Răzvan Iorgu, Managing Director, CBRE: “What we should really focus on now is the increase on rents, because otherwise numbers just don’t work.”
In their real-estate market presentation delivered at CEDER 2023, CBRE showed that in the current environment of uncertainty, transactions in Europe are slowing down, falling by 63% in Q1 2023 as compared to Q1 2022 in Western Europe, while Eastern Europe has seen a downturn of about 50%. Although Romania has been faring better so far, these developments are expected to impact the local market, as well.
The presentation further implies that in this context, sellers are expected to become holders, trying to take advantage of lower vacancies, increasing rents, and then making their exit at a later date. During the Office Panel discussions held after the market presentation, Răzvan Iorgu reinforced this view, saying that times were not easy, but that there were still opportunities on the market, especially for holders.
Doron Klein, CEO of AFI Europe Czech Republic & Romania, also a member of the expert panel, pointed out that, given the current demand, he expected the vacancy rate to decrease and determine rents to increase: “There is no way the rents can stay as they currently are. We are out of the balance, out of the equation.” He added: “The development deals are very, very low compared to the normal cap rate. So, it doesn’t make any sense today to commence with a new construction of an office building, which will increase the pressure over the existing stock and will put a strong pressure over the rents.”
Razvan Iorgu further pointed out that if rents were to increase at a comparable level to what is going on in the other CEE countries, it would dramatically improve the perception Western Europe has over Romania’s potential. He went on to suggest that a collaboration between the major players on the market would be beneficial in this context: “There are a lot of things that can be done here if we think of it more as a community than as single players.”
