RESEARCH

Romania
Market
Overview
Full speed ahead
H1 2015

Record pre-leasing activity in

the office market, characterized
by fallen vacancy rates for
class A buildings

Yield
compression
within all
sectors

Flourishing sales
and higher rental
budgets in the
residential market

CONTENTS
03

INTRODUCTION

04

ROMANIAN ECONOMIC OVERVIEW

06

OFFICE MARKET

09

LAND MARKET

10

INVESTMENT MARKET

12

RETAIL MARKET

12 SHOPPING CENTRES
14 HIGH STREET
15

INDUSTRIAL&LOGISTICS MARKET

17

RESIDENTIAL MARKET

19

PROJECT MANAGEMENT

20

HOTEL MARKET

21

PROPERTY TAXATION

22

LEGAL ASPECTS

ROMANIA Market OVERVIEW H1 2015

INTRODUCTION

Romanian market
In the office market pre-leasing
activity accounted for more
than a third of the total take-up
in H1 2015, a 30% increase
compared to the same period of
2014. IT&Communication was again
the dominant sector accounting for
more than 50% of the total demand,
whereas Calea Floreasca/
Barbu Vacarescu was the most
sought after submarket.

European outlook
The revival of investment activity in
Europes peripheral markets has
gathered pace. Spain and Ireland,
which have led the peripheral market
recovery over the last 18 months, have
continued to attract heightened levels
of investment, but the most impressive
increases in activity during H1 came in
Italy and Portugal.

The land market maintained the

dynamic momentum started last
year, with strong interest of small
residential developers for both small
land plots located in the prime
central area and 1,0005,000 sq m
land plots located in central and
peripheral areas. Office developers
continue to show great interest in
land plots located in the northern
and north-western areas
of Bucharest.
The Bucharest residential market
is registering a good performance
in 2015, the enhanced activity in
supply proving the developers'
confidence in the Romanian
market. Among the announced new
phases of the existing residential
compounds, new trends become

Following the strong first half to 2015,

Knight Frank forecasts that annual
European commercial property
investment will reach approximately
230 billion. This would make 2015
comfortably the best year since the
market peak of 2007, when investment
reached 257 billion.

The weight of money targeting the

property sector led to continued yield
compression in Q2, both in core and
peripheral markets. Prime office yields
hardened in cities such as Amsterdam,
Lisbon, Madrid, Milan and Paris. Knight
Franks European weighted average
prime office yield moved in to 4.90%,
its lowest level since Q3 2007.

bolder on the market: mixed-use

projects gathering office, retail and
residential units. The market is still
relying on Prima Casa program to
generate sales.
In general, market sentiment is
positive and we are looking forward
to seeing the impact of the new
fiscal and taxation legislation on
the real estate market, but also the
opportunities within.

HORATIU FLORESCU
Chairman & CEO
KNIGHT FRANK ROMANIA

While investment activity is buoyant

in the large majority of European
markets, occupier market trends
remain more varied. Rental growth
was patchy in Q2, with Dublin, Madrid
and Vienna being among the small
number of European markets to
record increases in prime office rents.
The Irish capital remains Europes
standout performer for rental growth,
with prime office rents rising by 28%
year-on-year.

MATTHEW COLBOURNE

Associate, Commercial Research

KNIGHT FRANK

HIGHLIGHTS
Romanias economic growth
profile has improved in recent
quarters due to a combination of
local and external factors.
We foresee real GDP growth at
3.2% in 2015 and 3.5% in 2016,
based on household consumption.
Investments are recovering at
present, but their outlook remains
surrounded by risks.

Romanias economy:
So far, so good
by Eugen Sinca, Senior Analyst, BCR
Romanias economic growth profile
has improved in recent quarters due
to a combination of local and external
factors. The Eurozone economy,
Romanias main trading and investment
partner, is on track for a modest
recovery in 2015; real GDP growth is
expected at around 1.5% in 2015 and
1.8% in 2016, after negative growth rates
in 2012-2013 and unimpressive growth
in 2014. The ECBs asset purchase
program seems to be paying off and
lending to the private sector is gradually
improvingacross the continent, low oil
prices are already supporting household
consumption, while European export
companies are benefitting from the
depreciation of the euro vs. the dollar.
Only the Chinese economic slowdown
and the unsettled Greek sovereign
debt problem seem to cloud Europes
economic outlook in future quarters.

to the real GDP growth rate in 1H15.

The contribution of gross fixed capital
formation to real GDP growth was also
positive, at 1.5pp, while net exports
subtracted 1.5pp from the total growth
rate, because imports grew faster than
exports. The key takeaway from this data
is the ongoing recovery of investments,
which havealready managed to grow for
three quarters in a row up to 2Q15, after
a protracted contraction of almost two
years. During the last three quarters,
imports of goods and services have
been faster than exports, which is yet
another indication that investments are
gaining traction.
We foresee Romanias economic growth
at 3.2% in 2015 and 3.5% in 2016, based
on household consumption. Stronger
economic growth is not ruled out for
2016, but this depends on the precise
fiscal measures that would be enforced
by the government. A first look at the
new Fiscal Code suggests that the direct
impact on the economy is centered
upon consumption, while private
investments could benefit indirectly

Romanias real GDP rose by 3.7% y/y in

1H15, driven by household consumption,
which added 3.6pp to the overall growth
rate. Government consumption went
up modestly and contributed 0.1pp

Figure 1

Comparative development of different economic sectors

(4Q07=100%, real growth)
140%

RETAIL SALES

INDUSTRY

CONSTRUCTION

GDP

130%
120%
110%
100%
90%

Source: National Institute of Statistics, BCR Research

70%

80%

ROMANIA Market OVERVIEW H1 2015

from the rising disposable income of

Romanian consumers, which could in
turn make local companies invest more
in new production facilities. Besides the
fiscal measures embedded in the new
Fiscal Code, consumption is at present
being driven by very low inflation,
strengthening consumer confidence,
rising retail lending and positive trends
on the labor market. The consumer
confidence indicator released by the
European Commission for the Romanian
economy has returned to pre-crisis
levels, in line with stronger job creation
and a pickup in nominal wage growth
towards 8% y/y. The outlook for
investments is surrounded by risks due
to the disappointing absorption of EU
structural funds and sluggish growth of
corporate loans.
Annual inflation turned negative in June
2015 after the cut in the VAT rate for food
and could remain so until May 2016.
The reduction of the standard VAT rate to

20% as of January 2016, along with low

fuel prices,are the top elements behind
our scenario of a temporary fall in the
price level below zero. The central bank
is unlikely to respond with extended
monetary easing to this temporary
decrease of inflation brought about by
a supply shock like the change of the
taxation regime. Top officials from the
central bank have recently suggested
that even a rate hiking cycle is not
ruled out in 2016 to counterbalance the
impulse delivered by the fiscal easing
to aggregate demand at a time when
household consumption is already
growing.

the FX variations on inflation or to further

economic growth.
The main risks for 2016 come from
the possible deterioration of investor
confidence against the backdrop of
ambitious fiscal easing, parliamentary
elections and tensions in emerging
markets like China. Keeping the budget
deficit under control at 3% of GDP is
paramount for safeguarding Romanias
attractiveness on global capital markets
during a period when private capital is
rather scarce and selective.

The Romanian leu could trade between

4.40 and 4.50 most of the time in 2016
and the central bank is likely to maintain
a discreet presence on the FX market,
with possible interventions when daily
variations of the FX rate exceed 1%.
Bouts of volatility are not ruled out, but
we do not see any sizable impact from

HIGHLIGHTS
Office take-up in Bucharest
reached 140,000 sq m in H1 2015,
a 5% increase on H1 2014.
IT&Communication was again the
dominant sector accounting for
more than 50% of total demand,
while Calea Floreasca/Barbu
Vacarescu was the most soughtafter submarket.
Vacancy rates have fallen
due to the limited number of
developments, but there is a
significant office development
pipeline for the next few years.
Pre-leasing activity accounted for
more than a third of total take-up
in H1 2015, a 30% increase on the
same period in 2014.

OFFICE MARKET
Overview
In the first half of 2015, only two office
buildings totaling 44,000 sq m were
delivered to the Bucharest market.
The limited amount of new stock has
prompted a fall in the vacancy rate which
declined by 1.1 percentage points for
class A buildings. Demand for office
space is marginally higher than in 2014,
although H1 2015 saw no new entrants
to the market.
In general, market sentiment is positive,
with several high profile office projects
currently under construction, the majority
being developed speculatively. In
addition, by the end of 2016, we expect
the amount of supply in Calea Floreasca/
Barbu Vacarescu to exceed that of the
Central Business District (CBD).

Supply
H1 2015 saw the delivery of one Class A
building (Green Court II) and one class
B building which had been converted
from a shopping center (City Offices).
These two buildings comprised around
44,000 sq m of space, bringing the total
modern office stock of Bucharest to 2.16
million sq m.
In terms of submarkets, around 60% of
total new supply was delivered in the
South, with the remainder delivered in
Calea Floreasca/Barbu Vacarescu.
In the rest of the country, H1 2015
recorded only two new completions
both in Cluj-Napoca and comprising
the second phases of existing
projects: Liberty Technology
Park II (11,250 sq m) and
Cluj Business Center II (11,000 sq m).

Demand
In H1 2015 total leasing activity reached
140,000 sq m for Class A and B office
space, a slight increase of 5% compared
with the same period in 2014.

In terms of transaction types, pre-leases

were dominant, accounting for more
than a third of the total, followed by
relocations and renegotiations with 25%
and 19% respectively.
The buoyant level of pre-leasing activity
is particularly noteworthy, with the
trend started in the first half of 2014 and
continuing into 2015. Indeed, the volume
of pre-leasing deals reached 50,400 sq
m on H1, a rise of 30% on H1 2014. Calea
Floreasca/Barbu Vacarescu submarket
accounted for the largest share, with
over 50% of the total pre-leasing activity,
followed by the Center-West area.
The total number of transactions
signed in H1 2015 was in line with H1
2014, with the average area remaining
broadly similar (circa 1,400 sq m).
Large transactions, above 5,000 sq m
dominated market activity, accounting
for more than 45% of total gross takeup, a significant increase on the H1 2014
figure of 28%.
In H1 2015 the share of deal volumes
by submarket was similar to that seen
in 2014, with Calea Floreasca/Barbu
Vacarescu accounting for 40% of the
total. The neighboring submarket, Dimitrie
Pompeiu, accounted for 26% of total,
while other submarkets such as Presei
Libere Square, CBD, Center and CenterWest accounted for around 57%.
Major transactions included Genpacts
pre-lease in Hermes Business Campus
III (Dimitrie Pompeiu submarket) of
22,000 sq m and Oracles pre-lease of
20,000 sq m in Oregon Park, building
A. Other notable transactions were
Oracles 10,400 sq m deal in Sky Tower,
Carrefours relocation in Green Court II
(6,300 sq m) and NNDKPs pre-lease of
5,700 sq m in Bucharest One.
As in previous years, the biggest source
of demand came from the IT&C industry
which accounted for more than 50% of the
total. Professional Services continued
to help drive take-up (15% of the share),
while the Medical & Pharma and Retail
sectors each accounted for 7%.

ROMANIA Market OVERVIEW H1 2015

46+34+182A 36+25+19155A 40+26+765421A

Figure 2

Figure 3

Figure 4

H1 2015

H1 2015

H1 2015

Demand by leased area

Demand by type of transaction

Demand by submarket

>5,000 sq m 46%

Pre-lease 36%

1,0003,000 sq m

Relocation 25%

34%

<1,000 sq m 18%

Renegotiation/renewal

19%

3,0005,000 sq m

New demand/new entry

15%

2%

Expansion

Source: Knight Frank

Source: Knight Frank

5%

Calea Floreasca
Barbu Vacarescu

40%

Dimitrie Pompeiu

26%

Presei Libere Square

7%

CBD

7%

CenteR 6%
Center-West 5%
BANEASA

4%

PIPERA 2%
SOUTH

2%

West 1%

Source: Knight Frank

53+15+7631A
Figure 5

Demand by tenant activity sector

H1 2015

IT & Communication 53%

Professional Services 15%
Retail

7%

Pharma

7%

Other 6%
FMCG 6%
Manufacturing Industrial&Energy 3%
Media&Marketing 1%
Construction&Real Estate

1%

Agriculture 1%

Source: Knight Frank

Hermes Business Campus III

Forecast
Around 70,000 sq m of new office
space is expected to be delivered in
the second half of 2015, an increase
of over 50% on the same period in
2014. Noteworthy projects include AFI
Park 4 and 5 (32,000 sq m) and the
refurbishment of Sema Parc Office 3
(14,000 sq m).

TABLE 1

Headline rents are expected to remain

stable for the next six months.
Infrastructure works have been
announced for the Center-North area
of Bucharest, including the extension
of the Fabrica de Glucoza Road (two
lanes in each direction) and a series of
roundabouts allowing better vehicular
access to the A3 highway, which will
improve the overall traffic flow in the
area. Accessibility in the Pipera area will
be improved as well by the extension of
the Pipera / Pipera-Tunari road with two
lanes in each direction.
At a national level, Cluj-Napoca
remains the most active city in terms
of development, with an estimated
40,000 sq m of space scheduled
before the end of 2015. Regional cities

Figure 6

Figure 7

class A - H1 2015(%)

Annual evolution and forecast (sq m)

Vacancy rate by submarkets

Prime headline rent

by submarkets
(/sq m/month)

2,500,000

1618

Presei Libere Square

1416

Calea Floreasca
-Barbu Vacarescu

1416

Center-West

1315

Baneasa

1214

East

1113

Dimitrie Pompeiu

1113

West

1112

South

1011

Pipera

810

CLASS B
CLASS A

2,000,000
1,500,000
1,000,000
500,000
0
2010

CBD

Source: Knight Frank

Modern office stock

Source: Knight Frank

Source: Knight Frank

2015 F

The sharp drop in the CBD vacancy

rate from 7.8% in H1 2014 to 4.9% in H1
2015 is particularly noteworthy. While
we expect new developments in 2016,
the CBD is now seeing more innovation
following several years of tenant driven
activity.

H1 2015

In H1 2015 the vacancy rate for class A

office buildings declined to 11.4% from
12.5% at the end of 2014. The vacancy
rate in most of the submarkets is in
between 5-10%.

2014

Vacancy

2013

Service charges have followed

a similar trend ranging between
3.504.50/sq m/month.

are expected to experience further

outsourcing demand on the back of
improving stock along with attractive
underlying economic fundamentals.

2012

Rents have been largely unchanged on

previous years, with prime headline rents
continuing to be reported at around
18/sq m/month.

A significant level of pre-leasing activity

is expected in the next few years as
established developers, with recognized
track records have announced significant
projects for completion in 2016, mainly
in the Calea Floreasca/Barbu Vacarescu,
Dimitrie Pompeiu and Center-West
areas. It is worth highlighting the pipeline
schemes such as Oregon Park Phase I
(45,000 sq m), Bucharest One (51,000
sq m), Hermes Business Campus
Phase II & III (53,000 sq m) and Anchor
Metropol (36,600 sq m). With several
projects currently planned, the CBD will
also see new supply in the next few years,
the most significant projects being The
Landmark Business Park (21,000 sq m)
and the Oromolu Project (7,000 sq m).

2011

Rents

ROMANIA Market OVERVIEW H1 2015

LAND MARKET
Overview

HIGHLIGHTS

land plot in the Theodor Pallady area

by IKEA, a 5 ha land plot in Pantelimon
bought by Dedeman and a 50 ha
land plot located in Berceni, intended
for a residential development. Office
developers were also looking to secure
locations for theirs future projects.

The first half of 2015 maintained the

dynamic momentum that started last
year, with strong interest of small
residential developers for both:
5001,500 sq m land plots located in
the prime central area of Bucharest and
1,0005,000 sq m land plots located
in central and peripheral areas. Office
developers continue to show great
interest in land plots located in the
northern and north-western areas of
Bucharest.

A long-awaited decision was

the location for the second
IKEA store in Bucharest. IKEA
purchased a land plot of 10.8
ha in the Theodor Pallady area
and will open their second store
under this brand in Romania.

The rest of the country witnessed

transactions by big box retailers, e.g.
Lidl and Dedeman in Iasi, as well as
numerous agricultural land deals in Arad,
Slobozia and Constanta.

Prices

Supply
In terms of supply, there was no notable
change in the market compared with
the previous years, when major banks
and insolvency companies put up for
sale substantial land plots as distressed
properties. The currently available land
plots on the market are intended for
residential, office, retail or industrial
developments.

Demand
In H1 2015, demand for land continued
to grow with a high level of activity in all
market segments. As in recent years,
retailers were the most active in terms
of securing land plots for their future
locations.
Noteworthy transactions in Bucharest
included the acquisition of a 10.8 ha

Prices generally remained at constant

levels during H1 2015 despite a small
increase in demand for residential land
plots. For residential use, depending
on their location and economic
potential, prices of land plots vary from
200250/sq m in the peripheral areas
and 1,0001,200/sq m in the prime
central area and in the north of the city.
For land plots intended for office use,
there has been a small increase in prices
in the Calea Floreasca/Barbu Vacarescu
area, to around 1,000/sq m. The upward
trend is due to the limited availability of
land plots suitable for good quality office
projects. In the north-west area prices
range between 700900/sq m.
The prices for land plots intended
for retail use range between
350500/sq m in Bucharest, while in
the regional cities, prices range between
100250/sq m.

Forecast
The supply of land plots suitable for
good projects is expected to decrease,
while the demand is growing for land
plots suitable for residential and office
use. Thus, prices will witness
a slight increase.
As the process of obtaining all the
documents needed for a development
(PUZ, building permit) is lengthy and
cumbersome, the demand for land
plots with all authorizations in place
will be high.

Figure 8

TABLE 2

Bucharest land price evolution

Relevant land transactions

(/sq m)

Location

Buyer

Size

Use

Theodor Pallady
Bucharest

IKEA

10.8 ha

Retail

Pantelimon Bucharest

Dedeman

5 ha

Retail

Western Bucharest

Policolor

2.5 ha

Industrial

Berceni Bucharest

Metalurgiei Park
Residence

50 ha

Residential

Unirii Bucharest

Unirii View

2,700 sq m

Office

Iasi

Lidl and Dedeman

4.6 ha

Retail

Source: Knight Frank

3,000

CENTER OF THE CITY

SEMI-CENTER OF THE CITY
EDGE OF THE CITY

2,500
2,000
1,500
1,000

H1
2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

500

Source: Knight Frank

HIGHLIGHTS
Investors appetite for real estate
in Romania has increased in recent
months as the positive economic
conditions, together with yield
compression in other CEE
countries, have made investment
in the country very attractive.
Total investment volumes for the
period including 2014 and H1 2015
represent a post-crisis peak, and
this optimistic trend is expected to
continue.
Yields hardened in the local
market, particularly in Bucharest,
where yields for prime office space
fell by 50 bps in 12 months to 7.5%
in H1 2015.

89+9+2A
Figure 9

Transaction distribution
by property type in H1 2015

Industrial 89%

INVESTMENT MARKET
Overview
During the first half of 2015, a low level
of investment activity was recorded in
Romania. A total of 165 million was
transacted during this period, significantly
lower in comparison with H1 2014.
The second half of 2015 is expected to
improve, following a similar trend seen
during the same period of 2014 when
numerous large deals, such as the sales
of Green Court Phase I and the Nusco
Tower, increased full-year volumes.
Many transactions are currently in an
exclusivity period (after a MoU), with
several others very close to closing, which
will help to boost full-year investment
volumes. However, after an unusually
strong 2014, investment for 2015 is
forecast to be slightly lower this year.

Supply
Compared to the low delivery of projects
in previous years, the last 18 months has
seen several prime assets, developed by
established groups with excellent track
records, being brought to the market.
This has generated important investments
for the country, as the real estate market
continues to climb a wall of worry.
Investors appetite, both international
and local, for income producing assets
is growing. Banks are increasingly willing
to offer financing for projects with low
risk and we expect their risk aversion
to diminish over the next few years,
as the investment market continues to
strengthen.

Retail 9%

Office 2%

Source: Knight Frank

TABLE 3

Bucharest prime yields H1 2015

(%)

Office

Retail

Industrial

7.5

7.75

9.00

Source: Knight Frank

10

Demand
The total investment volume of
165 million in H1 2015 represents just
below 50% of total volumes recorded in
H1 2014. Despite this, the second half of
2015 will compensate, with several office
and industrial transactions expected to
close in the coming months.
The industrial sector dominated
transactional activity in H1 2015,
accounting for just below 90% of
the total investment volumes, with

4 large deals closed in this period.

The largest deal was the acquisition
of the Europolis Logistics Park
(215,000 sq m) for 120 million, one
of the biggest logistics parks in the
country. This was part of a regional
deal involving P3 as the buyer and
CA IMMO as the vendor. Besides P3,
another large player on the market was
Czech developer CTP, which acquired
two major industrial parks, Mercury
Logistics Park (35,000 sq m) and Cefin
Arad (93,000 sq m) for 10 million and
7.5 million respectively.
The retail sector came in second,
with a 9% share of the total investment
volume. Two major transactions were
concluded, namely the acquisition of
Galeria Mall Buzau (14,000 sq m) sold
by GTC to a domestic investor and the
sale of Praktiker Craiova by Bluehouse
to the British group Secure Property
Development & Investment. The office
sector was very weak in H1 2015, taking
only 2% of the total volumes, but is set
to strengthen during the second half of
the year.
Foreign investors like P3 and CTP, with
previous strong connections to the
Romanian market, are eager to increase
their portfolio of properties while others
like Secure Property Development
& Investment are interested in
strengthening their business. Foreign
investment was the major contributor in
H1, with domestic investors accounting
for only 7% of total investment.

Yields
Improved investment activity in the last
18 months consequently led to gradual
yield compression across all sectors.
In Bucharest, yields for prime office
space fell by 50 bps to 7.5% in H1 2015.
Together with improved economic
conditions, real estate in Romania has
become extremely attractive.
In the wider CEE region, a number of
large transactions have caused yields
to harden, with the lowest recorded in
Prague 5.75% for prime office assets,
5.50% for prime retail assets and 7% for
prime industrial projects.

ROMANIA Market OVERVIEW H1 2015

Annual evolution (mn)

2000
1800
1600
1400
1200
1000
800
600
400

H1
2015

2014

2013

2012

2011

2010

2009

2008

2007

200
2006

Looking ahead, sentiment for the coming

years is highly positive, with developers
having already announced several prime
projects to be delivered, further fuelling
investors appetite.

Romania investment transaction volumes

2005

For the second half of 2015, there are a

significant number of transactions close
to conclusion (e.g. Floreasca Park). The
office sector is expected to be particularly
active, with buyers looking for both high
quality buildings with top specifications
as well as assets in the process of
liquidation. There are also several
industrial transactions that have been
announced for completion by the end
of the year, which will provide a further
boost to full-year investment volumes.

Figure 10

2004

Forecast

Source: Knight Frank

Floreasca Park, Bucharest

11

HIGHLIGHTS
Compared to H1 2014, when no
deliveries were registered, supply
significantly increased in H1 2015.

RETAIL MARKET
Shopping CENTRES
Overview
Economic growth driven by an increase
in consumption and consumer
confidence, provided a strong incentive
for retailers to reconsider their cautious
expansion plans in Romania. Shopping
centers remained the main destinations
for shopping and with the new deliveries,
such as Mega Mall in Bucharest, new
brands have also entered the market.
Modern retail stock in Romania
increased by 117,700 sq m in the first
six months on 2015, with many mall
expansions expected to complete by the
year-end. Throughout H1 2015, fashion
retailers maintained their growth plans,
with many opening stores in Bucharest.

Supply
Although there were no new deliveries
during the first three months of 2015, Q2
saw retail stock in Bucharest increasing
by 72,700 sq m, owing to the completion
of the Mega Mall project, developed by
NEPI. This took total stock levels in the
city to approximately 1 million sq m.

With the exception of the Mega Mall,

there was only one new delivery in
the wider Romanian market: Coresi
Shopping Center in Brasov, developed
by Immochan, opened in March and
provides over 45,000 sq m of shopping
mall space.

Demand
Demand in H1 2015 was generated
largely by well-known food and fashion
brands. After a pause of one year, fashion
retailer Inditex signed contracts for 10
new stores in the Mega Mall in Bucharest
and Coresi Shopping Center in Brasov,
prior to their completions.
At least 25 new retailers have entered the
Romanian market so far this year, focusing
mainly on leasing space in Bucharest.
Marks&Spencer opened their first local
food store in Mega Mall, as did sportswear
specialists Sport Vision, Buzz and
Sportisimo. Significant activity also came
from interior design and home decoration
retailers such as English Home, Roche
Bobois and Casa Convenienza.

Figure 11

Retail stock in various Romanian cities

(Stock/1,000 Inhabitants)
1,000,000
900,000

RETAIL STOCK SQ M

1,200

SQ M / 1,000 INHB.

1,080

800,000

960

Source: Knight Frank

12

Galati

Brasov

120
Craiova

100,000
Timisoara

240

Sibiu

200,000

Ploiesti

360

Cluj Napoca

480

300,000

Suceava

400,000

Pitesti

600

Constanta

500,000

Oradea

720

Iasi

840

600,000

Bucharest

700,000

ROMANIA Market OVERVIEW H1 2015

Forecast
Compared to H1 2014, when no deliveries
were registered, supply significantly
increased in H1 2015. During the second
half of the year, new supply, particularly

1,000,000
800,000
600,000
400,000

H1
2015

2014

200,000

H2
2015 F

Bucharest, in particular, will see many

new deliveries complete in the next
18 months. Phase one of Pipera Plaza
(7,500 sq m) looks set to be delivered
by the end of the year, while ProdPlast
Imobiliare will start construction of the
Veranda Mall, a 25,000 sq m shopping
center due to open in 2016.

(sq m)

2013

AFI Europe plans to extend the AFI

Palace Cotroceni by 8,000 sq m, and
also begin construction on a new 35,000
sq m shopping center in Brasov, due to
enter the market in 2016.

Bucharest shopping center stock

and pipeline

2012

Bucharest may begin to see a slight

decline in prime rents, following the
opening of Mega Mall and the new
ParkLake mall, which is due in 2016 and
is being actively promoted in the market.
For dominant shopping malls, the
vacancy rate remains at 5%.

NEPI remains a major player in the

market with plans to complete the
expansions of City Park Constanta
(21,000 sq m), Deva Shopping Center
(10,000 sq m) and Severin Shopping
Center (10,000 sq m), and to begin the
construction of Timisoara Shopping City
(70,000 sq m).

Figure 12

2011

In the past 12 months, prime rents for

the leading schemes remained relatively
constant. For 100 sq m spaces, rents
currently range between 6070/sq m/
month for shopping centers in Bucharest
and between 2535/sq m/month in the
rest of the country.

in the form of extensions of existing

projects, is expected across the country.

2010

Rents

ANNUAL COMPLETIONS
STOCK

Source: Knight Frank

Mega Mall, Bucharest

13

HIGH STREET

HIGHLIGHTS
The high street retail market
welcomed some new entrants
this year Nespresso opened
its doors on Calea Dorobantilor,
while luxury fashion brand
Michael Kors opened its first
shop in JW Mariotts The Grand
Gallery, together with Braiconf
and Diesel.

Nespresso, Bucharest

Overview
In H1 2015 the growth on the high
street market in Romania remained
fairly steady. The most active players
in the market, continuing expansion,
were food retailers, casinos and betting
operators. New shopping mall deliveries
on the Romanian retail market during
the first half of the year contributed to
broadly stable prime high street rents
for 100 sq m spaces, which remained at
5060/sq m/month.

Figure 13

High street prime rents evolution

(/sq m/month)
75
70
65

Rents

As with 2014, the first half of 2015 saw

no major high street spaces delivered
in Bucharest, only a few located on
the ground floor of residential or office
buildings, in northern Bucharest (Calea
Floreasca/Barbu Vacarescu) and
west (AFI). Last year, Calea Victoriei
witnessed a series of infrastructure
improvements, however the increased
interest forecast for this area has not yet
materialized. Instead, the vacancy rate
in this area, and in Dorobanti, increased,
following the relocation of some brands,
such as Victoria 46, to shopping malls.

Prime rents have stabilized in the range

of 5060/sq m/month, continuing the
same trend seen during the second half
of 2014. Examples of rents reaching
70/sq m/month have now become rare.

14

H1
2015

2014

2013

2012

Following a similar trend to previous

years, food retailers including
supermarkets and restaurants,
continued to be the main drivers of
demand. Mega Image, the largest
supermarket chain in Romania with

2011

55

2010

Demand

Source: Knight Frank

The high street retail market also

welcomed some new entrants this year:
Nespresso opened its door on Calea
Dorobantilor, while luxury fashion brand
Michael Kors, opened its first shop in
JW Mariotts The Grand Gallery together
with Braiconf and Diesel.

Supply

60

50

a network that currently comprises more

than 400 stores nationwide, is planning
together with the sports equipment
retailer Decathlon, to open its biggest
concept retail store, across from
Baneasa Shopping City and IKEA.

Forecast
An increase in public and private
consumption has led to a rise in retailers
confidence as well as their appetite for
expansion. Therefore, we expect a rise in
such activity in the short-term.

ROMANIA Market OVERVIEW H1 2015

INDUSTRIAL
& LOGISTICS MARKET
Overview
The first half of 2015 witnessed a strong
activity in terms of new deliveries in the
regional cities of Romania. Retailers
are still among the most active tenants,
together with logistics operators.

Supply
A total of 88,500 sq m were brought to
the market across the regional cities
in H1 2015, thus bringing the industrial
and logistics stock in Romania to
almost 2 million sq m. The new supply
consisted of extensions to four existing
developments, comprising 54,500 sq m
in Timisoara Airport Park, developed by
Globalworth for Continental and Elster
Rometrics, 20,000 sq m in Olympian
Timisoara, 10,000 sq m in Transilvania
Logistic Park Cluj and 4,000 sq m
built-to-suit in CTP Turda. Speculative
deliveries represented a third of the total

new supply. Approximately 80% more

new space was delivered in the first
six months of 2015 than in the whole
of 2014, when only 49,500 sq m were
delivered. This clearly demonstrates
developers increasing confidence in
the local industrial market.

HIGHLIGHTS
New supply in H1 2015 was
80% higher than the deliveries in
the whole year of 2014, proving
developers confidence in the
market. Excluding Bucharest,
which recorded 30% of the total
take-up, Ploiesti and Timisoara
were the most attractive cities in
terms of demand.

While Bucharest saw no deliveries in

H1 2015, maintaining its current stock
at slightly over 1 million sq m, two very
large developments are expected to
significantly increase the stock. These
are the extension of P3 Logistic Park and
LOG.IQ Bucuresti, the new 40,000 sq m
project of Immofinanz, which will be
delivered in two phases: the first in Q4
2015 and the second in Q1 2016.

Demand
The total industrial take-up across the
country was slightly more than 180,000
sq m in H1 2015, similar to H1 2014.

29+23+10942A 34+26+22117A 28+27+22107321A

Figure 14

Figure 15

Figure 16

H1 2015

H1 2015

H1 2015

Take-up by region

Take-up by type of transaction

Take-up by tenant activity sector

Bucharest 29%

renewal/RENEGOTIATION 34%

LOGISTICS 28%

Ploiesti 23%

Pre-lease 26%

RETAIL 27%

Timisoara 23%

Relocation 22%

Automotive

22%

BRASOV 10%

NEW ENTRY/NEW DEMAND 11%

PRODUCTION

10%

ORADEA 9%

EXPANSION 7%

OIL&GAS 7%

CLUJ 4%

DISTRIBUTION 3%

ARAD 2%

ARCHIVING SERVICES

2%

MedICAL&PHARMA 1%

Source: Knight Frank

Source: Knight Frank

Source: Knight Frank

15

Excluding Bucharest, which recorded

cca. 30% of the total take-up, Ploiesti
and Timisoara were the most attractive
cities in terms of demand, each
registering 23% of total leasing volume.
Retailers and logistics operators
were the main drivers of the take-up,
followed closely by the manufacturers of
automotive components with 22% of the
overall leased area.
A total of 27 transactions were recorded
in H1 2015, with an average size of
6,700 sq m per lease. Almost a third
of the overall number of transactions
involved leased areas larger than
10,000 sq m. Noteworthy transactions
included P&G in Dunca Timisoara
(28,000 sq m), Inteva Products in
Oradea (16,900 sq m) and Geodis
Calberson in Prologis (16,300 sq m).
As regards the type of transactions,
the distribution between pre-leases,
renewals and relocations remained
broadly similar to 2014, with renewals
accounting for a third of the total
volume, followed by pre-leases with
26% and relocations with 22%.
Built-to-suit projects represented
approximately 29% of total transactions
in H1 2015.

Vacancy

Forecast

Due to the low levels of speculative

development and the good absorption
of existing industrial space, the vacancy
rate fell to approximately 8%, decreasing
by two percentage points as compared
to the end of 2014. This is the lowest
recorded vacancy rate in recent years,
and similar to the 2007 level.

In H2 2015, new supply is expected

to be delivered in Ploiesti (extensions
to Ploiesti West Park and WDP Ploiesti),
in Timisoara (extension to VGP
Timisoara) and in Braila (the new
development of Yazaki).

Rents
Rental levels for prime industrial and
logistics space remained stable in the
first half of 2015, both in Bucharest and
in the other regions across the country.

TABLE 4

General market practice

overview
Vacancy rate

approx 8% (Bucharest Area)

Typical
contract
length

Logistics

35 years

Production

57 years

BTS

710 years

Transactions over recent months have

indicated increased demand in the
established industrial hubs of Romania,
and this trend is expected to continue in
the second half of 2015. By the year end,
overall take-up is expected to be
a similar level to 2014.
Rental levels are expected to remain
unchanged, or to slightly increase due
to the limited numbers of speculative
projects and the low vacancy rate.

TABLE 5

Prime rental and service charge

ranges
Rent
/sq m/
month

Bucharest

Rest
of the
country

Logistics
(<3,000 sq m)

3.904.20

3.503.90

3648 weeks

Logistics (3,000
10,000 sq m)

3.754.00

3.003.50

Incentives

Free rent months depending on

the contract length

Logistics
(>10,000 sq m)

3.303.60

2.503.00

Indexation

HICP

Manufacturing

3.504.25

3.503.75

Average BTS
construction
duration

Service charge
Source: Knight Frank

Source: Knight Frank

Figure 17

Figure 18

Annual evolution (sq m)

Annual evolution (sq m)

1,200,000

250,000

Bucharest modern industrial stock

1,000,000

Bucharest industrial take-up

200,000

800,000

150,000

600,000

50,000

2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
H1 2015

200,000

Source: Knight Frank

2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
H1 2015

100,000

400,000

16

0.500.95

Source: Knight Frank

ROMANIA Market OVERVIEW H1 2015

RESIDENTIAL MARKET
Supply
During H1 2015, the residential market
registered a flourishing activity in terms
of new supply, with well performing
residential compounds elaborating
expansion plans. New deliveries were
generated mainly by the most active
players in the residential market such
as Cosmopolis which delivered 50 new
apartments in the first part of the year,
taking its total to approximately 1,800
residential units. As per its expansion
plans, the developer started the
construction of four apartment blocks
which are due at the beginning of 2016.
West Residential Park delivered 63
apartments in its Scandinavia project
and started the construction of a new
block. Started last year the Timisoara
58 residential project, developed by
the Spanish group Gran Via, also
delivered another two blocks with 170
apartments in the first half of 2015.
City Point delivered its second block
bringing 50 units to the market and it is
already developing the third one.
Greenfield Residence, a very popular
residential compound located in the
northern part of Bucharest, which
has less than 10% of its delivered
units available for sale, started the
construction of its second phase
consisting of 9 blocks with 252
apartments to be delivered in H2 2015.

expected to be delivered in Q1 2016.

Following the success of new
residential compounds in the semi
center of Bucharest, specifically the
Mihai Bravu area, a project put on
hold in 2009 has been brought to life
again. The Israeli developer Gindi
Group together with Real-Sol company
are building GViTown, a residential
compound which is expected to deliver
its first phase respectively with 81 units
in the first half of 2016.

HIGHLIGHTS
The Bucharest residential market
was thriving in the first half of
2015. Both local and international
developers are turning their
attention towards the Romanian
market announcing large
developments in Bucharest, as
well as in other major cities of the
country.

Regarding future new supply, the

international developer, Adama, is
planning the construction of a new
residential compound, Evocasa
Serenia, located in the southern part
of the city. The project will comprise
77 apartments and will be finalized in
2017.
On a smaller scale, premium residential
units are under construction:
Gafencu 49 with 110 luxury
apartments will be finalized in H1 2016,
Primaverii 30 will complete its 18
apartments in 2016 in the north-central
area and Ansamblul Rezidential
Sebastian, a small size compound
located in the semi-central area will be
delivered in H2 2016.
Even though multiple large scale
residential projects have been
announced, according to the National

*NOTE: This analysis only considers new developments

with more than 100 announced units, located within the
capitals city limits or in sizeable residential projects in
satellite locations of Bucharest. The research addresses
more than 70 active residential projects, both existing
schemes and projects under construction.

MetroCity, another large scale project

has been announced to be delivered
in the western part of the capital city,
in the vicinity of the future Academia
Militara metro station. The project is
developed by the local subsidiary of
the Portuguese developer Confrasilvas
and it will comprise 230 apartments.
The first phase of the project, with 110
units is due in H2 2015.
A premier on the local market is
the Cartierul Solar Residence
project located in the southern part
of Bucharest. The projects novelty
comes from the fact that the energy
for the compound will be produced
by photovoltaic panels, making the
dwellings cost effective. Its first phase
will include 320 residential units and is

Serenia, Bucharest

17

We are currently part of a time

machine, facing 2008 again in
terms of developments resuming,
increasing demand and loaning
appetite. Yet, this time machine
will no longer lead us to 2009,
but directly to 2016, opening the
gates for a feasible sector. Due
to a liquid market, we notice the
extensive potential for residential
developments, besides Bucharest,
which is the main emerging
market, there are large secondary
cities which are making economic
progress, where development
is appropriate.

Head of Marketing & Sales

ADAMA

Average prices
(/built sq m 1 bedroom apartment)
MIN.
AVG.
MAX.

1,200
1,000
800
600
400

Another sign that the residential market

is reviving, is represented by the fact
that a formerly insolvent residential
compound, Asmita Gardens, managed
to exit insolvency and its sales rhythm
is accelerating, with less than 40%
apartments available.

Upper End

Low End

Medum End

200
0

Source: Knight Frank

Figure 20

A noteworthy trend is that residential

developers are turning their attention
to other major cities of Romania. Thus,
large scale compounds are expected to
be delivered in Constanta, Craiova, Cluj
Napoca and Brasov.

Loan guarantees, Prima Casa

H1 2015
30,000
25,000
20,000
15,000
10,000

H1
2015

2014

2013

2012

2011

2010

2009

5,000
0

Source: FNGCIMM (Fondul National de garantare a

creditelor pentru intreprinderile mici si mijlocii)

18

The first half of 2015 witnessed increased

demand for new residential units. Demand
was driven not only by low budget buyers
focused on peripheral areas, but also
by sophisticated investors who bought
premium residential units in the centralnorthern part of Bucharest.

Demand from new home buyers was

once again backed up by the Prima
Casa program. According to FNCGIMM,
15,600 mortgage loans were granted in
H1 2015. The average amount contracted
was approximately 38,000. According
to Romania National Bank statistics, at
national level 11% more mortgage loans
were granted in H1 2015 compared with
H1 2014, indicating a general interest in
buying real estate.

Figure 19

1,400

Demand

In the outskirts, relevant compounds

typically sold an average of 56
apartments per month. This can increase
up to 1012 apartments sold per month in
well performing projects focused on low
income buyers.

ALINA NECULA

1,600

Statistics Institute, the number of

building permits issued in H1 2015
decreased by 6% compared with H1
2014, indicating that owners are still
cautious following the recession years.

Compared with other countries within the

region, Romania is following a positive trend
similar to Poland and the Czech Republic,
where residential sales are flourishing.
However, while there is increased interest
in owning new home, buyers still act
prudently and mortgages are sustained by
governmental programs (e.g. MdM financial
support program in Poland).

Prices
Prices slowly started to pick
up, with average values varying
between 7001,200/built sq m and
medium-range projects recording an
average of 950/built sq m.

Lettings
Compared with 2014, when the
corporate lettings market saw a
decrease in rental budgets, as clients
either renegociated their existing
contracts or lowered their starting
budget, H1 2015 witnessed an increase
in rental budgets.
As a general trend, corporate clients
are interested in apartments with 3 or
4 rooms in northern prime locations,
such as Aviatorilor, Kiseleff, Dorobanti
Capitale or Floreasca. The average
term of a leasing contract is 2 years.

Trends
As anticipated, new mixed use projects
will be delivered in Bucharest, a trend in
line with other European capital cities.
In H1 2015, Vastint Romania, IKEA's
real estate division, started works at a
mixed use project in the central area,
on the site of the former Timpuri Noi
plant. The project will include office and
residential units and its first phase is
due to be delivered in 2016. In addition,
Immofinanz group announced a large
scale project which will include the
modernization and extension of Iride
Business Park. The entire project will
include office, retail, hotel and residential
space, and is expected to take several
years to complete.
In the coming years, as buyers become
more sophisticated, the residential
market may witness more innovative
concepts that are environmentaly
friendly and cost effective. Furthermore,
sustained by the economic recovery,
both local and international developers
may shift their attentions away from
Bucharest, towards the other major cities
in Romania with the greatest potential for
residential development. H2 2015 is set
to see high levels of new supply.

ROMANIA Market OVERVIEW H1 2015

PROJECT
MANAGEMENT
Overview
As the economic growth of Romania
continues, the improvement of business
productivity and flexibility is proven
essential for companies in order to
remain competitive.
Project management services are
designed to comprehensively meet
clients requirements for the interior
design, fit-out and renovation of office
spaces that increase productivity and
save on occupational costs.

Supply
Following the general trend of previous
years, project management in the
Romanian office market was provided
by external consultants from all the
major agencies, dedicated project
management companies or in-house by
the developers.

Demand
In H1 2015, demand continued to come
mainly from corporations that calculate
project management fees into their
budget, followed by smaller offices.
Adding a project management fee into
the budget, actually led to a reduced

total budget due to cost efficiency

planning.
Corporations key requirements
consisted of services such as budgeting,
space planning and design, tendering
suppliers, construction management,
commissioning, handover and relocation
management, which allowed them to
focus on their core business activities.

HIGHLIGHTS
Efficient project management
services have improved the
functionality of space by 15%
to 30% and reduced project
costs by at least 15%.

Forecast
Corporations are setting a trend by
choosing different types of office
layouts, according to their internal
collaboration systems, which encourage
communication and improve the
employee experience. The creation of
such environments elevates employees
satisfaction and ultimately, work
productivity.
Moreover, we expect an increase in the
adaptation of hot desk solutions, which
save on occupational costs.
Organizations that embrace mobile
workstyles and support a distributed
workforce enable people to strike a
better work-life balance. To achieve this,
they will rely on multiple, complementary
technologies and broad technology
solutions.

19

HOTEL MARKET

HIGHLIGHTS
The positive trend observed in
the first half of 2015 represents
a further improvement on 2014
growth.

As the government adopts new

policies and passes laws to
favour tourism development
while implementing the countrys
promotion worldwide, we expect
the tourist sector to continue
improving. Branded developments
will also depend on the
government strategic actions.

Romanias investment
attractiveness might be negatively
impacted by the instability in
Ukraine; however, the nomination
of Bucharest as one of the
host cities for the UEFA Euro
2020 is expected to incentivize
hotel development as the
UEFA committee has indicated
insufficient hotel supply in the
budget segment.

Supply

Demand

Romania features approximately 1,600

hotel establishments with approximately
95,000 rooms. While only 7% of
total hotel supply is branded, 42%
of the hotels are affiliated to some
international consortium (Bucharest
office to check this).

According to the statistical office,

tourist arrivals increased by 14.5%
to approximately four million in the
first half of 2015 compared to the
same period in 2014; while overnights
increased by 14.3% to approximately
8.7 million.

The hotel market in Romania is

dominated by three-star establishments
which account for almost 39% of total
supply followed by the two-star segment
(35%). We note that this predominance
changes in Bucharest and major cities
where the majority of supply is in the
three- and four-star category.

As illustrated in the following table,

total increase in arrivals and bednights
was mainly driven by an increase in
international travellers (+16.1% and
+17.1% respectively). Main source
markets were Germany (111,600),
Italy (95,900), Israel (88,800), France
(62,200) and the USA (59,300). These
countries together accounted for
approximately 43% of total international
arrivals. Domestic travellers also
registered a healthy increase of 14% in
arrivals and 13.5% in bednights.

In terms of new hotel openings, the

270-room Sheraton Bucharest opened
on 28 August. The centrally located
hotel, in addition to two restaurants,
a gym and a spa, also features
an extensive conference space
of approximately 1,200 m able to
accommodate 1,400 attendees.
In addition, Carlson Rezidor group is
expected open the first Park Inn by
Radisson hotel in Romania in the fourth
quarter of 2015. The hotel, featuring 210
rooms, will be part of the first dualbranded hotel property run by Carlson
Rezidor in Romania.The Park Inn by
Radisson Bucharest Hotel & Residence
will adjoin the five-star Radisson Blu
hotel in Bucharest, replacing the former
Centre Ville aparthotel, which is currently
undergoing renovation to turn into
Park Inn.The new brand addresses the
medium market, while Radisson Blu
covers the upper-upscale segment.

In 2014, domestic tourists accounted

for approximately three quarters of
total arrivals while average length of
stay registered for both domestic and
international visitors was two nights.

Medical Tourism
Medical tourism is a growing segment
of the market. International visitors that
come to Romania for medical services
spend between 3,0005,000. On
average the number of medical tourists
increased by 15% in 2014, according to
the Romanian medical tourism company
Seytour. Main source countries for
medical tourism are Germany, the UK,
Italy, France and Israel.

TABLE 6

Annual Evolution
Total

Arrivals

Bednights

Period

Arrivals

Bednights

International

Domestic

International

Domestic

H1 2014

3,515,109

7,579,178

839,966

2,675,144

1,653,288

5,925,890

H1 2015

4,024,800

8,663,000

975,200

3,049,600

1,936,000

6,727,000

Growth

14,5%

14,3%

16,1%

14,0%

17,1%

13,5%

Source: Knight Frank

20

ROMANIA Market OVERVIEW H1 2015

New building
valuation
requirements
By Alexandra Smedoiu, CFA, Director
PricewaterhouseCoopers Romania
2016 financial year brings a lot of
changes in tax regime applicable to real
estate companies. To name just a few:
VAT reverse charge for constructions,
reduced VAT rate for certain dwellings,
gradual removal of construction tax,
reduction in building tax rates and
change of the building tax regime from
the nature of the owner to the nature of
the property.
While the changes mentioned above and
in particular the change in building tax
regime depending on the destination of
the property (i.e. different tax rates for
residential and non-residential buildings)
has been communicated at large, not
so well known is the change in valuation
requirements.
So far, legal entities owning buildings
(either residential or commercial) were
required to revalue their properties at
least once every three years, otherwise
they would have faced significant
increase in building tax liabilities (up to
10 times). This requirement generated
the need to carry out a financial
statement-type valuation, which was
going to be booked in the accounts of
the building owner and presented at the
local tax authorities together with the
valuation report.
With the new requirements as of
1st January 2016, legal entities (and
individuals alike) owning non-residential
buildings face the same time-sensitive
valuation requirements. This time
however, the valuation for tax purposes
is strictly separated from any financial
statement-type valuation.

statements of the owners. Thus starting

with financial year 2016s building tax
liabilities, the local tax authorities would
no longer require owners to present
balance sheets together with their
valuation reports.
Two questions arise with these new
requirements. First, how the two values
compare, i.e. the value of a building
determined based on the specific
property tax valuation standard
compared to the value of the building
determined based on general valuations
for financial statements purposes.
Likely the value using the new valuation
standard for tax purposes would be
higher than the value implied by the
financial statements valuation as the
cost approach does not consider
economic depreciation of buildings.

Starting with
1st January 2016
the building tax
will depend on
the destination of
the property (i.e.
different tax rates
for residential and
non-residential
buildings).

Second, how should the valuation as

at 31st December 2015 be performed?
As no transitory provisions have
been introduced for 2016 building tax
liabilities, it is likely that the 2015 yearend valuation would still be determined
based on old standards. Further
guidance may be expected with the
publication of the methodological norms
to the new fiscal code (expected by the
end of the year).
Until then, owners (even those that are
not specifically required to initiate a
valuation process in 2015) are invited
to consider whether there may be any
benefits in revaluing their real estate
assets in anticipation of the new provisions
applicable as of 1st January 2016.

A new valuation standard to enter

into force on 1st January 2016 guides
professional valuators into using the
cost approach (less a maximum 10%
adjustment) for determining the taxable
base of buildings. Such valuation would
no longer be recorded in the financial

21

Did you know that

according to the
Romanian Civil Code,
tenants benefit of a
pre-emption right
to conclude new
lease agreements if
the landlords intend
to conclude such
agreements?

Landlords,
be aware of tenants
pre-emption right!
by Simona Chirica, Ph.D., Partner
and Madalina Mitan, Senior Associate
Schoenherr&Associates SCA
When a landlord wishes to conclude a
new lease agreement for the premises
previously rented to a tenant, it should
consider the latters right to enter
into such agreement with priority.
Only a tenant who fully complied with
itsobligations derived from the previous
lease agreementmay exercise such preemption right. Moreover, tenants who
expressly waive to the legal preemptive
right are not entitled to make use of such
right anymore.
Tenants may exercise their pre-emption
right to lease the premises before the
expiryof the previous lease agreements,
as well as after the termination of the
lease agreements. The period after
which the right may be exercised
depends on the duration of the previous
lease agreement. For example, if
the previous lease agreement was
concluded for a period of more than
one year, the tenant may exercise the
pre-emption right within a maximum
period of 3 months from the termination
of the previous lease agreement.
There are two scenarios in which the
tenant may exercise the pre-emption
right to conclude the new lease
agreement, as follows:
The landlord makes a direct offer to
the tenant. The offer should contain all
the essential terms and conditions of
the new lease agreement.
If the tenant accepts the offer, a new
lease agreement will be concluded
between the tenant and the landlord. In
such a case, the tenant should consign
for the landlord at least the rent
corresponding to the first payment due
under the lease agreement.

22

If the tenant fails to accept the offer

within 30 days, landlordsoffer will be
considered rejected. In this case, the
latter may freely conclude the lease
agreement with a third party under the
same terms and conditions notified
to the tenant. In case the landlord will
change the terms and conditions of
the offer submitted to the tenant, it
should notify again the tenant on the
new terms and conditions.
The landlord concludes a lease
agreement with a third party subject
to the condition precedent that the
former tenant does not exercise its
pre-emption right within 30 days from
the moment when the landlord notifies
to the latter the terms and conditions
of the agreement concluded with the
third party. If the tenant accepts the
terms and conditions notified, the
agreement is concluded between
the tenant and the landlord, while the
agreement with the third party ceases
retroactively.
The rules above apply only if the
parties have not agreed differently on
the pre-emption procedure in their
initial lease agreement. As failure
of the landlord to observe tenants
pre-emption right to conclude a new
lease agreement may trigger claims
for damages against the landlord,
it is highly advisable for the latter to
observe tenants pre-emption right.

COMMERCIAL BRIEFING
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Bucharest
Knight Frank
Horatiu Florescu, Chairman&CEO
+40 21 380 85 85
horatiu.florescu@ro.knightfrank.com
Roxana Bencze, COO
+40 21 380 85 85
roxana.bencze@ro.knightfrank.com
European Research
Matthew Colbourne, Associate,
Commercial Research
+44 20 7629 8171
matthew.colbourne@knightfrank.com
Heena Kerai, Research Analyst
+44 20 7861 5386
heena.kerai@knightfrank.com

Knight Frank LLP 2015

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2015

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