romanian_investment_trends[1].pdf

7/28/2019 romanian_investment_trends[1].pdf

1/14

Romanian Investment Trends

ONCOR INTERNATIONAL 2007


2/14


MACROECONOMICS

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.

IIntroduction


3/14


GEconomic reforms over the past 6 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 997 figure of 54 % to 5 % in 006, the unemployment rate is currently 5.6%, GDP growth forecast for007 is of 5.8%), relatively low interest rates and the competitive tax policy - 6% flat tax.

Evolution of annual GDP growth rate:

In Q3 006, 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 006, 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.

GDP/ INFLATION RATES/ FDI

Although consumption and GDP per head are lower than the regional average and EU levels, the consumer sector is expected to continue

developing.

GDP growth 1995 - 2007*

-8.0%

-6.0%

-4.0%

-2.0%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Romania Europe

Source: NBR, NIS; *estimations

Foreign Direct investments (billion)

Source: NBR, Eurostat; *estimations

10

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007*

9

8

7

6

5

4

3

2

1

0


4/14

3ONCOR INTERNATIONAL 2007

EIn 006, the Romanian LEI (RON) stabilized towards Euro (EUR) with the average exchange rate amounting to RON 3.878 in January

007.

During 006 the dollar (USD) slightly depreciated against the RON and reached an average price of RON .63 in January 007.

As a result of the strong RON, investments at the Bucharest Stock Exchange (BSE) continued to be profitable for foreign investors.

Exchange Rates

Romania EU

Inflation Rates - Romania & EU

Source: NBR, *estimations

1997 2001 2002 2003 2004 2005 2006 2007* 2008*

0

10

20

30

40

50

%

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 006 inward Foreign Direct Investments reached Euro 9.08 billion,

registering a 74.4% increase against the same period last year (Euro 5.3 billion).

USD EUR

Exchange Rates

Source: NBR, *estimations

2005 2001 2002 2003 2004 2005 2006 2007*0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Due to the stronger RON, Romanias foreign debt is declining and Romanian purchasing power is rising. This trend is very likely to continue

in 007. A strong RON is also acting as a buffer against the rise of inflation.


5/14

4 ONCOR INTERNATIONAL 2007

Market capitalization now stands for about 3 % 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.

SSecurities Market

Market capitalization by sector for activity

Source: BSE, 2007

38.10%

2.40%2.40%

45.20%

0.40%

0.30%2.60%

4.70%

energy

services

materials

banks and financial

equipments

chemicals

consumer goods

pharmaceuticals

Market capitalization GDP

BSE capitalization vs. GDP 2002-2006 (bin Euros)

Source: BSE, 2007

2002 2003 2004 2005 2006

0

20

40

60

80

100

120

140

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.


6/14


BET BET C BET FI

Yields index, stock

Source: BSE, 2007

2002 2003 2004 2005 2006 2007*

0 %

50 %

100 %

150 %

200 %

250 %

300 %

350 %

400 %

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.

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.


7/14


THE PROPERTY MARKET

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 Slovakia,

annual yields for real estate

investments last year fell to 7.5% -

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.

IIntroduction


8/14


OThe office space market is expected to boom again in terms of developments starting 008, 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.

Offices

Rent Office index - Romania

0

2

4

6

8

10

12

14

16

18

20

22

24

2002 2003 2004 2005 2006 2007*

Bucharest Brasov Timisoara Constanta Iasi Cluj-Napoca

Source: Coldwell Banker Affiliates of Romania; * estimations

America House Milenium Business CenterCharles de GaulleFinancial Plaza


9/14


RShopping Centers

Romania with its potential market of over .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 (0 million), Czech Republic (0 million), Austria (8 million) and Slovakia

(5.5 million) all have smaller markets.

Retail

Bucharest Mall Plaza Romania Unirea Shopping Center

Downtown Innercity

Bucharest Office rent index (Eur/ sqm/ month - downtown & innercity areas)

2002 2003 2004 2005 2006 2007* 2008*

0

5

10

15

20

25

30

35

40


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. million sqm of offices in Bucharest and the

actual supply only reached about million.


10/14


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

RENT Euro / sqm

80 - 130

100 - 130

60 - 80

40 - 70

45 - 70

50 - 80

50 - 70

40 - 70

50 - 70

New Pipeline Shopping Centre Schemes 2007-2008

2.000.000


GLA sqm

Serbia

Ukraine

Croatia

Austria

Bulgaria

CzechRepublic

Slovakia

Hungary

Romania

Russia

Germany

France

Italy

UK

Turkey

Poland

0

200.000

400.000

600.000

800.000

1.000.000

1.200.000

1.400.000

1.600.000

1.800.000

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.

Downtown historical area

of Bucharest


11/14


IThe 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.

Industrial / Logistic Parks

Rent index Euro/ sqm/ year - Bucharest


2002 2003 2004 2005 2006 2007*

0

10

20

30

40

50

60

70

80

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.

Cefin Logistics Park


12/14


Rent Index Euro/ sqm/ year - Bucharest

20

220

420

620

820

1020

1220

1420

2002 2003 2004 2005 2006 2007*

Office High Street Retail Industrial Shopping Centers


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 8-0%, possibly rising to 3% 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.

MThe Romanian real estate market continues to offer investment yields that are superior to mature markets in the European Union and North

America.

In the neighboring Czech Republic, Poland and Slovakia, annual yields for real estate investments last year fell to 7.5% - 7.50% for office

and retail spaces.

Market development and opportunities

Prime Yields Index: Commercial Property Market - Romania

Offices Retail Industrial


0 %

2 %

4 %

6 %

8 %

10 %

12 %

14 %

16 %

2002 2003 2004 2005 2006 2007*

The following table shows the yields evolution in the last 6 years:


13/14


Location

BUCHAREST

Downtown

Inner city

BRASOV - downtown



IASI - downtown

CLUJ - NAPOCA - downtown

Yield 005

(%) / year

0.3%

0%

%

%

%

%

%

rent 005

sqm / year

6

44

6

6

6

6

6

rent 006

sqm / year

44

6

6

6

6

6

Yield 006

(%) / year

7.50%

7.80%

8.5%

8.5%

8.5%

8.5%

8.5%

rent 007

sqm / year

40

68

74

74

74

74

74

Yield 007

(%) / year

6.50%

7.00%

8.00%

8.00%

8.00%

8.00%

8.00%

Rent trend next

months

Yield trend next

months

OFFICES

Location

BUCHAREST

Calea Victoriei

Magheru Blvd

BRASOV - downtown



IASI - downtown

CLUJ - NAPOCA - downtown

Yield 005

(%) / year

9.00%

.00%

.00%

.00%

.00%

.00%

.00%

rent 005

sqm / year

,00

,00

480

480

480

480

480

rent 006

sqm / year

,00

,30

660

70

600

600

70

Yield 006

(%) / year

8.50%

8.50%

9.00%

9.00%

9.00%

9.00%

9.00%

rent 007

sqm / year

,30

,560

70

840

70

70

780

Yield 007

(%) / year

8.00%

8.00%

8.5%

8.5%

8.5%

8.5%

8.5%

Rent trend next

months

Yield trend next

months

HIGH STREET RETAILING

Location

BUCHAREST

BRASOV

TIMISOARA

CONSTANTA

IASI

CLUJ - NAPOCA

Yield 005

(%) / year

9.50%

0.00%

0.00%

0.00%

0.00%

0.00%

rent 005

sqm / year

54

5

4

5

5

4

rent 006

sqm / year

5

5

4

5

5

5

Yield 006

(%) / year

8.50%

9.00%

9.00%

9.00%

9.00%

9.00%

rent 007

sqm / year

5

5

5

5

5

5

Yield 007

(%) / year

8.50%

9.00%

9.00%

9.00%

9.00%

9.00%

Rent trend next

months

Yield trend next

months

INDUSTRIAL - LOGISTICS/DISTRIBUTION (Unit size of 10,000 sqm+)

Location

BUCHAREST

BRASOV

TIMISOARA

CONSTANTA

IASI

CLUJ NAPOCA

Yield 005

(%) / year

8.50%

9.00%

9.00%

9.00%

9.00%

9.00%

rent 005

sqm / year

450

5

5

5

5

60

rent 006

sqm / year

40

30

30

30

30

40

Yield 006

(%) / year

8.00%

8.50%

8.50%

8.50%

8.50%

8.50%

rent 007

sqm / year

390

0

0

0

0

0

Yield 007

(%) / year

7.5%

8.5%

8.5%

8.5%

8.5%

8.5%

Rent trend next

months

Yield trend next

months

SHOPPING CENTRES

Source: Coldwell Banker Affiliates of Romania; 2007 first semester data


14/14

North America South America Australia Asia Europe

50A, Icoanei Street,Bucharest , Romania, Code 00457

Phone: +40--00 39 39Fax: +40--00 39 37

www.coldwell-banker.ro

An International Real Estate Services Company


romanian_investment_trends[1].pdf

Documents