Colliers International (2014) Bucharest Market Research and Forcast Report

Research & Forecast
Report | Romania
2014 Real Estate

Market Review
Contents
Economic Overview
Bucharest Office Market
Romania Shopping Centers Market
Bucharest High Street Market
10
Romania Industrial Market
12
Bucharest Land Market
14
Romania Investment Market
16
Bucharest New Residential Market
18
Bucharest Hotel Market
20
Taxation Aspects
22
Legal Issues
24
Definitions and Assumptions
26
Research & Forecast Report | January 2014 | Romania | Colliers International
"Any fool can know.

The point is to understand."
Albert Einstein
To Albert Einsteins words I will add that not only must we understand the
past, but we must see through the present, into the future.
By Ilinca Paun
Managing Director
ilinca.paun@colliers.com
A new real estate business is, on average, a 5 year effort. Even though the
most skeptical of us recognize the crisis is over, the development risks are still
perceived as high and it takes courage to assume new development costs.
With banks still requiring high equity contribution and pre-leases, private
money is the blood of current investments.
The difference between those who will hit the bulls-eye of success and the
ones who will continue to struggle is the use of analytics. Sharp analytics
are the reason why certain global retailers have increased their sales in the
last years, despite heavy competition or why certain online businesses do so
much better than others. Understanding what clients need and their criteria
in making decisions is the key for winning new business.
You might say that in a tenant-driven market it is only natural to pay attention
to the clients needs, but unfortunately what most of the developers mean by
that is a better financial offer than the competition. What I mean is different.
Tenants value a developer who cares about their business. They are worried
about aspects such as attracting and retaining top talents, increasing the
productivity in the work space, their brand and acquiring better positioning
against competition. The industrial players care about increasing efficiency
and health & safety regulations, while retailers care about rotating stocks and
finding good trained sales personnel.
The leasing market is entering a new growth cycle and opportunities will
follow. The IT industry is booming, a significant number of new retail brands
are looking to enter Romania, and the automotive sector is growing in the
country side. Your job seems easy, but it is not, as there are many like you out
there, with good quality properties, office or shopping centers, warehouses or
production facilities.
Should you choose to drop prices, you will create a winning story on the
short term, make your board happy for a day and brag about it in the press.
However, on the long term you commoditize the real estate product, cut
down your profits and enter a relationship with a tenant that will constantly
put pressure on price on any occasion.
Colliers International
is a leader in global real estate services,
defined by our spirit of enterprise. Through
a culture of service excellence and
collaboration, we integrate the resources of
real estate specialists worldwide to accelerate
the success of our partners. We represent
property investors, developers and occupiers
in local and global markets. Our expertise
spans all property sectorsoffice, industrial,
retail, residential, rural & agribusiness,
healthcare & retirement living, hotels &
leisure.
Having in mind the macro-business issues, not only those related to real
estate, will create a valuable platform for the tenant to make a decision. This
means changing the habit of negotiating the price down, and replacing it with
solutions based on business particularities, which are non-negotiable. This
will help you in winning a long term sustainable partner.
The market is gaining speed, shifting into 2nd gear, so the race for clients
begins. Investment funds will follow shortly. Plots are at best prices and the
time to buy is now.
I am delighted to share with you our market knowledge and understanding
about what happened in 2013, as well as our projections for 2014. I hope you
will consider this analysis in the daily business decisions.
Best Regards,
Ilinca Paun
33 Research
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International
Economic Overview
Mihai PATRULESCU
Senior Economist
Macroeconomic and Strategic Analysis
For the first time since 2007, Romania managed to outpace

the other CEE countries in terms of growth, registering a GDP
expansion of 3.5% in 2013. This attainment was generated by
the positive performance of the industrial sector, which grew
by more than 5% yoy, and agriculture that managed to offset
poor domestic demand, especially weak fixed investment.
However, growth is expected to slow down to 2.1%yoy in
2014, as the outstanding agricultural production 2013 creates
negative base effect. Exports (estimated 6.5%yoy in 2014)
and industry (estimated 5.0%yoy in 2014) will remain the
biggest growth drivers, helped by demand from Germany and
improved labour competitiveness. However, the positive effect
on industrial output growth from higher production capacities
will disappear in 2014 since no major project follows recent
investment in manufacturing. Fixed investment in machinery
dropped 22.3%yoy in 3Q13 and is expected to decline further in
4Q13. Non-manufacturing investment will be affected in 2014
by lower green energy subsidies and higher taxes on utility and
energy companies.
In the medium term, domestic demand remains a drag on
growth. While the adjustment of unit labour costs since
the financial crisis keeps Romania at the forefront of cheap
CEE manufacturing, it also limits the expansion of private
consumption (est. 0.7% in 2013). We expect a moderate pick-up
in private consumption during 2014 (forecast 1.4% yoy) and
2015 (forecast 1.3% yoy) as wages are set to grow at a linear rate
and loans to the private sector may continue to have a weak
dynamic.
Lending dynamics have been very weak in 2013 (-4% yoy

estimated in December), amid fast bank deleveraging, tight
lending standards and deterioration of asset quality. All these
indicators are lagging the economic recovery and we expect
lending to the private sector to remain in contraction territory
during 2014.
The NBR has been trying to address the issue of weak lending
by easing monetary conditions. Helped by favorable inflation
dynamics in 2013, the central bank cut the reference rate by
175bp from May-13 until Feb-14. However, the disinflationary
process from 2013 was accelerated by temporary factors as
the exceptional agricultural production and the reduction of
VAT for bread products. Consumer price inflation is expected
to accelerate to 3.7% by the end of 2014 due to negative base
effects and the increase of excise taxes (the latter is likely to have
an impact of 0.5pp on inflation). As inflation picks up, the NBR
will have limited space to cut the monetary policy rate further,
but may focus more on liquidity management. The bank has
taken a first step in this direction during January, when it cut
Minimum Reserve Requirements for both RON and EUR. These
policies displace additional liquidity to the banking system
and consequently could help maintain interest rates around
low levels in 2014. Nevertheless, monetary easing can do little
to address the structural problems of the banking sector or
the lack of demand. Public finances remain sustainable under
IMF/EU monitoring, but reform fatigue has risen. Elections for
the European Parliament in May and Presidential elections in
November also highlight political risks for the budget execution
and the financial markets.
Provided political tensions will not escalate, the RON is
likely to have a balanced evolution. 2014 and 2015 will play
an instrumental role in the absorption of EU funds and the
resulting inflows could potentially generate some appreciation
pressures for the domestic currency. Nevertheless, these
pressures are likely to be offset by the deleveraging process and
the volatility of capital flows. Overall, we expect the EUR/RON
to close 2014 around 4.45 and decline to 4.38 by the end of 2015.
Key Economic Indicators Evolution

Indicator
2009
2010
2011
2012
2013
2014
GDP GROWTH
-6.6%
-1.1%
2.2%
0.7%
3.5%
2.1%
GDP PER CAPITA ()
5,501
5,786
6,139
6,161
7,506
7,769
INDUSTRIAL PRODUCTION GROWTH

(%)
-1.4%
4.0%
0.1%
-1.0%
5.5%
5.0%
-9.12%
0.20%
1.07%
1.07%
2.10%
1.44%
CURRENT ACCOUNT BALANCE

(% IN GDP)
-4.1%
-4.4%
-4.5%
-4.4%
-1.1%
-0.9%
NET FDI (% IN GDP)
3.01%
1.80%
1.40%
1.30%
1.83%
1.35%
BUDGET DEFICIT (% IN GDP)
-9.01%
-6.83%
-5.60%
-2.90%
-2.80%
-2.80%
INFLATION RATE (%)
4.70%
8.00%
3.14%
4.96%
1.57%
3.67%
4.24
4.21
4.24
4.46
4.42
4.45
HOUSEHOLD CONSUMPTION (%)
AVERAGE EXCHANGE RATE

(RON/EUR)
SOURCE: National Commission of Prognosis, National Institute of Statistics, Unicredit Tiriac Bank
Exports and Imports Evolution (mn. )

60,000
50,000
40,000
30,000
Exports
Imports
20,000
10,000
SOURCE: National Institute of Statistics
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Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Green Court Bucharest by Skanska, to be delivered in Q4 2014
Bucharest
Office Market
Supply
116,000 m2 were delivered on the market during 2013. 95,000
m2 out of this volume were delivered in the fast developing
Floreasca Barbu Vacarescu area. Consequently, the modern
office stock in the area recorded a 76% increase, reaching
220,000 m2.
Thus, Bucharest's office stock amounts to 1,656,000 m2 as of
December 2013, 8% higher compared to the stock registered at
the end of the previous year.
Demand
had a 150,000 m2 contribution to the total activity on the

market. 103,000 m2 resulted from renegotiations & renewals, as
the contracts signed during the peak of the market (2007 2008)
reached maturity in 2013. Another 47,000 m2 resulted from
relocations from competitive stock.
An in-depth analysis of the contracts that were subject to
renegotiations in the last year revealed that Dimitrie Pompeiu
qualifies as one of the friendliest areas with a share of 40% in the
total contracts renewed in 2013. The next two most stable areas
were: Piata Presei (15%) and Pipera (12%).
In terms of relocations from competitive stock, the market
revealed two main trends. On the one hand there were
companies moving towards the CBD area, especially Victoriei,
and on the other hand, there were others favoring Pipera area
due to its affordability.
Only 50 bps lower compared to December 2012, the vacancy
rate stood at 18% as of December 2013. Due to the considerable
deliveries registred in the last year, Floreasca Barbu Vacarescu
saw an increase in the vacancy rate (from 3% to 24%).
2013 marked an increase in the net take-up registered on

the Bucharest office market. With a 20% growth in volume
compared to the previous year, the net take-up equaled 100,000
m2. The net take-up is fuelled by transactions which lead to the
absorption of the available office stock .
Rents
Most of the transactions composing the net take-up were

closed in three main areas: Dimitrie Pompeiu, Politehnica and
Floreasca Barbu Vacarescu. The Politehnica area proved to be
a successful story as it succeded in attracting the largest prelease agreement signed in 2013.
The average headline rents registered a slight compression

during 2013. In most of the cases, the rent reductions varied
between 5% and 10%.
In terms of net demand, the IT&C sector led the market in

2013 being the subject of 40% of the transactions comprised
in the net activity, followed by the energy, industrial and
financial sectors. The healthy demand is represented by
expansions and new entries on the market that accounted for
approx. 70% of the net take-up.
There are two main metrics measuring the office rents evolution
the headline and the effective rent level.
As landlords were more flexible in finding creative solutions

for attracting tenants, effective rents on the market recorded
further downward corrections.
The entire activity on the market also includes renegotiations /

renewals and relocations from Class A stock. These two sources
Bucharest Office Market Evolution

Indicator
2009
2010
2011
2012
2013
1,190,000
1,360,000
1,478,000
1,540,000
1,656.000
Total Take-Up (m2)
90,000
177,000
183,000
168,000
250,000
Net Take Up (sqm)
90,000
116,000
115,000
80,000
100,000
18%
18.5%
16.5%
18.5%
18%
Stock Evolution (m2)
Vacancy Rate (%)
Average Headline Rents and Vacancy Rates by Area

11-13
34%
Baneasa
Pipera
A. Vlaicu
15-16
7%
P. Presei
D. Pompeiu
11-13
8%
Floreasca
Barbu Vacarescu
16-18
5%
8-10
49%
14-16
24%
Aviatorilor
Victoriei
P. Poenaru
10
10%
Pacii
14-15
2%
16-18
21%
14-15
14%
Grozavesti
Politehnica
Obor
Romana
Eroilor
Izvor
14-15
16%
Universitate
12-14
23%
P. Muncii
Unirii
10-12
17%
Piata Sudului
Average headline rent (/m2)
Forecast
Based on the projects that are under active construction
currently, the market will receive an additional 110,000 m2 gross
leasable area by the end of 2014.
The net take-up is expected to continue on the upward trend
in 2014, as there are favorable conditions for further growth in
demand fuelled by expansions and new entries. However, we
expect to see a certain decrease in the total transactional activity
on the market. Only a few of the contracts reaching maturity
in 2014 are still to decide between renegotiation/renewal and
relocation, as for most a decision was reached in 2013. Demand
coming from new entries will be fuelled mainly by business
Vacancy rate
process outsourcing (BPO) / shared service center (SSC)

companies. Based on our research, the Eastern Europe region
recorded an average 10% yearly increase in take-up generated by
these companies in the last two years. Nonetheless, a more rapid
growth is expected for the following years.
Transactional activity is also expected to come from companies
with a clear consolidation strategy. As most of these companies
have their activities distributed between several buildings they
will be actively looking for securing a sole location.
In terms of rents, on average, we do not expect significant
changes in terms of the headline rents. However, the landlords
will be willing to find feasible solutions in order to attract
clients.
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Victorya City Center by Benevo, to be delivered in Q4 2015
Romania Shopping
Centers Market
Supply
Traditional: At the end of 2013, the Romanian traditional
retail stock stood at 2,210,000 m2. Counting in all the post2008 deliveries, the market registered a 47% growth in the
last five years. However, the development speed decelerated
in the last two years. 2012 and 2013, with around 130,000 m2
yearly deliveries, registred a significant drop in the new supply
compared to the previous three years. The first part of 2013 was
rather quiet with only 2 small projects (Uvertura Mall Botosani
and Cora Constanta) being launched. Nonetheless, the fourth
quarter registered the delivery of three large projects with a total
of 96,000 m2. Each of these three projects was much awaited
on their markets. Promenada Mall (36,000 m2) located in the
Floreasca - Barbu Vacarescu office hub, was the first project in
Bucharest to start construction works after the crisis hit. AFI
Palace Ploiesti (33,000 m2) was received by Ploiesti city, only
1 year after the delivery of the first shopping center in the city,
and Shopping City Galati (27,000 m2) was the first modern
scheme to serve the city.
Specialized: In the last five years the market shifted from large
projects to small developments. During the post-2008 period
the deliveries registered on the market consisted mainly in
small schemes (a food discounter and several adjoining boxes)
and additional construction phases in existing projects. For
2013 there were a number of plans for completing the existing
food stores with complementary boxes. However, a market that
was announcing to be quite active at the beginning of 2013,
proved to be much slower in terms of deliveries.
Demand
Traditional: In 2013 Romania registered only a modest
improvement in the household consumption, of only 0.7%
compared to 2012. This had an uneven impact on retail sales

registered by the food & beverage and non-food segments. While
the former segment registered a 0.1% contraction, the latter
one had a 3.6% expansion. Overall, the international retailers
reported an increase in sales in 2013 compared to 2012. A part
of the well established brands registered yoy growth rates of up
to 10% and 20% in turnover for a number of the existing shops.
Overall retailers were actively looking to expand in 2013, even
those that have been dormant in the previous years. The market
also recorded demand coming from new international brands
(such as Kazar, La Martina, Luisa Spagnoli, Patrizia Pepe, Suvari,
Tchibo, Pretty Ballerinas, Vicomte A, Zuper Kids, Bonpoint,
Crabtree & Evelyn, Ethan Allen).
Another trend that emerged last year was the large international
retailers propensity towards larger selling areas. This is a trend
that started in the Western Europe, as retailers are trying to offer
higher product variety. Their main focus is to offer a wonderful
shopping experience in order to be able to fight with the
continuously increasing on-line segment.
Specialized: Taking into account the limited new supply
recorded on the specialized retail market, the demand performed
accordingly. Except for Bricostores takeover by Kingfisher,
Kauflands and Dedemans continuous expansion, there was no
significant movement initiated by the large retailers, neither in
terms of land acquisitions nor leasing. Jumbo was the second
new entry of the year. The retailer chose to open its first unit in
Timisoara, Bucharest following shortly thereafter. For 2014 the
retailer announced a number of 5 more units to be opened on the
market. The shop addresses families and offers home decorations,
toys, children clothes, bath and kitchen accessories.
Rents
Traditional: After the 10-15% decreases in rents registered in
2012 and taking into account the limited new supply brought on
the market in 2013, there were no further rent reductions.
Specialized: As the rents in specialized schemes are directly
linked to each locations turnover potential, there were no
changes in rents on this segment.
Romania Shopping Centers Market Evolution

Indicator
2009
2010
2011
2012
2013
Traditional Shopping
Centers Stock (m2)
1,500,000
1,719,000
1,940,000
2,080,000
2,210,000
Specialized Shopping
Centers Stock (m2)
670,000
772,000
787,000
821,000
821,000
Stock per 1,000 capita

Traditional Shopping Centers
Zagreb
Bratislava
725
Warsaw
448
Prague
Budapest
716
Bucharest
346
655
Kyiv
328
Forecast
Traditional: More than 300,000 m2 are in incipient stages of
construction or are planned to break ground in the following
months. However, only 27,000 m2 (Targu Jiu Shopping City) will
be delivered on the market by the year end.
Taking into account all the projects announced for delivery in
Bucharest before end of 2017, the city should receive around
300,000 m2 of leasable area. Provided that all these projects will
come to completion, the market is expected to receive a 40%
increase in supply in the next years.
The Eastern part of Bucharest, the last uncovered part of the city
in terms of modern shopping facilities, will be in the spotlight
on the short and medium term. Three shopping centers adding
up to over 250,000 m2 are very active on the marketing and
leasing side in order to secure tenants. Thus, retailers should
carefully analyze each of the three future centers in terms of
both location and concept in order to make the best choices for
this area.
546
St Petersburg
510
Moscow
Sofia
280
268
Belgrade
187
options for retailers to expand. However, as the household

consumption is expected to grow in 2014, the retailers will
strengthen their positions on the market.
A wave of new brands will most likely enter the Romanian
market in the following years. Based on the initial discussions
initiated by Colliers Retail Team as part of the New Brands
service line, there are at least 50 international retailers present
in the CEE countries which are considering to enter Romania in
the following period. Still, given the fact that most of them are
interested in partnerships and offering franchises, we expect
that only 10-20% of them will be able to open a shop in the next
12 months.
Specialized: We expect a higher activity on the development
side on the specialized sector. As a number of land plots were
already secured we expect to see developers starting the
construction works this year.
After several postponements, 2014 will see both the start and
the delivery of Vulcan Value Center, the most advanced large
specialized retail project planned for development.
As 2014 is expected to be the post-2008 year with the lowest new

supply delivered on the market, there will be limited available
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H&M Lipscani Store, leased by Colliers International Romania
Bucharest High
Street Market
In this section we analyze both Bucharests high street sales and leasing market
segments. While the information related to the selling market refers to the entire city,
the analysis of the leasing market is limited to the following areas: Old City Center,
Dorobanti, Calea Victoriei and Magheru Balcescu Bratianu.
Bucharests high street sales market developed greatly in the

last two years as it proved to be a quite liquid segment with a
large number of investors looking to place money in small (100
m2) to medium (600 m2) retail properties. Investors ranged from
high net worth individuals, Romanian or foreigners, small real
estate funds to existing landlords of large high street portfolios.
Counting in all the transactions closed in 2013, the high street
market recorded a total activity of up to 26 mn, more than 60
properties being subject to closed transactions.
Rents & Prices

The Bucharest high street market recorded an increase in
attractiveness in 2013 compared to the previous year. On one
hand the leasing market became much more appealing for
retailers and succeeded in attracting important new brands and
on the other hand the sale market increased its appeal to both
buyers and sellers.
Transactional Activity
On the leasing side, each of the analyzed areas registered an
increase in activity.
The Old City Center, especially Lipscani Street, was the most
targeted location by the fashion retailers that address the middle
income segment. As most of the international retailers have
already secured a strong presence in the Romanian shopping
centers, they started looking to open flagship stores on high street.
Consequently, for most of them, Lipscani Street represented the
best location due to the large pedestrian traffic in the area. This was
the case with H&M and Koton. While the former opened towards
the year's end, Koton secured a space in the area.
Dorobanti and Calea Victoriei were both targeted by luxury
brands. After more than 2 years with high vacancy rates,
owners became more flexible in pricing. Thus, a number of new
retailers opened locations on Dorobanti (Bonpoint and Tartine
& Chocolat) and Calea Victoriei (Antony Morato, Porsche
Design, Lancel), generating a decrease in vacancy rates. The
high street area comprised between Romana and Unirii Square
was the quietest high street artery, with no significant brand
opening or closing down activities in the area.
There were no significant changes in the obtainable rents in

2013 compared to the previous year. However, the average rent
varied depending on each areas attractiveness. Even in case of
the spaces located along the same boulevard the average rent
varied greatly. For each of the following boulevards: Magheru,
Balcescu, Victoriei and Dorobanti the rent levels for the spaces
located close to squares are twice as high as those registred for
the units distributed along the arteries. Calea Victoriei follows
the same trend for most of the spaces, except for those located
across Radisson Blu Hotel. As here lays Bucharests luxury
location, the spaces in the proximity have the highest rents on
Calea Victoriei. The most expensive high street units are those
located around Romana square, which have asking rents of 90
100 per m2.
On the high street sales market the total transaction price varied
between 200,000 and 1,500,000, the average standing at
around 500,000. This translates in an average price per m2 of
2,500, varying between a minimum of 1,500 and a maximum
of 7,000. The deal prices were mostly influenced by the
sustainable rent level associated with a certain location. Other
particularities such as the covenant of the tenant and the
leasing period were also priced in.
10 Research & Forecast Report | January 2014 | Romania | Colliers International
Main Retail Arteries by Atractiveness
45-55/m2
30-40/m2
Dorobanti Square
Victoriei
35-45/m2
Romana
30-40/m2
90-100/m2
50-60/m2
35-45/m2
Calea Victoriei
45-55/m2
Universitate
30-40/m2
Izvor
30-40/m2
30-40/m2
50-60/m2
Unirii
60-90/m2
30-40/m
Low interest
Medium interest
Forecast
Taking into account that there is no significant new supply to
become available on the market and with a higher interest from
the retailers willing to open additional locations, we estimate
no further decrease in rents in 2014. New stores are expected in
the Dorobanti area, as Mario Plaza made high street solutions
available here. Towards the end of 2013, the ground floor in
Mario Plaza shopping gallery changed ownership and was
turned into traditional high street units.
High interest
The luxury sector is expected to gain new retailers in the

following year. As high street rents seem to have hit bottom in
2013, 2014 represents the best moment for any international
retailer willing to enter Romania.
In terms of high street sales, in 2014 the market will follow
the same trend as in 2013. An important number of investors
are still interested in placing money in this type of properties.
Nonetheless, the only limitation foreseen for the next period is
given by the limited supply of high street properties available
for sale.
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Prologis Park Bucharest by Prologis
Romania
Industrial Market
Supply
2013 marked the second year with no new deliveries on the
Bucharest industrial market. Due to the fact that demand
continued on the downward trend it entered in 2009, there
were few developers who would consider a speculative
logistics development. Things looked up for the countryside
stock which amounted to 668,000 m2 at the end of December
2013. Timisoara received 13,200 m2 in two existing projects
Timisoara Airport Park and VGP.
The slow activity on the warehousing segment was balanced by
a considerable increase in movement on the production side.
Based on the major production plants that started operations
in 2013, we can conclude that Romania made a solid case for
companies active in automotive and construction materials
sectors. Brasov and Sebes became the hotspots for companies
expanding and opening new production units. In the Western
part, the activity was led by Timisoara, Arad and Oradea. The
new production lines in the construction materials sector were
concentrated mainly in the Eastern part of the country as they
export to countries such as Moldavia or Ukraine.
Demand
In 2013, the demand for the Bucharest logistics was still on the
descending trend. With a net take-up of 36,000 m2 in 2013, the
market registered an 18% compression in activity compared to
2012. Taking into account also the renegotiations / renewals
concluded in 2013, the warehouse market accounted for
114,000 m2 in all the transactions registered on the market. The
vacancy rate at the year-end stood at 13.7%, 80 bps smaller
compared to the level registered at the end of 2012. The logistic
companies were mostly static. They were mainly involved in
renegotiations/renewals and to a lesser extent in expansion
leases. They were focused on strengthening their position on

the market by gaining new clients, reducing their operations
in the distribution centers and consolidating cross-docking
facilities throughout the country.
The demand for production sector continued to escalate in 2013.
The improvement was easily noticeable as the market saw a
higher number of companies prospecting the market. Moreover,
a significant part also made decisions of opening plants in
Romania. Companies present on the market took advantage of
the growing external demand and either expanded their facilities,
or developed / planned the development of new production
units. The main drivers of the demand on the production market
were the automotive and textile segments, followed closely by the
pharmaceutical and the oil & gas sectors. Companies active in the
light manufacturing sector started looking for specialized cities.
While Ploiesti attracted investments in oil & gas sector, Timisoara
continued in attracting technology companies. Moreover, cities
such as Craiova or Zalau, with a history in textile manufacturing,
were also considered for a number of developments.
Rents
2013 was marked by a slight reduction in rents across the entire
logistics market. As most of the cities had vacant spaces, the
owners were forced to offer further discounts in order to secure
tenants. The headline rent for medium spaces (1,000 3,000 m2)
varied between 3.3 and 3.5 per gross leasable area.
Usually, the premises suitable for the production sector are
built-to-suit solutions. Moreover, nowadays the developers
are willing to also provide the necessary equipment (such as
compressed air, ventilation in/out, industrial gas or busbars).
These improvements, known as Above Standard Tenant
Improvements (ASTI) bring added value to a project. Moreover,
more recently, they became a tool for increasing a projects
profitability, as the base rent for a built-to-suit production unit
dropped from 4 5 to 3.3 3.5 /m2 (without ASTI).
Cross-docking is a practice in logistics of unloading materials from an incoming semitrailer truck or railroad car and loading these materials directly into outbound trucks,
trailers, or rail cars, with little or no storage in between.
Bucharest Industrial Market Evolution

Indicator
2009
2010
2011
2012
2013
Stock (m2)
895,700
907,700
922,000
941,000
941,000
Net Take-Up (m2)
100,000
75,000
52,000
44,000
36,000
Vacancy Rate (%)
12%
15.4%
15.3%
14.5%
13.7%
Stock Distribution
Eastern Europe Select Capital Cities
200.000 m2
Sofia
3%
Bratislava
4%
Zagreb
4%
Bucharest
Kyiv
5%
8%
Prague
9%
Budapest
9%
Warsaw
14%
Moscow
44%
Forecast
Log Center Bucharest, Immofinanzs warehouse project
is announc ed to be developed in the North Western part
of Bucharest. With 20 40,000 m2 in the first development
phase, the project will increase the Class A logistics stock by
140,000 m2 upon delivery. However, the developer will start the
construction works only after securing pre-leasing contracts for
a significant part of the project.
As long as a significant increase in the household consumption

is still unforeseeable in the year to come, most likely, the
demand on the logistics sector will be driven by existing
companies and to a lesser extent by new entrants. While the
demand from the warehousing sector will remain limited in
the following year, the production sector will lead the market in
2014 as well. The center of the country will be more appealing
for investors willing to take advantage of the educated yet
cheaper workforce in Romania, especially on the automotive
and the textile sectors.
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2014 | | Romania
International
Dedeman Pitesti opened in August 2013, on a plot sold through Colliers International Romania
Romania
Land Market
There was a lot of noise on the market in terms of prospecting
activity. However, the transacted volume remained subdued in
2013, due to both lower number of transactions but also reduced
deals sizes. After 2008, the players on the market switched
their behavior. If before 2008 they were continuously buying
land plots, in the last five years they alternated procurement
with development periods. As 2011 and 2012 were two good
performing years in terms of transactional activity, starting with
2013 most of the players entered the development period.
Demand
As only existing players were familiar with the current markets
particularities, they were able to correctly assess available
opportunities. Thus, new entrants on the market were almost
missing.
The demand was driven by retail, office and to a lesser extent
by residential developers. The small retailers (supermarkets,
discounters and gas stations) were the most active. The
discounters finally secured locations in the Northern parts of
Bucharest in 2013, as these became affordable. Only a few gas
stations were actively buying land plots, including the new
comers which started to build up networks in Romania 2 years
ago. Kaufland and Dedeman were the most notable drivers of the
demand from big boxes. Two years after entering Romania, Leroy
Merlin secured its second location in Bucharest in 2013. Other
large retailers were focused on optimizing and restructuring, or
integrating their portfolios after finalizing the take-over process
(Auchan - Real and Kingfisher - Bricostore). In 2013 the retail
developers were focused on developing the sites acquired during
the previous years. Those with a strong investor profile returned
to their bases - income producing assets or joint venture deals.
However, they were still eager to acquire land plots with high
development potential or situated in locations with limited
competition. This was the case with the plots bought by Nepi (in
Targu Jiu) or by Benevo Capital (in Bucharest - Aversa factory).
On the office side, 2013 recorded a drop in activity compared
to 2012. Even though there was interest for both small projects
and large business parks, it was difficult to find available sites
at feasible prices in the targeted areas. Sites for residential,
especially the large plots, were the least demanded. There was
some interest in entering joint venture contracts for big projects.
Demand from speculative buyers strengthened in 2013. They
were looking for small size land plots, in very good areas, suitable
for various uses, at discounted prices.
Supply
Banks were one of the most active land vendors in 2013. Upon
admitting the current market reality, a part of them became
aggressive in terms of pricing and succeeded in attracting buyers.
Out of the entire supply, factories were very much traded in 2013.
There were two categories of such premises targeted by retailers:
operational sites relocating or closing down due to the economic
downturn (primary market) and factories on the secondary
market, bought initially by developers for residential, office or
shopping center use and re-sold in 2013 to big box retailers.
Transactions & prices

The market registered a compression in the total volume
concluded due to a decrease in the average transaction value.
If, in 2012 the market recorded 3 deals over 20 mn each, in
2013 there was only 1 transaction exceeding the 15 mn level:
Benevo Capital secured Aversa factory (10 ha) in Obor Square in
Bucharest for 17.3 mn, provided that the factorys operations are
preserved for at least three more years. Consequently, the market
was dominated by small and medium size deals, below 3 mn,
closed by opportunistic investors and small retailers. The prices
remained on the descending trend in 2013, given the increase in
supply of attractive deals from banks, liquidators and distressed
owners. According to our estimation, in 2013, the market recorded
a 10-25% decrease in prices compared to 2012. However, there
were also areas that preserved constant prices. This was the case
with central and exclusivist areas where the supply is limited and
usually the owners do not have any pressure to sell.
Bucharest Land Prices Evolution

3,500
3,000
2,500
2,000
Center
1,500
Semi-central
1,000
Peripheral
500
0
2008
2009
2010
2011
2012
2013
Average Land Prices Registered in Transactions in 2013

Baneasa - DN 1
300-400/
m2
Nicolae Caramfil
Pipera
400-500/
m2
100-300/
m2
The information is based on the deals

concluded in 2013 and not average
asking prices for the specified areas.
They highlight the most targeted type of
land plots. As usual, the prices were
influenced by size, destination, building
parameters, status of the permitting
proces.
Floreasca
Barbu Vacarescu
PrimaveriiMircea Eliade
300-500/
m2
2,500/
m2
Romana
Dorobanti-Icoanei
900-1,200/
m2
Colentina - Obor
150-250/
m2
Theodor Pallady
50-300/
m2
Alexandriei Road
50-100/
m2
Forecast
For 2014, we expect transactional activity to continue at the
same pace as in 2013. Most buyers will, however, continue to
be rather opportunistic. While there are banks and landowners
with pressure to sell, the market will offer good deals. As
supply is expected to remain considerably higher in relation to
demand, overall prices will be on a descending trend in 2014
as well. As in the past years, the existence of a valid PUZ will
weigh a lot in the buying decisions especially in case of the
developers. They are very reluctant to acquire land which does
not have yet a PUZ approved, as this implies a delay of around
1-1.5 years before the construction works start. Besides the risks
associated with the obtainable building parameters, a project

developed on such a land is associated with higher risks due
to the uncertainties in relation to the market conditions at the
time the future project is delivered and sold/leased (within 2
2.5 years on average from the land acquisition).
Intensive real estate developments in certain parts of Bucharest
started to cause accessibility problems in these areas. Thus,
we might see investors reluctant to start new projects here
until infrastructure solutions for solving these problems are
implemented. Nonetheless, there are also areas with recently
finished infrastructure projects that became appealing to
investors. Thus, we expect to see a higher transactional activity
in these areas in the following period.
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International
City Park Mall of Constanta traded in 2013 to NEPI in the largest transaction post 2008. Colliers International Romania advised the seller Neocity Group.
Romania
Investment Market
In 2013 the investment market saw deals with yielding assets
with a total volume of app. 300 million, doubling the previous
years volume. This volume does not account for joint venture
transactions in development projects, nor acquisition of shares
in self-standing European platforms that have ownership also in
Romanian assets.
As the Romanian economy is on a trend of growth, and more
developed markets in the region are becoming tighter, we
expect 2014 to be a more active year in commercial property
investments with new investors entering the market.
Transactional Activity
2013 was dominated by retail transactions, five of the seven
deals closed involving such schemes. While the two office
deals took place in Bucharest, the retail transactions were all in
regional cities.
Bucharest retail continues to be an attractive target for
investors, exemplified by the joint venture between NEPI and
Real4You for the development of Mega Mall Shopping Centre.
However, Bucharest is still to see the first acquisition of a
yielding retail scheme.
The Lakeview office building (25,500 m2) was the subject of the
first transaction closed on the investment market in 2013, being
acquired by NEPI from a partnership between AIG Lincoln and
DPGS for a price of 62m.
NEPI continued its acquisition spree with two retail schemes
in secondary cities in Drobeta Turnu Severin where it
acquired Severin Shopping Center (app. 16,000 m2 anchored
by Carrefour) from BelRom and Deva where it acquired Deva
Shopping Center (app. 42,000 m2 anchored by Metro and Real)
from a private investor.
The year-end saw the announcement of NEPIs acquisition of

City Park Mall in Constanta (over 29,000 m2, anchored by Cora)
for 81m. This represented the largest retail and overall one
of the top three overall commercial property deals in terms
of volume of the past five years (Colliers International being
involved as an advisor in all three transactions).
The year also saw Mitiska REIM's club deal with Intercora,
where Mitiska bought a 50% interest in Intercoras Romanian
retail park portfolio, and the takeover of Atrium Center Arad by
Hungarian investor, Demjan Sandor, through the acquisition of
the 50% stake of the project it did not already own.
Finally, another transaction announced at the end of the year
was the transfer of Charles de Gaulle Plaza, a 23,000 m2 prime
office building in Bucharest, between two funds managed by
the same asset manager, GLL Partners.
Investors, Investments and Prices

NEPI continued to be the dominating investor on the market,
being the investor in five of the transactions closed in 2013.
Private equity funds have been mostly absent in the past two
years from the market. There are signs however that these funds
may return in 2014 driven away from the low yield environment
in the markets of their current focus. These players can look at a
broader spectrum of investments, but require higher returns.
Other players prospecting the market included specialist
investors, listed companies and private wealth. The latter
can invest from high street retail spaces to mid-sized office
buildings.
In terms of potential investments, the market supplies options
from core assets, to value-add opportunities to distressed
situations.
The Romanian market offers a yield premium of 100 250
bps over more mature CEE countries. While a yield gap is still
present in the expectations of sellers and buyers there are clear
signs that this gap is narrowing.
Romania Investment Market Evolution

Indicator
2009
2010
2011
2012
2013
100
500
90
155.5
300
OFFICE (%)
8.5%
8.25%
8%
8.25%
8.25%
INDUSTRIAL (%)
12%
10%
10%
10.25%
10%
RETAIL (%)
9.5%
9%
8.75%
8.5%
8%
TRANSACTION VOLUME (MIL. )
BUCHAREST PRIME YIELD
CEE Investment Enviroment

Russia
8.5%
Poland
6%
%
Prime office yield
Ukraine
11%
Czech Rep.
6%
Positive
Mostly positive
Neutral
Not a positive investment enviroment
Slovakia
7.5%
Hungary
7.75%
Romania
8.25%
Croatia
8.5%
Serbia
9.5%
Forecast
Europes economy is expected to grow in 2014 and political
uncertainty over its future declining. With global capital
flowing into European and CEE property, and with intense
competition for investments in the more mature markets of
Poland and the Czech Republic, the time is ripe for investors to
look to markets with a more attractive risk-return profile, such
as Romania. After an excellent growth year in 2013 (+3.5%)
the local economy is expected to continue its growth at a
rate exceeding 2% in 2014, which should enable an attractive
Bulgaria
9.5%
investment environment in a global market where uncertainties

and turbulences are present both in the western markets as well
as the commonly known emerging markets.
During the course of 2013, a number of investors that
were dormant or cold towards Romania for the past few
years became more interested in seeking opportunities to
allocate capital here. As a result, there has been an increased
prospecting activity and there have been a larger number of
acquisition negotiations initiated, which reached in scope
beyond the Bucharest office sector.
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2014 | | Romania
International
Cosmopolis by Opus Land
Bucharest
New Residential
Market
2013 was the most dynamic year of the post crisis residential
market. Prices suffered further downward corrections, demand
picked up, encouraged on the one hand by a higher confidence
in the market, and on the other hand by rumours surrounding
the Prima Casa programme.
Supply
The residential stock (in monitored projects) increased by 10%
in 2013, reaching a total volume of approximately 22,000 units.
New deliveries consisted of both additional phases in existing
compounds and new launched projects. The first semester saw
the delivery of 75 apartments of Adora Urban, while the second
semester received the second phase of Adamas Optima Project.
In addition well performing projects like Militari Residence
or Cosmopolis continued to bring new units to the market.
The southernmost area of Bucharest continued its accelerated
development throughout 2013, due to the high demand for
more affordable dwellings. Semi central areas with good
access continued to receive small scale developments intended
for the higher earners.
Sales accelerated during the summer months when the

rumours of the change in the Prima Casa surfaced. The
programme reduced financing solutions to national currency
loans in order to diminish exchange rate risks. According to the
FNCGIMM the number of daily loan requests doubled (from
90 to 180), but they dropped as soon as financing was available
only in RON. However, throughout 2013 the National Bank
of Romania reduced the reference interest rate from 5.5% in
January to 4% at the end of December. The annual percentage
rate of charge for RON denominated loans stood at the end of
December at 6.11 % while for Euro denominated loans it stood
at 5.87 %.
Sales slowly picked up towards the end of the year, and the
average absorption rate per month was six units per compound
(in monitored projects).
Prices
The average price at the end of the year was 890/built m2, 3%
lower than the value at the end of 2012. Due to the change in
financing some projects reduced marginally their prices. The
small difference in prices in comparison with the end of 2012 is
an indication of the market reaching a minimum threshold.
NCGIMM The national fund for guarantee is the state institution

F
in charge of Prima Casa
Nevertheless, new deliveries have been overwhelmingly

destined for Prima Casa or the 5% VAT buyers.
Demand
While the first six months of the year saw an overall increase
in demand of 20 25% in comparison with the similar period
of 2012, the end of the year marked a total absorption volume
of approximately 3,000 units (50% higher than end of 2012) in
monitored projects.
Bucharest New Residential Prices Evolution (/built m2)

2,000
1,600
Market Average
1,200
Low Projects
Middle Projects
800
Upper Middle Projects
400
0
2009
2010
2011
2012
H1 2013
H2 2013
Emerging Residential Areas for

New Developments
Baneasa
Pipera
A. Vlaicu
P. Presei
D. Pompeiu
Floreasca
Barbu Vacarescu
Aviatorilor
Victoriei
P. Poenaru
Obor
Romana
Grozavesti
Pacii
Politehnica
Eroilor
Izvor
Universitate
Unirii
Prelungirea Ghencea
P. Muncii
Dristor
Nicolae Grigorescu
1 Decembrie
Anghel Saligni
Nicolae Teclu
Soseaua Alexandriei
Piata Sudului
Aparatorii Patriei
Dimitrie Leonida
Forecast
We expect to see an increase in deliveries and new launched
projects throughout 2014, given the higher demand for new
apartments, as well as developers' desire to complete their
expansion plans. Similar to previous years we will most likely
witness the further development of well performing projects,
but most likely this will happen at a higher pace in order to
satisfy demand.
Demand will continue on an upward trend, encouraged by the

more diverse supply. We expect to see an increase in Prima
Casa loans as the RON EUR interest rate differential continues
to shrink. Coupled with lower down payment requirements
for RON loans, this will lead to the national currency gaining a
higher stake in home acquisition financing.
We expect to see no major changes in prices over the next
period, due to the fact that buyers continue to be very price
sensitive.
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2014 | | Romania
International
Radisson BLU Hotel
Bucharest
Hotel Market
Under this section we analyze the hotels that qualify according to the international
standard as midscale, upscale and luxury hotels. In order to do so we have studied the
existing hotels affiliated to international chains, the strong local chains (such as
Continental) and a certain part of those non-affiliated. In choosing the non-affiliated
hotels, we have taken into account a number of indicators, including: a minimum
number of 50 rooms per property, the hotel's awareness on the market, the quality of
the premises and the provided services.
Supply
Without any increase in the hotel stock in 2013, the Bucharest
market offered 7,054 rooms in 55 hotels as of December 2013.
While a new 5* hotel (Premier Palace & Spa) was delivered
on the market, Starlight Hotel was converted into an office
building.
An in-depth analysis of the supply, revealed that the 4* hotels
have the largest share of the market. They account for 62% of
the total rooms on the analysed market. The 5* hotels have a
share of 21% in the total supply, the 3* category being the least
developed segment.
Demand
The demand for hotel accommodation increased at a slow pace
in 2013. With an average occupancy rate of 58.6% in 2013, the
Bucharest lodging market recorded a 5.8% yoy growth. The
increase in occupancy varied greatly from period to period.
In April and September the market registered the largest yoy
growth rate, reaching a maximum of 19.4%.
However, the demand for the 5* segment was reallocated

between the analysed hotels.
As usual, the demand on the hotel market was driven by
foreigners, accounting for 60% of the entire activity. However,
the target clients differ greatly by hotel category. While the 5*
accommodation demand was generated mainly by foreigners
(70% share in the demand for this category), the activity on the
3* category was composed mainly by domestic demand.
Bucharest, a traditional business destination, registered an
increase in demand from the leisure segment in 2013. Most of
the hoteliers on the market reported growths in the demand
generated by the leisure segment. Thus, the market saw an
improvement in the occupancy levels registered during
weekends.
Rates
The Bucharest hotel markets occupancy rate increased in
2013 at the expense of the average daily rate (ADR). Before
registering any significant increase in ADRs, the market has to
prove a sustainable growth in occupancy. Thus, the ADR of 74
per room night in 2013 was 4% smaller compared to the 2012
average. However, the ADR for the whole accommodation
market in Bucharest is much smaller compared to the figures
registered for the analysed segment.
The average revenue per available room (RevPar) for 2013
recorded a 2.2% increase. Thus, Bucharest accommodation
market registered a slight increase in revenues.
Overall, hoteliers on the market reported increases in activity in

2013 compared to 2012. However, the increase in the occupancy
rate had an uneven distribution on each hotel categorys
performance. While the 3* and 4* hotels registered significant
growth rates in occupancy, the 5* hotels were mostly constant.
Bucharest Hotel Market Evolution

Indicator
2009
2010
2011
2012
2013
48.4%
52.5%
56.8%
55.3%
58.6%
AVERAGE DAILY RATE (/ROOM NIGHT)
86
80
77
77
74
REVENUE PER AVAILABLE ROOM (/ROOM NIGHT)
42
41
44
42
43
AVERAGE OCCUPANCY RATE (%)
Source: STR Global, Ltd. republication or other re-use of this data without the express written permission of STR Global is strictly prohibited.
Monthly Occupancy and ADR Change from Previous Year (%)

25.0
20.0
15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0
-20.0
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Occupancy Rate Growth (%)
Nov-13
Dec-13
ADR Growth (%)
Source: STR Global, Ltd. republication or other re-use of this data without the express written permission of STR Global is strictly prohibited.
Forecast
Bucharest is an attractive destination for large international
operators. However, out of the 6 international hotel chains that
were announcing the development of future hotel schemes in
Bucharest, only Hilton and Rezidor are still actively assessing
solutions for opening new facilities on the market. Based on
these two projects, the market might receive 300 additional

rooms in the following 2-3 years.
As both the regional and local economy is expected to
strengthen in the following period, the demand for the
accommodation market is set to increase its attractiveness. We
expect slightly higher occupancy rates for 2014 but constant
ADRs.
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Real Estate
Investments
in Romania
Taxation Aspects
from the gross income the 25% expense quota. Subsequently,

the income tax computation base represents the difference
between gross rental income, 25% expense quota and health
fund contribution. The 25% expense quota represents fixed
deductible expenses for which no justifying documents are
required.
Alternatively, individuals have the option to determine the
annual net income based on the single entry bookkeeping.
In this case the income tax is applied to the gross income
reduced by actual deductible expenses, including health fund
contributions.
Income tax is also due from individuals earning income from
renting out rooms from their own houses for tourism purposes.
The taxable base and the taxation method depend on the
number of rooms rented out.
Alex MILCEV
Tax Partner, Taxation Services
We are presenting below some key aspects that should be

considered by individuals or companies investing in Romanian
real estate properties either directly or via a Romanian entity.
In case of income derived from the lease of agricultural land the

income payer has the obligation to withhold, pay and report the
income tax and health fund contribution due. The computation
base is determined under the 25% quota system, as detailed
above in case of rental income. The option to determine the
annual net income based on the single entry bookkeeping is not
applicable any longer for such type of income.
1. Taxation of rental
and disposal of assets
The individuals earning income from more than 5 lease

contracts (including lease of agricultural land) at the fiscal year
end have the obligation to register starting with the following
fiscal year and consider the tax rules applicable for income
from independent activities (normally taxed at 16% on actual
numbers).
Rental activities
Disposal of the real estate
Rental income is subject to a flat 16% tax that is applicable to

both companies and individuals but with certain differences in
the computation of the tax base.
Capital gains obtained by Romanian companies from disposal

of Romanian real estate properties are subject to a 16% profits.
The taxable gain is determined as the difference between the
selling price and the fiscal value of the fixed assets sold. In the
case of depreciable fixed assets (buildings), the deductible
fiscal value is defined as the entry value/increased revaluated
accounting value less fiscal depreciation.
Specifically, in case of Romanian companies, apart from other

tax deductible expenses, the tax base is decreased by the fiscal
depreciation of the building (except for land which may not
be depreciated). The reserves from the revaluation of fixed
assets, including land, performed after 1 January 2004 will be
gradually recognised as taxable income proportionally with
the recognition of tax depreciation of these assets or at once at
the time of their disposal. This rule concerns the revaluation
reserves that are deducted from profits for tax purposes through
depreciation or through expenses with alienation of assets. In
effect, this change eliminates the tax revaluation of assets which
was available for several years.
It should be noted that Romanian companies which apply the
IFRS rules are guided by different rules in respect of reserves
related to fixed assets.
With regards to the rental income obtained by individuals,
as of 1 January 2014, it is also subject to 5.5% health fund
contribution , irrespective of whether the individual earns other
income subject already to such contribution. The computation
base for health fund contribution is determined by deducting
Distribution of net profits is further taxed with a 16% dividend

tax. However, there are situations when the tax can be reduced
below 16% and even to nil (e.g. via tax treaties, EU ParentSubsidiary Directive).
As an alternative, the shareholders of a Romanian company
can opt to sell the shares of the company rather than selling
the companys property. In this case, they are liable to the 16%
income tax applied to the capital gain obtained through the
company sale. In certain situations, based on the provisions of
the tax treaties, sale of shares held in Romanian companies may
be exempt from tax in Romania., Starting with 1 January 2014,
the income derived from the sale/alienation of shares held
in a Romanian company is considered non-taxable income
provided that the shareholders of the Romanian company hold
at least 10% of its share capital for an uninterrupted period of
at least 1 year at the date of transaction. In case of capital gains
obtained by individual investors from disposal of real estate
property, the tax depends on the period of time the property

was owned for. Namely, the tax for real estate properties sold
within 3 years of acquisition stands at 3% of the transaction
value for transactions up to RON 200,000, while for transactions
exceeding RON 200,000, the tax due is RON 6,000 plus 2% of the
amount which exceeds RON 200,000.
Sales of properties held for more than 3 years, are taxed at 2% of
the transaction value for transactions under RON 200,000, while
for transactions exceeding RON 200,000 the due tax is RON
4,000 plus 1% of the amount exceeding RON 200,000.
Although not expressly provided by the law as in case of rental
income, the individuals performing sales of real estate as a
business should also register and the income earned should be
considered as income from independent activities and taxed
accordingly.
2. Vat aspects
Rental of real estate property is normally VAT exempt. However,
any taxable person performing rental activities may opt to
charge a 24% VAT on such transactions (such option allows
deduction of VAT on related costs).
As a rule, the sale of old buildings/parts of buildings and the
underlying land, as well as of any other type of land is VAT
exempt without deduction right unless the taxable person
performing such transactions opts to tax the sale with 24% VAT.
This exemption is not applicable to sale by a taxable person of
a new building or land on which buildings can be erected. In
should be noted, that in case of building and land registered
under one single cadastral number, the VAT treatment in case
of sale of immovable property depends on which of the two,
land or building have the greater value or alternatively, in case
of same value, which of the two have the bigger surface (the
unfolded build surface of the building is the one to be taken into
consideration).
A 5% VAT tax rate is applicable for the sale of social housing
(including related land) under certain conditions (i.e., houses
of maximum 120 square meters and not exceeding RON 380,000
in value - net of VAT).
Individuals trading in real estate as a business are to be treated
as taxable persons. Thus, when performing taxable operations
(e.g. sale of new buildings) the individuals are liable to register
for VAT purposes if the volume of their transactions exceeds
RON 220,000.
3. Local taxes
Owners of buildings are liable to pay an annual building tax to
the local authorities. For companies, such building taxes range
between 0.25% and 1.5% of the taxable base, which is the book
value of the building. If the building has not been revaluated in
the past 3 years, the above rate will be between 5% and 10% and
between 30% and 40% if the building has not been revaluated in
the past 5 years.
There are different rules for establishing the taxable base for
local tax purposes in case of companies applying IFRS rules
and as accounting policy for the recognition of fixed assets the
(inflated) cost model. In such case, the taxable base for local tax
purposes is to be established based on an evaluation report.
For individuals, the tax rate is 0.1% and is applied to the
value of the building, which is calculated based on minimum
established values provided by law. Increased local taxes are
applicable for individuals owning more than one building.
With regards to the tax on land, both companies and individuals
owning land are liable to pay a tax which is established as a
fixed amount per square meter, depending on the location of
the land.
Starting with 1 January 2014, a new tax on constructions other
than buildings was introduced.
The persons liable to pay construction tax are Romanian legal
entities (with certain exceptions), permanent establishments
in Romania of foreign legal entities and legal entities set up in
Romania according to the European legislation.
There are certain constructions subject to this new tax, such as
road infrastructure, e.g. alleys, streets, parking places, sidewalks,
light-frame constructions, etc.
The special construction tax is computed by applying a 1.5%
rate to the value of the constructions existing in patrimony as of
31 December of the previous year, recorded in the accounting
books, subtracting from that certain elements such as the value
of buildings (including certain works) for which building tax is
due.
Construction tax has to be computed and declared to the tax
authorities by 25 May of the year for which such tax is due, and
paid in two equal instalments, by 25 May and 25 September of
the respective year.
E&Y provides a range of services including assurance, advisory,

tax advisory and compliance, and transaction advisory.
E&Y Romania
Bucharest Tower Center, 22nd Floor, 15-17 Ion Mihalache Blvd.,
Sector 1, 011171 Bucharest, Romania
Tel: (40-21) 402 4000
Fax: (40-21) 410 7052
Email: office@ro.ey.com
Web: www.ey.com/ro
The monthly computation base for health fund contribution due on rental income
cannot be lower than the national minimum gross earning (RON 850 as of 1 January
2014 and RON 900 as of 1 July 2014), if this is the only type of income subject to the
contribution, and it is also capped at 5 national average gross earnings (for 2014, the
national average gross earning is of RON 2,298).
A building is new if sold by the end of the year following its first utilization/occupation, or is transformed in certain conditions.
Significant
Amendments
in the Land
Development and
Urbanism Law
Floreasca | Business Park
169A Calea Floreasca | Building B | 5th Floor
014459 - Bucharest | 1st District | Romania
Phone +40 21 527 2000 | Fax +40 21 527 2001
Office@pelifilip.com | www.pelifilip.com
Significant changes to the Urbanism Law, i.e. Law no.

350/2001 regarding land development and urbanism,
came into effect on 13 July 2013. The changes were enacted
under Law no. 190/2013 for the approval of Governments
Emergency Ordinance no. 7/2011 for amending and
supplementing Law no. 350/2001 regarding land development
and urbanism.
Law no. 190/2013 was adopted with the aim of harmonising
and establishing a coherent framework of the urbanism
development within the Romanian localities, especially in the
cities.
We present herein a short description of the most important
changes brought by Law no. 190/2013, with special
consideration to the proceedings for initiating and approving
zoning urban plans.
According to the newly enactments under Law no. 190/2013,
the urbanism certificate will indicate the regime of updating/
amending existing urbanism documentations and of their
corresponding local regulations. Therefore, in case the
technical parameters of a new investment project do not
comply with the urbanism documentation in force, under
the urbanism certificate, the applicant shall be informed in
respect to: (i) the impossibility of amending the urbanism
documentation in force; or (ii) the necessity of obtaining
an opportunity endorsement in accordance with the
relevant legal norms; or (iii) the possibility of preparing
a new urbanism documentation in order to amend the
urbanism documentation in force, without prior obtaining an

opportunity endorsement.
A main concern of the law maker was to limit the possibility
of legal entities or individuals to initiate drafting urbanism
documentations and excluding the former interdiction to
draft land development and urbanism documentation at the
initiative of legal entities or individuals, except for the cases
expressly provided in the law. The initiative for drafting land
development and urbanism documentations shall pertain
exclusively to the public administration authorities for the
following types of documentations: (a) land development
documentations; (b) general urban plans (PUGs); (c) zoning
urban plans (PUZs) for the central areas; (d) PUZ for the
entire protected construction areas and protection area of
monuments; and (e) PUZ or detailed urban plans (PUD),
in case the envisaged projects to be developed are of public
interest.
In any other cases, the initiative for drafting urbanism
documentations may pertain to public administration
authorities or to any other interested natural and legal
persons.
In accordance with the amendments brought to the Urbanism
Law under GEO no. 7/2011, which entered into force as of 11
February 2011, the initiative for drafting of a PUZ became the
exclusive attribute of the public administration authorities.
As an exception, legal entities or individuals were allowed
to initiate PUZs exclusively for: (i) industrial parks; (ii)
technological parks; (iii) supermarkets; (iv) hypermarkets; (v)
commercial parks; (vi) cultural parks; (vii) production zones;
(viii) the development of new residential assemblies; (ix)
transportation infrastructure; or (x) the expansion of the intra
muros area of the locality with at least 10,000 sq. m. for habitat
functions or at least 5,000 sq. m. for service or production
functions. In these cases, the preparation of the PUZ was made
through the investors due care and on the investors expense.
As of the entering into force of Law no. 190/2013, the
provisions above were removed and replaced with a more
general wording, allowing legal entities and individuals to
initiate PUZs and PUDs, except for the cases in which drafting
these urbanism documentations is the exclusive attribute of
the public administration authorities, as provided above.
Pursuant to Law no. 190/2013, in case under the urbanism
certificate an amendment of the urbanism documentation in
force is requested or in case such would be requested by the
specific conditions of the area or the nature of the project to
be developed, the relevant local public authority may approve
the investment project subject to the planning and approval
of a PUZ, through the investors due care and on the investors
expense, based on a preliminary opportunity endorsement
issued by the specialised structure lead by the chief architect
and approved by the relevant competent legal entities.
Furthermore, limitations of the coefficient of land use (CUT)
to be amended under a PUZ have been introduced under the
Law no. 190/2013.
According to the Urbanism Law, whenever the technical

parameters of a new investment project do not comply
with the ones approved under the PUG (therefore certain
derogations need to be approved) or in the event that the
existing urbanism documentation does not contain enough
information to integrate the project within the urbanism
regulations, the competent authority may require the drafting
and approval of a PUZ or a PUD.
of the public debate, the submission of the explanatory

memorandum prepared by the mayor/county council
president and speciality report prepared by the chief architect.
The PUZ shall determine the rules regarding the construction

regime, the function of the area, the maximum height allowed,
the CUT, the percent of land occupancy (POT), the withdrawal
of the buildings from the alignment and the distances from the
side and rear boundaries of the plot.
The amendments brought by Law no. 190/2013 aimed to

clarify also the regime of PUD. Therefore, the Urbanism
Law currently clearly stipulates that the PUD may be
drafted only with the purpose of a detailed regulation of the
provisions included in a PUG or PUZ. A PUD may regulate the
withdrawals from the side and rear boundaries of the plot,
the car and pedestrian accesses, the architectural-volumetric
compliance, the manner to occupy the ground, the design
of the public areas. Moreover, Law no. 190/2013 expressly
provides that the PUD may regulate the POT.
The newly enacted norms provide that the amendment by

PUZ of parts of the territorial reference unit may be financed
by legal entities or individuals and, in this case, the CUT
proposed under the regulations of the PUZ cannot exceed
the initial CUT as established under the PUG with more than
20%. The limitation not to increase the CUT with more that
20% does not apply in relation to a PUZ drafted for areas of
commercial interest, industrial parks, technological parks,
supermarkets, hypermarkets, commercial parks, service areas
and any other similar area.
Moreover, the period for which a PUG may be extended was

also increased. Under the current legislation, the PUG may be
extended only once for a period of maximum 5 years (instead
of 3 years under the former regulation).
The recent amendments provided a certain level of

clarifications but also generated numerous controversies
and were firmly disputed by the professional urbanism and
architects organizations.
Moreover, certain cases where drafting of a PUZ becomes

mandatory have been removed, such as those referring to
areas destined to hypermarkets and/or commercial parks,
production zones, cultural parks, areas where new residential
assemblies will be developed or the coast area or the
protection area of the sea coast.
Consequently, under the newly enactments of Law no.
190/2013 the drafting of a PUZ is mandatory for the following
areas/activities: (i) localities central areas; (ii) protected
construction areas and protected area of monuments;
(iii) entertainment and tourism areas; (iv) industrial,
technological zones or parks and service areas; (v) in case
of land dismemberments (in Romanian: parcelari), if the
plot of land shall be de-merged in more than three plots;
(vi) transportation infrastructure; (vii) areas subject to
restructuring and urban regeneration; and (viii) any other
areas established by the local public entities of the localities,
according to law.
The territorial delimitation of the zones for which a PUZ is
mandatory will be established by means of the PUG. However,
by way of exception, the PUZ shall not be mandatory, if the
PUG regulates the conditions for authorising the investments
within the respective area, except for the protected
construction areas.
The period for approving the land development and urbanism
planning documentations by the relevant local or county
council was increased under Law no. 190/2013 and the
relevant local or county council is required to issue a decision
approving or rejecting the land development or urbanism
documentation within a maximum of 45 days (instead
of 30 days under the former regulation) after the closing
Definitions
and Assumptions
Definitions
Average Daily Rate (ADR) is given by the hotel rooms total
revenue, divided by the total number of rooms sold during a year.
Factory Outlet Center is a consistently designed, planned
and managed scheme, with separate store units, where
manufacturers and retailers sell merchandise at discounted
prices that may be surplus stock, prior-season or slow selling.
Headline Rent is also known as contractual rent and reflects
the level at which relevant transactions are being completed
during a certain period. If there are no relevant transactions
during the survey period, the quoted figure will be hypothetical,
based on expert opinion of market conditions. The figure
excludes service charges, taxes, and tenant incentives.
Net Take-up is the sum of all total occupational market
activity categories which lead to a net increase in demand for
space. This would only include the following activity types: new
occupation, expansion and relocation from non-competitive
stock (Class B and unconventional spaces).
Occupancy Rate is given by the total hotel rooms sold,
divided by total number of rooms available in the hotel,
multiplied by 100.
Owner Occupier Deal is an inter-party deal where the
transaction is not conducted on the open market and often for a
non-market price.
Prime Net Initial Yield the yield an investor is prepared to
pay to buy a Grade A building, fully-let to high quality tenants
at an open market rental value, in a prime location. Lease terms
should be commensurate with the market. As a calculation,
net initial yield first years net income/purchase price (prior to
deducting fees and taxes).
Private equity real estate fund is a collective investment
scheme, which pools capital from investors either wealthy
individuals and/or institutional investors and generally targets
assets and/or markets with a potential to add value.
Regular Investment Deal is an open-market transaction,
conducted by two individual entities on an arms-length basis,
for a property which is currently let, or immediately available
for letting.
Retail Park also known as a power center is a consistently
designed, planned and managed scheme, that mainly
comprises medium and large-scale specialist retailers such as:
big boxes or power stores.
Revenue per Available Room (RevPar) is calculated by
multiplying a hotels average daily room rate (ADR) by its
occupancy rate. It may also be calculated by dividing a hotels

total guestroom revenue by the room count and the number of
days in the period being measured.
Specialized Shopping Center includes specific purpose-built
retail schemesor shopping centersthat are typically openair with GLA larger than 5,000 m2 and could be further classified
by size. This category includes the following sub-categories:
retail parks, factory outlet centers and theme-oriented centers.
Specialized schemes in Romania are represented either through
retail parks or factory outlet centers.
Theme-Oriented Center is a consistently designed, planned
and managed scheme that can either be leisure-based or
non-leisure-based. This scheme includes some retail units
and typically concentrates on a narrow, but deep selection of
merchandise within a specific retail category. A leisure-based
center is usually anchored by a multiplex cinema and includes
restaurants and bars with any combination of bowling, health
and fitness and other leisure-concept uses. A non-leisure-based
center concentrates on a niche market for fashion/apparel
or home furnishings or can target specific customers such as
passengers at airports.
Total Take-up is the total floor space known to have
been leased during the survey period through one of the
following activity types: pre-lease, new occupation, renewal/
renegotiation, expansion and sub-lease.
Traditional Shopping Center is an all-purpose scheme that
could be either enclosed or open-air and classified by size.
There are two types of small traditional centers: comparisonbased and convenience-based. Comparison based centers
include retailers typically selling fashion apparel and shoes,
home furnishings, electronics, general merchandise, toys,
luxury goods, gifts and other discretionary goods. Comparisonbased centers are often part of larger retail areas, most likely
found in city centers and not anchored. Convenience-based
centers include retailers that sell essential goods (those items
consumers buy on a regular basis) and are typically anchored
by a grocery store (supermarket or hypermarket). Additional
stores usually found in convenience-based centers include
chemists (drugstores); convenience stores; and retailers selling
household goods, basic apparel, flowers and pet supplies.
Vacant Space is the total gross leasable floor space in the
analyzed existing properties, which is physically vacant and
being actively marketed at the survey date. Space should be
available for immediate occupation.
Assumptions
High Street Retail we have taken into account the supply
available in Bucharest.
Hotel we have analyzed the hotels that qualify in line with
the international standard as midscale, upscale and luxury
hotels. In order to do so we have studied the existing hotels
affiliated to international chains, the strong local chains (such
as Continental) and a certain part of those non-affiliated. In
choosing the non-affiliated hotels, we have taken into account

a number of indicators, including: a minimum number of 50
rooms per property, the hotel awareness on the market, the
quality of the premises and the services provided. The entire
analysis refers to these hotels.
Industrial we have analyzed the Class A industrial projects in
Bucharest and the main cities in the countryside. We took into
account both the logistic and the production facilities.
Investment we have taken into account the office, industrial
and retail transactions above 4 million closed on the
Romanian market.
Land we have taken into account the available supply of land
plots in Bucharest and the countryside.
Office we have taken into account the buildings located
in Bucharest, which offer at least 3,000 m2 of Gross Leasable
Area and comply with the conditions for a good quality
development, no matter their location.
Residential we have analyzed the projects located in
Bucharest and having more than 100 units in the phases
available on the market.
Specialised Shopping Centers we have considered all
Romanian specialized schemes having total gross leasable areas
higher than 5,000 m2.
Traditional Shopping Centers we have considered all
Romanian traditional schemes having commercial galleries
larger than 5,000 m2.
SOURCE: National Institute of Statistics
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6 continents
United States: 140
Canada: 42
Latin America: 20
Asia Pacific: 195
EMEA: 85
Primary Authors:
Daniela Popescu
Head of Research - Bucharest
+40 21 319 77 77
daniela.popescu@colliers.com
Colliers International <<Romania>>

Floreasca Business Park
169A Calea Floreasca, Building A, 7th floor
014459 Bucharest, Romania
Phone: (40-21) 319 77 77
Fax: (40-21) 319 77 78
$2
billion in
annual revenue
1.12
billion square feet

under management
13,500
professionals
and staff
About Colliers International

Colliers International is a global leader in commercial real estate services, with over 13,500
professionals operating out of more than 482 offices in 62 countries. A subsidiary of FirstService
Corporation, Colliers International delivers a full range of services to real estate users, owners
and investors worldwide, including global corporate solutions, brokerage, property and asset
management, hotel investment sales and consulting, valuation, consulting and appraisal services,
mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked
Colliers International as the second-most recognized commercial real estate firm in the world.
colliers.com
Copyright 2013 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to
ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult
their professional advisors prior to acting on any of the material contained in this report.

Colliers International (2014) Bucharest Market Research and Forcast Report

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Research & Forecast

2014 Real Estate

Bucharest Office Market

Romania Shopping Centers Market

Bucharest High Street Market

Romania Industrial Market

Bucharest Land Market

Romania Investment Market

Bucharest New Residential Market

Bucharest Hotel Market

Definitions and Assumptions

Research & Forecast Report | January 2014 | Romania | Colliers International

"Any fool can know.

For the first time since 2007, Romania managed to outpace

Lending dynamics have been very weak in 2013 (-4% yoy

Research & Forecast Report | January 2014 | Romania | Colliers International

Key Economic Indicators Evolution

GDP PER CAPITA ()

INDUSTRIAL PRODUCTION GROWTH

CURRENT ACCOUNT BALANCE

NET FDI (% IN GDP)

BUDGET DEFICIT (% IN GDP)

INFLATION RATE (%)

HOUSEHOLD CONSUMPTION (%)

AVERAGE EXCHANGE RATE

Exports and Imports Evolution (mn. )

SOURCE: National Institute of Statistics

Green Court Bucharest by Skanska, to be delivered in Q4 2014

had a 150,000 m2 contribution to the total activity on the

2013 marked an increase in the net take-up registered on

Most of the transactions composing the net take-up were

The average headline rents registered a slight compression

In terms of net demand, the IT&C sector led the market in

As landlords were more flexible in finding creative solutions

The entire activity on the market also includes renegotiations /

Research & Forecast Report | January 2014 | Romania | Colliers International

Bucharest Office Market Evolution

Total Take-Up (m2)

Net Take Up (sqm)

Stock Evolution (m2)

Vacancy Rate (%)

Average Headline Rents and Vacancy Rates by Area

Average headline rent (/m2)

process outsourcing (BPO) / shared service center (SSC)

Victorya City Center by Benevo, to be delivered in Q4 2015

compared to 2012. This had an uneven impact on retail sales

Research & Forecast Report | January 2014 | Romania | Colliers International

Romania Shopping Centers Market Evolution

Stock per 1,000 capita

options for retailers to expand. However, as the household

As 2014 is expected to be the post-2008 year with the lowest new

H&M Lipscani Store, leased by Colliers International Romania

Bucharests high street sales market developed greatly in the

Rents & Prices

There were no significant changes in the obtainable rents in

10 Research & Forecast Report | January 2014 | Romania | Colliers International

Main Retail Arteries by Atractiveness

The luxury sector is expected to gain new retailers in the

Prologis Park Bucharest by Prologis

leases. They were focused on strengthening their position on

12 Research & Forecast Report | January 2014 | Romania | Colliers International

Bucharest Industrial Market Evolution

Net Take-Up (m2)

Vacancy Rate (%)

NCGIMM The national fund for guarantee is the state institution