CA Immo Romania has been present on the local market since 2001, specializing in class A office buildings and counting several iconic projects in their Bucharest portfolio: Europe House, Opera Center, Orhideea Towers, Bucharest Business Park.
How have you perceived Romania's office market evolution through the past decade, since being at the helm of the company?
Every year, Bucharest's landscape is reshaped through new buildings that bring a breath of fresh air to the local real estate market. Developers started prioritizing the easy access, infrastructure and quality of the area when choosing the location of their office projects, because ultimately people need to feel content in the workplace.
Compared to the 1990’s when Bucharest looked more disheveled and the office market was only starting to take shape, now we have a few noteworthy buildings and even clusters of modern workplaces. Even if the modern stock from regional cities such as Timisoara or Cluj-Napoca increases, Bucharest remains the most desired destination both for entering on the Romanian market and for expanding the business.
During the past few years CA Immo exited several CEE markets (Bulgaria, Croatia, Slovakia, etc.) - how does Romania fit into the company's portfolio?
Romania is a core market that kept steady, amounting to about 7-8% of the total global portfolio of CA Immo. At the moment, we are consolidating the projects that are on the roll, since 2020 was such a challenging year for everyone. Due to limited mobility linked to lockdowns and other pandemic safety measures, signing new leasing contracts was a challenge here, as in most other global jurisdictions, but we registered a very good appetite for renewals. For example, we have projects with zero vacancy over the last decade and we are proud to say that numerous tenants have been with us since the delivery of the building and have been telling us it is an ideal work environment for their activities ever since. Despite these challenges, Romania's turnover still fared well and was at the same level as in 2019. The plan is to stay on the Romanian market for the long-run.
Leasing office space “through a screen” is indeed not an easy feat - how did you adapt to this new situation?
We are in negotiations with a number of digital systems providers. While these programs are fit for new projects because you can implement useful parameters, the already existing buildings cannot be easily mapped. We provide space planning and blueprints to interested tenants, but this is usually not enough to make a decision, the majority prefers to "feel" and see the place. During times of crisis, people have a natural tendency of avoiding or delaying decision-making processes. However, companies that grew had to move into more spacious offices. Overall, leasing took five to six months longer than it would have in 2019 – a considerable slowdown.
When do you think we will start seeing the light at the end of the tunnel for the office sector?
People have an innate need to meet one another and offices play a pivotal role in socialization. During the pandemic, I personally avoided working from home as much as possible because this is the only way to make a clear cut between career and leisure time. The natural rhythm where people are taking their kids to school and then going to the office will slowly return after the crisis is overcome. However, a hybrid model where employees can work from home one or more days per week was already in place before the pandemic (we implemented such a model in 2018). Taking into consideration social distancing norms (the 1,5-2 m rule) and the available space, we estimate that by September 2021, 50-60% of employees will probably return to the office.
Bucharest’s office sector is continually expanding and changing - can new development opportunities still be found here?
There's definitely enough room for new development projects as long as state institutions acknowledge the importance of proper office spaces and change their obsolete current headquarters. There's great potential for tenants in this specific segment and the Ministry of European Funds, for example, took the step into a building fit for their needs. Looking at the big picture, the market potential is immense and in the following years the only limitation will be represented by the available workforce. The equation is simple: more employees in the work field require more office spaces. Besides Bucharest, Cluj-Napoca, Iași and Timișoara are strong university centers and their pool of talented graduates will lead to more job creation, in turn rising the demand for office spaces.
Are you considering expanding beyond Bucharest to capture these growing opportunities?
We are most interested in liquid markets and this aspect is not as strongly represented in other cities as it is, at this point, in Bucharest. A dynamic environment where exits are commonplace is attractive both for local and foreign investors because they can be sure their investment will not be blocked in a stationary market.
Do you have a final message about Romania's real estate market?
I definitely encourage all foreign investors that are interested in Romania's real estate market to come and experience the opportunities that can be found here first-hand. Our portfolio had an occupancy rate consistently over 90% throughout our decade-long presence in Bucharest, generating stable revenue. The complementary tenant and workforce pool will only keep pushing this up.
