” said Andrei Sarbu, the CEO of SVN Romania.

The north area of Bucharest has the largest number of homes due for delivery in 2023, with about a third of the new supply, having become the most important residential development zone in the city. After years of dominance, the west area will attract about 22 percent of the new residential supply. The East and south parts account for about 17.5 percent, respectively 15.6 percent of the new homes that should be delivered this year.

The structure of the new supply will not see significant changes in 2023, SVN Romania’s report also notes. About 54 percent of the new homes due to be delivered this year

2023, and more than a quarter adhere to the practice of spending 1-2 days per week at the office. At the same time, a quarter of employees believe that working exclusively from the office will be prevalent this year, and only 7 percent are betting on exclusively remote work, according to a survey by Genesis Property, among 1,031 respondents nationwide.

“The study confirms that the future of work is hybrid. Employees want the flexibility to work from home or the office depending on their unique needs and preferences. At the same time, we understand the value of in-person collaboration and socialisation for driving innovation and building strong team relationships. Precisely to meet this need, we are developing YUNITY Park, a modern concept that prioritises flexibility, comfort, and collaboration, which are essential for companies in their mission to attract and retain top talent,” said Maria Jianu (Tudorica), Commercial Real Estate Manager at Genesis Property. The results of the study suggest that the main benefit of physical presence is face-to-face interaction with colleagues, and

Currently, Speedwell is working to obtain permits for CityZen, a large-scale project on Calea Grivitei (exGriro), which aims to improve living conditions for current and future residents of the area by developing apartments, offices, services, restaurants, cultural activity spaces, food markets, craft workshops, extended public spaces, parks, running tracks, kindergartens, public parks, and recreation spaces.

“We’ve chosen to develop projects in several areas of Bucharest, where we felt there was a demand from potential buyers, thus contributing to improving life in those communities. However, in some areas, and especially around the centre of the capital, we have noticed a need for substantial investments in order to achieve harmonious development at the city level. These investments generate a series of positive effects, including a higher standard of living, but also an improved image for the capital, with projects worthy of a European metropolis that respects its past, but especially its future,” said Jan Demeyere, Architect and Co-Founder of Speedwell.