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Romanian Investment Trends: Oncor International 2007
Romanian Investment Trends: Oncor International 2007
Romanian Investment Trends: Oncor International 2007
MACROECONOMICS
Introduction
Romania,
one
of
the
largest
markets in Central and Eastern Europe is the newest member of the European Union. With an easy access to the countries of the former Commonwealth of Independent States, the Balkans, the Middle East and Northern Africa, this country is gradually becoming the perfect location for foreign investment. Considering the fact that the level of transactions on the Romanian market is still the lowest in Central Europe the unexplored potential of the national market is very high on a long term perspective.
Economic reforms over the past 16 years have led to the present fast growing economy. The privatization of the large state owned companies has attracted many western companies that considered Romania as an investment opportunity, due to its economic indicators (inflation has been constantly decreasing from the 1997 figure of 154 % to 5 % in 2006, the unemployment rate is currently 5.6%, GDP growth forecast for 2007 is of 5.8%), relatively low interest rates and the competitive tax policy - 16% flat tax.
Romania
Source: NBR, NIS; *estimations
Europe
In Q3 2006, the growth rate of real GDP accelerated for the fourth time running to 8.3 percent from 7.8 percent, falling short of the Septembers benchmark projection by 0.7 percentage points. For the first time in 2006, the economic growth pattern showed investment becoming the engine of GDP growth; the growth rates of consumer demand and exports recorded insignificant changes quarter on quarter. On the supply side, all economic sectors posted higher paces of increase.
Although consumption and GDP per head are lower than the regional average and EU levels, the consumer sector is expected to continue developing.
2003
2004
2005
2006
2007*
2008*
Romania
Source: NBR, *estimations
EU
Foreign direct investments (FDI) growth over the last five years reflects a strong economic recovery that has propelled Romania to the top rank among SEE and CEE countries in terms of GDP and export growth. In 2006 inward Foreign Direct Investments reached Euro 9.082 billion, registering a 74.24% increase against the same period last year (Euro 5.213 billion).
E
2007.
Exchange Rates
In 2006, the Romanian LEI (RON) stabilized towards Euro (EUR) with the average exchange rate amounting to RON 3.8178 in January
During 2006 the dollar (USD) slightly depreciated against the RON and reached an average price of RON 2.6132 in January 2007. As a result of the strong RON, investments at the Bucharest Stock Exchange (BSE) continued to be profitable for foreign investors.
Exchange Rates
4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2005 2001 2002 2003 2004 2005 2006 2007*
USD
Source: NBR, *estimations
EUR
Due to the stronger RON, Romanias foreign debt is declining and Romanian purchasing power is rising. This trend is very likely to continue in 2007. A strong RON is also acting as a buffer against the rise of inflation.
Securities Market
Market capitalization now stands for about 23 % of the national GDP and this is mainly due to the lack of new companies and IPOs on the stock exchange and not because the current stock are rated too low.
2.40%
2.40%
45.20% 38.10%
0.40% 0.30%
energy services materials banks and financial
2.60%
4.70%
equipments chemicals
While in older EU member states the market capitalization represents a value between 50% - 70% of the national GDP, in Romania the small size of the capitalization could mean that there is a lot of space for future growth, and a great development potential.
120
100
80
60
40
20
Market capitalization
Source: BSE, 2007
GDP
Still, the stock exchange does not fulfill its duties in the economy, meaning that it failed to help companies get financial support from the securities market. Some sectors of the economy are yet to be present on the market: air transport, telecom etc.
BET
Source: BSE, 2007
BET C
BET FI
Considering the fact that the level of transactions on the Romanian market is still the lowest in Central Europe the unexplored potential of the national market is very high on a long term perspective.
Introduction
The Romanian real estate market continues to offer investment yields that are superior to mature markets in the European Union and North America. In the neighbouring Czech Republic, Poland and annual yields for Slovakia, estate real
investments last year fell to 7.25% 7.50% for office and retail spaces. The very high demand has been the perfect fuel for the real estate market, thus ensuring the steady growth of the entire sector.
Offices
The office space market is expected to boom again in terms of developments starting 2008, with developers still focusing on the northern area of Bucharest, where high hopes, in terms of access, focus on the building of the Bucuresti Brasov motorway, which would help decrease traffic issues. Also other areas, especially Western part of Bucharest, started to attract new developments.
Bucharest
Brasov
Timisoara
Constanta
Iasi
Cluj-Napoca
America House
Financial Plaza
Charles de Gaulle
Bucharest Office rent index (Eur/ sqm/ month - downtown & innercity areas)
40 35 30 25 20 15 10 5 0 2002 2003 2004 2005 2006 2007* 2008*
Downtown
Source: Coldwell Banker Affiliates of Romania; * estimations
Innercity
It is estimated that the office market will reach a balance between supply and demand in approx. 5 years from now. By then, the estimated demand for office spaces will be twice as high as supply: there is an estimated need of approx. 2 million sqm of offices in Bucharest and the actual supply only reached about 1 million.
Retail
Shopping Centers Romania with its potential market of over 21.5 million consumers is the second largest market for goods and services in Central and Eastern Europe (excluding Russia and the Ukraine) In comparison, Hungary (10 million), Czech Republic (10 million), Austria (8 million) and Slovakia (5.5 million) all have smaller markets.
Bucharest Mall
Plaza Romania
GLA sqm
Together with one of the lowest levels of shopping centres supply in Europe and relatively weak domestic competition, Romanian retail market has proved to be has proved to be a great opportunity for international retailers and investors alike.
High Street The high street retail sector is booming, aided in part of an increasingly attractive target for international retailers which stimulated the demand for prime retail locations and solid rental growth.
CITY BUCHAREST Calea Victoriei Street Magheru Blvd. Calea Mosilor Street Stefan Cel Mare Blvd. BRASOV - downtown TIMISOARA - downtown CONSTANTA - downtown IASI - downtown CLUJ - downtown
The Romanian industrial market features an increasing demand for modern premises with all the necessary facilities. This trend is generally seen in the most important cities such as Bucharest, Timisoara, Cluj Napoca, Constanta, Brasov, Iasi or Oradea.
The demand for industrial space in Bucharest is strongly rising, due to the increase in the production and storage operations. The industrial and warehouse real estate market can be characterized by high demand for western-grade facilities and a massive supply of antiquated premises.
10
M
America.
The Romanian real estate market continues to offer investment yields that are superior to mature markets in the European Union and North
In the neighboring Czech Republic, Poland and Slovakia, annual yields for real estate investments last year fell to 7.25% - 7.50% for office and retail spaces.
The following table shows the yields evolution in the last 6 years:
Offices
Source: Coldwell Banker Affiliates of Romania; * estimations
Retail
Industrial
Some investors, in Romania, have embraced a different strategy, sealing partnerships with major developers, financing their projects and imposing a series of conditions for acquisitions. Such investors are getting annual yields of 8-10%, possibly rising to 13% for projects located outside the capital city.
Currently, all the segments of the real estate market are characterized by a lack of projects that could be acquired by large foreign investors.
Office
Industrial
Shopping Centers
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OFFICES
Location BUCHAREST Downtown Inner city BRASOV - downtown TIMISOARA - downtown CONSTANTA - downtown IASI - downtown CLUJ - NAPOCA - downtown 216 144 162 162 162 162 162 10.3% 10% 12% 12% 12% 12% 12% 222 144 162 162 162 162 162 7.50% 7.80% 8.25% 8.25% 8.25% 8.25% 8.25% 240 168 174 174 174 174 174 6.50% 7.00% 8.00% 8.00% 8.00% 8.00% 8.00% rent 2005 sqm / year Yield 2005 (%) / year rent 2006 sqm / year Yield 2006 (%) / year rent 2007 sqm / year Yield 2007 (%) / year Rent trend next Yield trend next 12 months 12 months
SHOPPING CENTRES
Location BUCHAREST BRASOV TIMISOARA CONSTANTA IASI CLUJ NAPOCA rent 2005 sqm / year 450 252 252 252 252 260 Yield 2005 (%) / year 8.50% 9.00% 9.00% 9.00% 9.00% 9.00% rent 2006 sqm / year 420 230 230 230 230 240 Yield 2006 (%) / year 8.00% 8.50% 8.50% 8.50% 8.50% 8.50% rent 2007 sqm / year 390 210 210 210 210 220 Yield 2007 (%) / year 7.25% 8.25% 8.25% 8.25% 8.25% 8.25% Rent trend next Yield trend next 12 months 12 months
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50A, Icoanei Street, Bucharest 2, Romania, Code 020457 Phone: +40-21-200 39 39 Fax: +40-21-200 39 37
www.coldwell-banker.ro
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