Transcript IN CEE - Finmedia

Presentation to:
JW Marriott Bucharest Grand Hotel, May 4, 2004
ROMANIAN REAL ESTATE MARKET
WITHIN CENTRAL EASTERN
EUROPE
EU Accession Effects
May 4, 2004
CEE ECONOMICAL STATISTICS
GDP Growth (real) in CEE
GDP GROWTH IN
CEE
In 2003, GDP growth in non-EU countries was between 3-7%
Inflation in CEE
INFLATION IN
CEE
• All markets have now inflation rates below 15% (most markets are below 10%)
• 2003: 14.1% inflation rate, significant decrease recorded by Romania since 1990
FOREIGN DIRECT INVESTMENT
(FDI) IN CEE
• USD 15bn invested in CEE in
2003,
46% decrease from the
record FDI levels tracked in 2002
(USD 28bn)
• € 1.381bn (acc. to NBR data) FDI in Romania, in 2003, the
highest achieved in CEE
Source: CB Richard Ellis
• Total volume of FDI in Romania (USD 10.433bn) is still low compared to
other CEE countries (Poland USD 38bn, Czech Republic USD 26bn)
OVERVIEW OF CEE OFFICE
MARKET
CEE MODERN OFFICE
STOCK
*CEE Modern Office Stock per 1,000
*CEE Modern Office Stock
(as at Dec. 2003)
Warsaw
1,95
Prague
1.744
Prague
1.223
1.194
Warsaw
1,34
Bratislava
BUCHAREST
Bratislava
1,451
Budapest
Sofia
inhabitants (as at Dec. 2003)
Budapest
0,75
703
Sofia
0,591
BUCHAREST
0,515
497
256
Millions sq m
*Class C not included
Source: CB Richard Ellis
sq m/ 1 , 0 0 0 inhabitants
*Class C not included
Source: CB Richard Ellis
• Most buildings left from communist times are currently occupied by governmental
organizations and local companies, are classified as class C office buildings and are
not included in the statistics
• Bucharest – still undersupplied compared with other CEE capitals
CEE MODERN OFFICE STOCK
DYNAMICS
BUCHAREST Modern Office Stock
Thousand sq m
500
400
300
200
100
0
1996 1997 1998 1999 2000 2001 2002 2003
Year
Q1
2004
Source: CB Richard Ellis
Source: CB Richard Ellis
• In the late ’90s the rapid growth of Budapest, Prague and Warsaw created
an oversupply, so that ‘developers’ market’ ended, ‘tenants’ market’ began
• Bucharest – constant upward trend
CEE MODERN OFFICE
SUPPLY/COMPLETIONS
BUCHAREST Annual Modern Office Stock
Sq m
80.000
70.000
60.000
50.000
40.000
30.000
20.000
10.000
0
1997
N ew
1998
1999
Refurbished
2000
2001
2002
2003
Q1 2004
Year
Source: CB Richard Ellis
Source: CB Richard Ellis
• Approx. 1.33m sq m of new office space completed in 2003 in CEE countries, 7.1%
decrease from 2002
• 82,000 sq m of new modern office space completed in 2003 in Bucharest, 19% increase
from 2002 (total completions - relatively similar with 2002)
• Over the last 3 years office completions have decreased the fastest in Warsaw and
Budapest, while growing in Sofia, Prague and Bucharest
CEE OFFICE SUPPLY FORECAST
23%
- total expected growth during the next 2 years (by
roughly 2.5% per quarter) in CEE countries
5.7%
- total expected growth in the next 6-8 months in CEE
countries
ROMANIA (by 67.8% - ~350,000 sq m) and Sofia
(by 35.5%) – fastest growth expected in the next two years
CEE OFFICE TAKE-UP
Bucharest Take up by Type of Property
(2002 - 2003)
CEE Office Take up
Sq m
25.000
Thousand sq m
250,0
20.000
200,0
30.000
10.000
150,0
100,0
5.000
50,0
0
0,0
15.000
Q1 2002
Q2 2002
A Class
Q3 2002
Q4 2002
B Class
Q1 2003
Villas
Q2 2003
Q3 2003
Q4 2003
Q ua rte r
Source: CB Richard Ellis
2001
2002
2003
Bratislava
Prague
Bucharest
Sofia
Budapest
Warsaw
Source: CB Richard Ellis
Bucharest – total take-up in 2003: 132,000 sq m
Bucharest (by 60%) and Bratislava (by 150%) have recorded
the highest increase of office take-up in 2003
CEE – PRIME OFFICE RENTS AS AT DEC.
2003
CEE Prime Office Rent
Warsaw
23
Sofia
19
Prague
19
Bucharest
18
Bratislava
18
Budapest
16,5
Euros/ sq m/ month
Source: CB Richard Ellis
•Average prime office rents in CEE ~€22/sq m/month are
lower than in every other major markets in Europe
• Average prime office rents in Bucharest (~€18/sq m/month)
CEE – PRIME OFFICE YIELDS
CEE Prime Office Yields
14,0
Percent
12,0
10,0
8,0
6,0
4,0
2,0
0,0
Bucharest
Sofia
Bratislava
Warsaw
Budapest
Prague
Source: CB Richard Ellis
• Investing in office products in CEE provides the best returns in Europe
• Prime office yields between 8% (Prague) and 13% (Sofia and Bucharest)
• Bucharest prime office yields – currently between 12% and 13%
• Bucharest prime office yields - forecasted to reach 10% by 2007
CEE – INVESTMENT ENVIRONMENT
• Decrease in risk (and perceived risk) of investing in CEE countries
determined:
Investment transactions
Yields compression, in the last 5 years
• Office investment market – more mature than retail, industrial or hotels
• Investors – looking for good quality product determine:
Prices up
Yields down
• Most active investors : - German and Austrian open-ended funds
- Middle Eastern – strengthening
- Irish funds
LOCAL INVESTMENT ENVIRONMENT
General assessment
•
Before 1990 most land and real estate assets were state owned
•
Building ownership by foreign individuals and companies –
no restriction
•
Land ownership by foreign individuals and companies is restricted
but
•
Romanian and foreign owned companies are entitled to land
ownership
LOCAL INVESTMENT ENVIRONMENT
General assessment
•
Law 1/2000 and Law 10/2001 govern the restitution of property in
Romania
•
Romania’s country risk – upgraded in 2003 from BB- to BB, but still did
not reach the “Investment Grade” BBB
•
Since 2002 the number of property investment enquiries has increased
in Bucharest
•
Large investment funds as Heitman, Europolis, GE Capital Golub, CA
Immo, HVB have started to look seriously at all market segments
Most active investors : - German and Austrian open-ended funds
•
- Middle Eastern – strengthening
- Irish funds
LOCAL INVESTMENT ENVIRONMENT
Office Investments
•
The office investment market is the most predictable
•
The lack of quality products determined a reduced number of
transactions, commited for only a total of 26,100 sq m
•
Achieved prime yields – still high (12 to 13%)
•
Poorly defined business district
•
Foreign investors are focusing on international quality commercial
developments, having good covenant
•
Trend:
Prices up
Yields down
CONCLUSIONS
EU accesssion effects on property market:





Increase of VAT directly affects tenants costs and developers constructions costs
Employment law: more strict regulations regarding working conditions
Commercial law: improved to make contracts more enforceable and transparent
Decrease of perceived investment risk
Increase of new incoming int’l companies, moving operations to CEE to take advantage
of:
o Lower labour costs
o Governmental incentives
o Highly skilled labour force
o Lower office occupational costs compared to Western Europe
Main consequences of EU expansion in CEE, in 2004, for Romania:


Less expensive labour force than in the CEE countries, EU members
Still lower real estate development quality standards and costs
CB RICHARD ELLIS
ROMANIA
KEY
Existing clients of CBRE benefit from accurate, constant and reliable
CLIENTS
consultancy.
Louis Dreyfus
Trading