PORR Group is a pan-European construction company with over 150 years of experience in real estate. The Romanian branch was established in 2004 and has been active particularly in the offices, industrial and public engineering sectors ever since.
PORR is present across various CEE jurisdictions - what are some notable differences between the Polish and the Romanian real estate markets?
Poland has gotten to the stage of a more mature and refined market, not only in Warsaw but across several secondary strong regional development pillars. Romania, however, is catching up fast, so in a few years' time we will probably see the same type of exquisite projects being built here, as well, particularly in the office segment. Seismic risk is a tough topic in Bucharest and many developers had to rethink their projects in order to comply with the regulations - as a side note, this is the main reason why we do not yet have a proper skyline here.
What about from a time perspective, how have you noticed the regional real estate market transform throughout the past decade?
Even though there is a notable trend towards better looking cities, I feel there is still room for improvement inside the industry, from an ethics and quality point of view. Clients are yet to fully understand that every project is unique, and in order to have the best results, an equally proficient developer is needed.
In Austria, the first six general contractors hold 40% of the market, while in Romania this percentage is not even held by the first twenty players. We are in an extreme market fragmentation but I am confident that little by little the industry will become more balanced and we will be able to homogenize the real estate environment.
PORR is well known for public infrastructure projects in Romania - what role does real estate play in your portfolio?
In 2019, PORR's turnover was equally divided between infrastructure and real estate projects, but in 2020, on the backdrop of the pandemic - some of our office projects got cancelled. However, we shifted our focus towards public works in the environmental engineering sector. The residential sector has not been our main focus, but we are interested in working with clients whose priorities are not fast exits and who are keen on investing in high quality buildings that bring them long-term revenue.
You mentioned how you shifted your focus during the pandemic - what strategy did you employ in order to mitigate challenges?
Besides the infrastructure works I mentioned, we also expanded towards civil construction projects, healthcare, as well as the defense and industrial sectors. At the moment, we are finishing Deutsche School Bucharest (roughly 95% completed), and continuing work for several of our clients. We opened a division in Constanta - where we started various environmental projects around Mamaia - Navodari, and we are planning to expand our public clients’ portfolio towards the East (Iasi, Bacau, etc.). In Iasi - where the market has become truly effervescent - we recently finished a mixed-use research and development office building.
From my point of view Constanta shows a huge potential thanks to the harbor and the generous and well-priced land bank waiting for investors, especially in office & logistics. Moldova is another hotpoint - Galati, Bacau and Iasi being bountiful (and yet untouched in many ways) markets that could bring serious development possibilities.
Qualified workforce is a recurring challenge in the real estate and construction business, what has been your experience on this front?
At the moment, the challenge is to consolidate the existing workforce that is spread across multiple small companies or is not legally registered. The construction sector is highly tempting at first glance due to the envisaged high numbers, but with great power comes great responsibility. Also, small contractors who do not know exactly what they are getting into can find themselves under the profit margin or incapable of finishing projects. It is important to strategize - for instance in 2020 we had to raise our prices, so this year won't find us on the wrong footing (it was evident that the commodities prices at that time were unsustainable), and it seems it was the right decision since we are now facing a serious challenge - raw material prices exploded. The workforce itself is not a challenge, there are qualified people all around – but we must discourage the Wild West construction market that unfortunately still exists in Romania and instead convince them to work on serious projects.
Looking towards the next two-three years - what are the main objectives PORR wants to fulfill?
For PORR it is important to reach the status of a local player, so we are trying to encapsulate as many geographical regions in our portfolio as possible. Being a Bucharest based company, our goal is to become closer to secondary markets in order to get access to local projects that represent 80% of the Romanian construction market.
What is your final message about Romania’s real estate construction market?
International players must know that the famous political instability trope is more a twisted perception of the public than an actual challenge of the market. Real estate projects are running smoothly in Romania, and while political figures change often, business runs its course.
