Reserch and Forecast Report 2017web

20
17
THE COLLIERS REPORT
Accelerating success.1
Contents
Top 10 Predictions 2017 4
Economic Overview 6
Industrial Market 10
Retail Market 14
Office Market 18
The Human Touch 22
Green Buildings 26
Investment Market 28
Land Market 30
Hotel Market 32
Taxation of Capital Gains 34
Fire Permit Compliance 36
2 Research & Forecast Report | 2017 | Romania | Colliers International

DEAR CLIENTS, FRIENDS, There are interesting trends to watch coming forward in
development: i) a new location opening for HQs in the north
In 2016 our company has celebrated 20 years of activity of Bucharest, ii) warehousing for e-commerce and in the
in Romania and we are thankful to a long list of clients for further north of Bucharest, iii) production facilities checking
trusting us with their real estate businesses. We have today into more south central cities, to avoid work force battle in
a large team of highly skilled and enthusiastic experts, the center-west of the country.
in 7 main business lines, offering more than 25 service
specializations. Looking more into the future, the big surprise will come
Ilinca Paun So one could argue that we are ready for a new cycle of in the following years from retailers, who will adapt their
growth and a fast pace new development market. But can shops and overall business model to technology and how it
Managing Partner
we have a development market without an investment changed the way people live. Robots and AI are no longer
Colliers International
liquid context? Not really, but the first triggers the other, it fantasies and the years to come will be a tipping point for
ilinca.paun@colliers.com
is a matter of time. So our efforts are to create liquidity by changing the way we educate and allocate human resources.
creating commercially appealing products and lobbying for Offices will no longer be offices, but living-working areas,
Romania as a whole. where creativity will flourish, where millennials feel engaged
The main drivers of the new developments in 2016 were in their meaningful work, where they can work out, read
the service industry fueling good terms financing for office a book and have a coffee with a friend. Projects will have
projects in Bucharest and other major cities, the appetite for mixed functions, office, retail and residential, creating an
buying off plan residential units caused by accessible loans urban experience for the young families, with all services at
and salary increases, which has also driven construction convenience and accessible by apps.
COLLIERS of new retail schemes and warehousing needs for a large I hope you enjoy reading our market report, covering all
INTERNATIONAL number of food operators or e-commerce players.
Brexit and Trump filled the digital and print media of the
sectors, including land market and hotels, and write to us
your opinions and questions. Please send them through
is a leader in global real estate services, second year half, and they were the main detractors for real to our colleague, Mihai Patrulescu, Head of Research and
defined by our spirit of enterprise. Through a estate funds specifically. But the outsourcing and automotive Strategic Analysis, who coordinated this edition of our annual
culture of service excellence and collaboration, companies cannot be stopped in expanding in Romania, not report.
we integrate the resources of real estate even by the limitations of the work force becoming scarce, We also welcome your inquiries about our service lines or
specialists worldwide to accelerate the or to be more accurate, becoming expensive, or the state client portfolio and expertise, and look forward to working
success of our partners. We represent inability to plan, finance and build highways. Romania has together in the near future.
property investors, developers and occupiers in what it takes to be attractive. Languages, flexibility, tech
local and global markets. Our expertise spans skills, several good looking state aids, and the traditional well
all property sectorsoffice, industrial, retail, Ilinca Paun Managing Partner
known hospitality. So development market has boomed in
residential, rural & agribusiness, healthcare & office and industrial compared with previous years and stock
retirement living, hotels & leisure. will increase significantly in the next 2 to 3 years.
3 3
TOP 10
2017
PREDICTIONS 3. IT and BPO/SSC sectors will
be the main drivers of office
space demand, particularly
outside of Bucharest
IT and Outsourcing services have seen a massive
development over the past 5 years and will maintain the
positive momentum in 2017. We expect these sectors to be
the second most important contributor to GDP growth, and
to be the key driver of demand for office spaces both in
Bucharest as well as the other major cities.
1. Huge uncertainty externally, 2. Investment transactions will 4. Competition on the office

but CEE will fare better than reach a post-crisis maximum market will increase
other EMs in 2017 As deliveries continue to outpace the newly created
demand on the Bucharest office market, the vacancy
Financial markets in the CEE region weathered the storms he pipeline for investment transactions in 2017 is already
T
rate is poised to increase over the upcoming period. New
of 2016 remarkably well. In fact, most structural metrics covering >65% of the total volume of transactions from
buildings which offer good connections to the public
indicate that CEE countries are closer to developed 2016. Liquidity has improved as new investors entered
transport scheme, Green certifications and an interesting
economies rather than other Emerging Markets. Romania the market in 2016 and as new investors are currently
mix of amenities will remain the market favorite and will
followed this CEE trend and is poised to show resilience prospecting Romania.
be able to keep rents around the current levels. Conversely,
against external shocks in 2017. We consequently expect
ank lenders will maintain a positive appetite towards real
B older buildings with poor metro connections will either
continued investments in the local market, propping up
estate projects. In addition, alternative sources of financing have to make additional investments, or risk competing
demand for office and industrial spaces.
such as bonds or mezzanine debt have become more solely on costs.
convenient and attainable.

5. New industrial developments 7. Bucharest retail market will 9. Residential areas will
will hit an all-time high focus on increasing client move closer to the recently
The total stock of industrial spaces is set to increase flow; other cities will focus on developed business centers
by 500,000 sqm in 2017, marking the highest rate of
deliveries/stock in the post-crisis period. Demand will
developments of retail parks Substantial investments made in land during 2016 are
Following the deliveries of the Parklake and Veranda aimed towards the development of new residential areas
stem primarily from the FMCG sector (40% of new
shopping centers in 2016, we expect no more retail in Bucharest, closer to the new office developments in
deliveries), E-commerce (20% of new deliveries) and IT
developments in Bucharest during 2017-2018. However, the Northern part of the city. We expect demand for these
& Electronics warehousing (10% of new deliveries). New
the existing shopping centers will focus on consolidating new residential developments to be supported by the
deliveries will remain focused on the Bucharest area (80%
their market positon and maximize the client catchment. demographics of employees, which are young enough to be
of new deliveries), but there is also an increasing interest
looking towards either their first or second home purchase.
for other cities. New deliveries will be concentrated in secondary and
tertiary cities, with a strong focus towards retail parks.
6. 2017 will be a point of 8. New brands will enter the 10. Land market will be geared
inflection for infrastructure retail market towards the retail and
2017 will result in the delivery of 180 new kilometers We believe there is a strong potential for new retail brands residential sectors
of highway, which will provide a fast-track connection to join the Romanian market. Increases in consumer
between the major cities in Transylvania. This should We expect the land market to be geared towards the
spending coupled with the delivery of new retail spaces
encourage investors to thread further East and will help evolving needs of consumers. Residential developments in
provide a strong momentum for the market. Brands
alleviate some of the workforce shortfalls in the western new areas will remain attractive, as will the expansion of
from Poland and Turkey may perform particularly well
part of the country. Both factors should result in increased networks for supermarkets, hypermarkets and DIY stores.
since: i) these brands match the needs of the prospective
demand for industrial spaces, especially in cities such as Buyers will also focus on minimizing time-to-market for
consumers very well, ii) Romania is the largest market
Cluj Napoca, Timisoara, Sibiu or Deva. developments and will consequently prefer plots with a
after Poland in the CEE region, and iii) established
solid administrative situation (e.g. PUZ, CUT, PUD).
Polish and Turkish brands have had a very encouraging
experience in the recent past.
5
ECONOMIC
OVERVIEW
1. EXTERNAL CONTEXT for global trade (particularly as Brexit negotiations will
come into play) as well as timid consumer confidence.
Even with growth at 3.3%, the CEE region has outpaced
all other EMs with the exception of Emerging Asia.
Huge uncertainty abroad due to Trump, Brexit, Furthermore, the region has weathered remarkably well
With US growth on the rise and flat-line growth in the
elections in Europe the market storm that followed Mr. Trumps victory in
Eurozone, we expect a divergence in the monetary policies
2017 is gearing up to be a year of unprecedented for the two regions. The US Federal Reserve Bank is set November, the aftermath of the Brexit vote or Italys
uncertainty: on the one hand, the global economy is set to tighten interest rates at least twice during 2017, while referendum. In fact, the structure of the economies in the
to regain its composure, while on the other hand, recent stable inflation will permit the European Central Bank to CEE region is closer to the advanced countries than to the
political shifts cast a very large shadow of risks. A new US continue stimulating the Eurozone economy throughout rest of the Emerging Markets.
President, Brexit negotiations, and elections in Europe all the year. The bank could withdraw some stimulus towards These structural improvements can be traced back to
have the potential to create considerable turbulences both the end of 2017, thus paving the way for winding down its the post-crisis period, when the region has implemented
for the CEE region as well as Romania in particular. We Quantitative Easing programme in 2018. reforms and has focused on an economic model based on
remain cautiously optimistic in our outlook, as we believe manufacturing rather than commodities.
CEE Countries: Less emerging, more developed
good economic sense will ultimately prevail. Unemployment Rates in the EU
This global context should prove to be broadly supportive
Macro storyline should continue to improve
for the CEE region. Growth in the area has slowed down Czech
If these shocks will not materialize, global growth is set Republic
to 3.3% in 2016, down from 3.6% in 2015. However, the
Germany
to accelerate to 3.3% in 2017 (up from 3.1% previously), main factor driving this slowdown has been a structural
Hungary
helped by emerging markets and, to a lesser extent, the US change in the absorption of EU funds, as the EU shifted
Romania
economy. The latter stands to benefit from a particularly from the 2007-2013 budgeting programme to the one
Poland
poor base in 2016, a build-up of inventories as well as for 2014-2020. The countries which traditionally had the
Bulgaria
the fiscal stimulus that President Trump plans to unroll. largest rates of absorption, such as Hungary and Poland,
Slovakia
Eurozone growth is set to remain stable at 1.5%, with have seen the sharpest slowdowns in growth. As these
Eurozone
Germany acting as the main driver (1.8%), followed by countries gradually ramp up the absorption of funds, we
France
France (1.2%) and Italy (0.8%). Growth in the Eurozone expect growth in the region to accelerate.
Italy
continues to suffer from uncertainty regarding the outlook
0% 2% 4% 6% 8% 10% 12%
Data Source: EUROSTAT

Consumer spending BPO/SSC and IT
One of the key factors for this performance is Consumer spending advanced rapidly in 2016 (+10.7% yoy) Behind the rapid expansion of consumer spending, there
the regions divergence from the global trend following a perfect storm of four catalysts: i) the general is a crucial structural shift in the economy: the emergence
of stagnating trade. While the share of trade VAT rate was lowered from 24% to 20%, while the rate for of the BPO/SSC and IT sector as powerhouse for growth
in GDP has fallen across most of the world, food products was slashed to 9%. Overall, this means that and employment. Output in the sector has increased by
the average VAT rate for Romania has come down to 14%, 12% yoy during 2016, making it the second contributor
it has risen further in the CEE-EU region. the lowest in the CEE region. ii) wages accelerated by 12% to GDP expansion after consumer spending and in front
In turn, this is down to a closer integration yoy, particularly due to the public sector (+20% yoy); of industrial production. Furthermore, the sector has
with the Eurozone supply chain (partly iii) low import prices helped keep inflation at historically consistently recorded growth rates above 7% p.a. during
helped by corporate restructurings in the low levels, thus increasing the disposable income of the past five years. We remain very constructive in the
post-crisis period). Separately, rising labour consumers; iv) local interest rates declined to historically outlook of the sector for two reasons: i) demand for BPO/
low levels, in turn helping increase disposable income for SSC services is expanding at a global level and ii) Romania
costs in global manufacturing hot spots have consumers. Considering this accumulation of factors, it has a significant potential for development in this area.
redefined the map of global manufacturing. is clear that the growth rate of consumer spending will At a global level, multinational companies have seen
Wages in traditional manufacturing hubs invariably slowdown in 2017. Some support will come from an increased benefit from constructing Shared Service
such as China have risen above those in fiscal easing (continued increases of wages in the public Centers as a mean to reduce costs and are set to continue
Romania and Bulgaria, which together sector as well as a reduction of the general VAT rate to implementing these solutions as key components of a new
19%) and a shift in the structure of employment, as more business model. The CEE region has been at the forefront
with a favorable location, better investment people move to the services with higher wages.
climate, and the benefits of EU membership,
has attracted investors and importers back
Indicator 2011 2012 2013 2014 2015 2016 2017F
to the CEE region.
GDP growth 1.10% 0.60% 3.40% 3.00% 3.60% 4.60% 3.60%
GDP per capita 6,601 6,663 7,207 7,532 7,997 9,130 9,720
2. R
OMANIA - Industrial production growth 0.10% -7.00% 3.80% 3.60% 2.00% 2.40% 2.50%
A STORY OF NUANCE Household consumption 0.80% 1.20% 1.20% 4.50% 5.70% 8.10% 7.50%
Growth is above the cyclical peak, but the economy is set Current Account (% of GDP) -4.90% -4.80% -1.10% -0.50% -0.60% -2.20% -2.00%
for a soft landing. 2016 was an exceptional year for the
NET FDI (% of GDP) 1.30% 1.90% 2.00% 1.80% 2.00% 2.40% 2.60%
Romanian economy, as headline growth accelerated to
4.6%. However, the acceleration was imbalanced across Budget deficit (% of GDP) -5.30% -2.90% -2.20% -1.50% -1.47% -2.70% -3.20%
sectors and relied heavily on a fiscal stimulus rolled out
Inflation rate 3.10% 5.00% 1.60% 0.80% -0.90% -0.50% 1.80%
between 2015-2016. As we approach 2017, fiscal space is
much more limited, but some sectors such as BPO/SSC, Average exchange rate 4.24 4.46 4.42 4.44 4.44 4.49 4.45
IT and manufacturing will remain strong performers. We
Unemployment rate 7.30% 6.80% 7.00% 6.60% 6.70% 5.70% 5.30%
expect the economy to expand by 3.6% in the current year.
Data Source: National Institute of Statistics, National Bank of Romania, Ministry of Finance, Colliers Research
7
of this boon, particularly in Poland where approximately However, there is also a more concerning view. A lack Fiscal challenges
300,000 people are employed in this sector. Romania of physical infrastructure has meant that post-2013
The biggest challenge for Romania in 2017 will be closing
is closely following up in the footsteps of Poland, as it investments in manufacturing have been compressed
the budget deficit. The combination between election
currently employs approximately 100,000 people in the in only a few areas of the country, creating significant
promises, changes to the fiscal code, and an impending
SSC/BPO sector. Furthermore, the prominence of the workforce pressures. During 2016, Romania ranked third
slowdown of the economy are bound to push the deficit
already existing companies should help boost demand in the global Manpower talent shortage survey, mainly
above the target of 3% of GDP. To solve this problem,
during 2017. We expect demand in this sector to come due to a lack of workers in the construction sector and
the default solution of past governments has been to
from the IT sector, banking and auto manufacturers. laborers. Under this scenario, we believe the country
trim investment spending. However, Romanias future
has the potential to absorb more investments, but is held
Romania remains very well positioned to attract new government should review this policy for two reasons:
back by workforce shortages and poor infrastructure. In
investments. The country currently has 5 polytechnic i) the magnitude of the deficit may be too large to adjust
order to mitigate this situation, the government needs to
universities, 59 domain specific universities and 174 solely via investments and ii) the policy of cutting taxes has
follow through on key infrastructure projects such as the
private colleges and is capable of training more than been ineffective in promoting investments in the private
Pan-European Corridor IV, the Transylvania Highway and
30,000 employees for the BPO/SSC and IT sectors sector. In this instance, we would suggest a two-pronged
its connection with the East. 2017 is set to be the first
every year. Second, Romania also ranks quite well in the approach: focus on increasing fiscal revenues while
point of inflection. The government plans to deliver 180
circulation of foreign languages. According to Eurostat, improving transparency for spending in the public sector.
74% of Romanians speak a second language, compared
The absorption of EU funds will be another crucial
with the EU28 average of 66%, ranking Romania higher GDP Breakdown by contribution to growth element for the outlook of the economy. There is hope the
than the other CEE countries (68% in the Czech Republic,
absorption of EU funds may improve starting from this
62% in Poland, 39% in Bulgaria and 37% in Hungary).
year as the previous government has released guidelines
Third, the lack of physical infrastructure has isolated some 0.2%
0.6% 0.4% for the absorption of as much as 5.6bn in Transport
regions of Romania from the post-2013 manufacturing Agriculture
funds during the next couple of years. Furthermore, the
boom (particularly the East and the South), creating a 0.2% Constructions
IT & BPO SSC government has continued to attract EU funds from the
strong potential for the BPO/SSC sector. Overall, it appears
Manufacturing 2007-2013 budget, as the absorption rate for transport
that Romanias biggest challenge will be to supply the Retail Sales
increased from 61% to 82% during 2016.
necessary workforce to keep up with mounting external Other Services
demand. Interest rates
Manufacturing Even though Romania operated with a positive output
gap in 2016, the spillovers into the rate of inflation have
Manufacturing activity has remained in positive territory
1.4% 1.9% been very limited. This apparent contradiction can be
during 2016, but at a very restrained pace (1.8% yoy).
explained by the rapid increase of imports during 2016
Partly, this is because Romanian manufacturing has
(8.7% yoy), which means that prices in Romania have
already achieved a close integration with the Eurozone
Data Source: INSSE become much more correlated with the ones in the
supply chain, while growth in the Eurozone remains
Eurozone. Considering the steady dynamic of prices in
lackluster. This integration was particularly strong in the
the Eurozone, external inflation pressures will remain
auto sector. Romanias automotive industry currently ranks new kilometers of highway and thus establish a highway
limited. Furthermore, consumer prices will benefit from a
11th in the European Union) behind those of the Czech connection between the major cities in Transylvania Having
reduction of the general VAT rate from 20% to 19%. The
Republic, Hungary, Slovakia, and Poland. Over the past five this connection will effectively enable manufacturers to
main risks for inflation are twofold: i) commodity prices
years, the countrys production share has stabilized at 2% tread towards the center of the country and alleviate some
will remain highly volatile due to plethora of political risks
of total EU car production and 10% of CEE production. of the current workforce shortfalls.

in 2017, and ii) uncertainty regarding the implementation
of a law mandating that more than 50% of supermarket Monetary Policy Rate vs 3M Robor
products should be from national sources.
4.5
The benign dynamic for inflation coupled with the 4
deceleration of consumer spending should enable the 3.5
3
NBR to maintain the policy rate unchanged throughout 2.5
2
2017. More importantly, we expect the interbank market 1.5
to remain flush with liquidity, thus keeping market rates 1
0.5
significantly below the NBRs policy rate. During the 0
past 4 years, the Romanian banking system has seen
Nov-14
Nov-15
Nov-16
May-14
May-15
May-16
Mar-14
Mar-15
Mar-16
Sep-14
Sep-15
Sep-16
Jan-14
Jan-15
Jan-16
Jul-14
Jul-15
Jul-16
a massive rebalancing, with the Loan to Deposit ratio
declining from 118% to 83%. In turn, this surplus of funds
has pushed market rates below the NBR rate. We believe Robor 3M
that absorbing this excess liquidity will be a prolonged Monetary Policy Rate
process for two reasons: i) administrative measures such Data Source: NBR
as sterilized interventions or increasing minimum reserve
requirements could prove to be expensive and ii) the pace
of expansion of banks balance sheets is constrained by
cautious risk appetite policies, as well as a structural lack
of capital for Small and Medium Enterprises.
We believe the NBR will follow the lead of the European
Central Bank and other CEE banks, and will gear up to
tighten market rates in 2018.
Exchange Rate
Considering the complicated context of 2016 (high risks
on the international financial markets, Parliament elections
locally, widening of the Current Account Deficit), the RON
is well positioned for a slight appreciation during 2017. The
Current Account Deficit is set to remain broadly unchanged
this year (at 2.2% of GDP) as consumer spending starts
to decelerate and as SSC/BPO sector will stimulate the
export of services. Also during 2017, the financing side
of the equation will improve: Romania looks to step up
the absorption of EU funds, while FDI inflows are set to
accelerate further. Overall, these factors should translate
into a stable evolution of the RON, with some appreciation
tendencies.
9
Industrial
MARKET
1. SUPPLY 2017, especially considering the large potential of the local
industrial sector.
3. RENTS
The market for industrial spaces has seen an abrupt Market rates for logistics remained broadly unchanged
At an international level, P3 Logistic Parks was acquired by
change in the pace of developments starting from 2015. during 2016, ranging between 3.8 /sqm and 4.25 /
the sovereign wealth fund GIC in a deal worth 2.4bn. P3
During 2015 the structure of developers in the market sqm. We expect rents to edge upwards during 2017, as
owns and manages over 150 warehouses in Europe, and
saw substantial changes, as players such as P3, CTP or the construction market may struggle to accommodate
in Romania its investment represents the largest industrial
WDP geared their strategies towards a rapid expansion the deliveries planned for this year. Building costs are
park in Bucharest, with a built area of over 305,000 sqm.
on the Romanian market. New deliveries of industrial consequently set to remain on an upward trend, which may
spaces during 2015 stood at 150,000 sqm, and the market push the starting point for headline rent close to 4 /sqm.
remained very bullish in 2016 as well. During 2016, new 2. DEMAND
deliveries stood at 350,000 sqm, of which 60% were We estimate total take-up of industrial spaces during 2016
in Bucharest. By early 2017, the total stock of industrial stood at 350,000 sqm, of which approximately 60,000
spaces stood at 3,000,000 sqm. Vacancy rate and stock on
sqm were geared towards speculative developments. The
The largest players in the market seek to actively expand largest generator of demand is the FMCG sector (in the
Bucharest market
their portfolios, in an attempt to capitalize on the structural past 2 years, their demand reached approx. 200,000 sqm
1,551,000
changes of the Romanian economy: i) increased spending in the main cities of Romania), followed by e-commerce, 1,151,000
15.4% 941,000 941,000 941,000 941,000
power and development of shopping areas in secondary electro-IT companies, and logistics companies.
15.3%
and tertiary cities, ii) increased focus on e-commerce The vacancy rate in Bucharest has decreased to 2% by the
14.5%
13.7%
922,000
and the optimization of logistics for traditional retail end of 2016 (down from 5% in the previous year), while 10.2%
corporations, iii) development of infrastructure in the the vacancy rate for the rest of the country stood at 5%.
908,000
western part of the country. This decline in the vacancy rate is remarkable when taking
5.0%
2.0% 2.0%
Furthermore, the number of players in the market is into account the large volume of new deliveries. Both 2010 2011 2012 2013 2014 2015 2016 2017F
expanding. During 2016, Panattoni, chose to follow in the factors indicate that the industrial market is one of the
footsteps of its successes in Poland, the Czech Republic or most active in the real estate sector and is set to retain this Stock Evolu on (m2) Vacancy Rate (%)
Germany and decided to enter the Romanian market. We
dynamism in 2017 as well.
expect continued interest from international players during
Data Source: Colliers research

4. FORECAST
The increase in demand for industrial spaces over the past The advent of e-commerce their customers consolidated during 2016, including
three years has been remarkable by all accounts. Even players such as Emag, Fashion Days, QuickMobile,
Mobile internet is increasing dramatically Romanias
as the stock of industrial spaces has increased by 13% F64, Evomag or Elefant.ro. Furthermore, this
online access, particularly by adding connections
during 2016, the vacancy rate has been compressed to its creation of value was also transferred down the
to rural areas, which are leapfrogging straight into
lowest level since 2008. Against this backdrop, we expect supply chain. The business of couriers is booming,
the mobile first experience and in some cases
a high number of speculative developments and prelease as Romanias largest player on the market, Fan
completely by-passing the PC-first user experience.
transactions in 2017. We estimate that the total stock of Courier, reported an increase of its turnover by
By 2016, the rate of penetration of mobile
industrial spaces will increase by 500,000 sqm, marking 30% yoy during 2016.
broadband connections was 73.8%, up from 60.4%
the highest rate of deliveries/stock in the post-crisis period. The starting point for online sales in Romania
in the previous year and a mere 48% in 2014.
Demand will stem primarily from the FMCG sector (40% of has been very low, with Eurostat reporting that
new deliveries), E-commerce (20% of new deliveries), IT This rapid increase in the number of mobile users
just 10% of Romanians shopped online in 2012.
& Electronics warehousing (10% of new deliveries), while has also been reflected in online traffic. Olx.ro, an
However, the rapid increase in the access to mobile
the rest of the deliveries will most likely be of speculative online trading platform, has emerged as the most
connections as well as the development of new
nature. We believe these speculative developments will popular website in Romania, with close to 9 million
online platforms are bound to push towards an
be easily absorbed by the market, especially in light of the unique users every month. Turnover in the entire
acceleration of this trend.
rapid acceleration of consumer spending. New deliveries market for online sales increased by 30% yoy in
will remain focused on the Bucharest area (80% of new 2016, with a notable exception during the month Overall, the existing level of warehousing facilities
deliveries), but there is also an increasing interest for other of November when Black Friday sales jumped by is insufficient for coping with the ramp-up in
cities. over 50% yoy. The increase in turnover was broad demand. We expect e-commerce to be one of the
based, as the entire industry of retailers using main sources of demand for the industrial sector,
During 2016, we have observed a substantial number of and help drive a doubling of the stock of industrial
online as the main channel for connecting with
manufacturing firms prospecting the region (including spaces over the next five years.
Turkish companies looking to tap new markets) as well as Acces to Mobile Broadband
a substantial number of international e-commerce retailers
(as was the case with Alibaba in Bulgaria).
Connections (% per 100 people)
73.8%
Available at New projects 60.4%

sustainable started 48.0%
rent levels
500,000 sqm 35.4%
3.8-4.25 TO BE DELIVERED
/sqm BY THE END OF 2017
2013 2014 2015 2016
Data Source: ANCOM
11
ROMANIA 3,000,000 sqm UKRAINE
Bucharest 1,151,000 sqm
Timisoara 370,000 sqm
Satu Mare Botosani
Cluj 213,000 sqm Baia Mare Suceava
Ploiesti 280,000 sqm
Bors
HUNGARY Salaj Iasi
Brasov 130,000 sqm
Oradea Bistrita MOLDOVA
Piatra Neamt
Arad 50,000 sqm Cluj-Napoca
2017
Targu Mures
M43 Vaslui
A11 Miercurea Bacau
The point of inflection for manufacturing 2017, 2018 A10 2017 Ciuc
activity Arad
Nadlac A3
Alba Iulia
Manufacturing activity in Romania has hit workforce 2017 Sfantu
Gheorghe UKRAINE
constrains during 2016, but we believe 2017 will Timisoara Deva
Sibiu Brasov
be an inflection point. During 2017, the government Focsani Galati
A6
is scheduled to release 180 km of new highways
in Transylvania; this will effectively establish a fast Resita
A1 Buzau Tulcea
Targu Jiu Braila
transit route between the major cities in the region Ramnicu Ploiesti
and the border with Hungary. In turn, this will enable Drobeta Valcea
Turnu Severin Pitesti Targoviste
manufacturers to develop production facilities in Slobozia
2017
other cities in Transylvania and alleviate some of the A2 A4
workforce shortfalls. Slatina Calarasi BLACK SEA
SERBIA Craiova
BUCURESTI
Constanta
Separately, rising labour costs in global Alexandria Giurgiu Port
manufacturing hot spots are redefining the map of
global manufacturing, driving growth into the next
group of low cost countries. This is forcing higher- BULGARIA
cost countries such as China up the value chain. In Legend
CEE, hierarchies are slowly shifting as tier 1 markets Low stock
such as Poland and the Czech Republic become Medium stock
more expensive and increasingly saturated. This
High stock
is likely to pave the way for new investments into
countries such as Romania and the Balkans, of which Existing highway
we have seen some early examples such as Alibaba Under construction highway
Planned highway
in Bulgaria or the Italian group Custom in Romania.
A6, A11 - routes to be determined

13
Retail
MARKET
1. SUPPLY (+20,000 sqm in extension of City Park Constanta),
Brasov (+13,500 sqm in extension of Coresi Brasov).
2. DEMAND
2016 saw the delivery of a series of new retail projects, We also saw a complete refurbishment of the Mercur Growth catalysts such as higher wages, fiscal easing and
with Bucharest acting as the main point of attention Shopping Center (15,000 sqm of GLA) in Craiova and a lower interest rates have helped prop up consumer spending
for developers. Total deliveries of new stock stood at new project delivered by NEPI in Piatra Neamt (27,900 in 2016. According to the National Institute of Statistics, total
240,000 sqm of GLA, out of which Bucharest accounted sqm of GLA). turnover in the retail sector has increased by 13.5% in 2016,
for more than 40%. The highlight projects of the year and we also observed a return of consumer confidence
We expect developers to focus in the future mainly on
were ParkLake Plaza and Veranda Mall, amounting to to levels last recorded in October 2008. However, with
projects outside of Bucharest, and particularly on retail
approximately 100,000 sqm of GLA. regards to the structure of spending consumers report
parks due to their flexible cost structure.
a greater propensity in making small purchases (e.g.
Following these two deliveries, there are no new
food, entertainment, fashion) rather than large ones (e.g.
projects announced for delivery in Bucharest during Traditional vs. purchasing a home or a car).
2017 2018. Within this period, we expect the existing
Specialised Shopping Centers
shopping centers to focus on consolidating their market Fashion brands continued to register a very good
position in order to maximize the centers attraction. performance in 2016, with most of them recording sales
Several shopping centers already announced extensions increase between 20-30% compared to 2015. The rapid
aimed at creating additional space for anchor tenants 27% increase in turnover encouraged existing players to extend
and/or entertainment areas (i.e. AFI Cotroceni, Sun their store networks and spurred new brands to enter the
Plaza, Promenada Mall, Colosseum Retail Park). These market. Players on the mass market fashion segment were
extensions plan to add over 50,000 sqm by the end of particularly active in extending their networks towards
Traditional
2018. secondary and tertiary cities. Brands like H&M, LC Waikiki,
Retail Park
C&A, Deichmann, CCC, Koton, Pepco, or TXM were among the
Overall, Bucharests ratio of retail stock increased from
most active in 2016.
573 sqm per 1000 capita in 2015 and currently stands at
626 sqm per 1,000 capita, however still behind the CEE 73% The American brand Forever 21 was the most notable new
markets. entry on the mass market segment, while the upper middle
segment saw new entries from brands such as COS, Boggi or
Cities outside of Bucharest also saw a considerable
Data Source: Colliers research Lanidor.
rate of new deliveries during 2016, particularly due to
extensions of the existing projects: Timisoara (+40,000
sqm- phase II of Timisoara Shopping City), Constanta

DIY retailers also increased their number of stores, with on new business models in order to attract customers. The
Leroy Merlin and Dedeman as the most active players on the focus will shift towards creating experiences for customers
market. Leroy Merlin has acquired the Baumax portfolio of and we believe there are three ways of achieving this goal: i)
stores in 2015-2016, thus opening 8 new locations, while the innovative and exciting entertainment options for customers,
latter opened 4 new stores during 2016 and was prospecting ii) complete experiences focused on offering a very large
new locations in early 2017. The DIY remains supported by number of options, and iii) targeted marketing campaigns.
two factors: i) as consumers remained reluctant towards Innovative malls are incorporating value-added elements that
purchasing new homes, they spent increasingly more on attempt to recast the mall as the new downtown, including
refurbishments, and ii) demographic trends for Romania are concerts, arts centers, spas, fitness clubs, and farmers
nearing the sweet-spot for the consumers focused on DIY markets. These services provide a level of leisure and
projects (the bulk of Generation X members are nearing entertainment that can never be satisfied online.
the moment when their propensity to shop in DIY stores
increases).
Consumer spending also filtered into entertainment areas,
3. RENTS
with restaurants seeing a substantial increase in business Rent levels remained broadly unchanged in 2016, as the
volumes (turnover increased by 16% yoy by Q3, 2016). The market was able to absorb organically the newly released
traditional fast food operators (McDonalds, KFC, Pizza Hut supply in retail centers. Although the performance of the
etc) also continued expansion but are mainly focusing their retailers continued to increase in 2016, they were rather
strategy on drive-thru concepts. conservative during the negotiation process and signed
contracts for constant base rent levels, compensating with
With the rapid development of e-commerce (see special box
turnover rents in the case of very successful locations.
on page 11), shopping malls will increasingly have to focus
Retail sales of food and non-food products Romania Shopping Centers Average Rents
25%
20%
City Asking Rent ( / sqm /month)
15% Bucharest 55-65
10%
Cities with more than
5% 30-40
250,000 inhabitants
0%
Cities with less than
-5% 15-20
250,000 inhabitants
-10%
Jan-12 Oct-12 Jul-13 Apr-14 Jan-15 Oct-15 Jul-16
*Average rents obtainable for prime spaces in good performing
Retail sales of food products centers for 100 sqm occupied by good brands;
Retail sales of non-food products
**This represents the market average; there are big differences
between the cities depending on the level of competition;
Data Source: INSSE
15
Projects to be delivered in 2017
4. FORECAST
Project Prima Shopping Center Project Platinia Shopping Center Project Bistrita Mall
2017 will be another active year for the retail market Developer Oasis Retail Development Developer Platinia Developer Element Development
in Romania, as the estimated deliveries will amount to GLA sqm 10,000 GLA sqm 13,000 GLA sqm 15,000
approximately 180,000 sqm of GLA. Even though the
aggregate number of deliveries remains broadly unchanged
from 2016 (12 projects in the pipeline), the structure of the
market is changing. Developers of shopping centers will
focus on smaller cities like Ramnicu Valcea or Sibiu, while
we expect to see also a rapid development of retail park
projects in cities such as Bistrita or Oradea. Oradea Bistrita
We expect fashion brands to remain very active in 2017
and we believe there is a strong potential for new players Project Shopping City Galati
Cluj-Napoca (extension)
to join our market. We expect Polish and Turkish brands to
Developer NEPI
be at the forefront of this trend, encouraged by the good GLA sqm 21,000
performance of the already established brands from these
markets. The main Polish fashion brands have already Sibiu
reached the point where they have a full coverage of their
home market and Romania is a natural development step
being the 2nd largest market in the CEE Region. Turkish Galati
Project Shopping City Sibiu
brands have a twofold motivation for looking towards the (extension) Ramnicu
Romanian market: the positive perspective for retail trade Developer NEPI Valcea
as well as their need to diversify income sources as a GLA sqm 16,900
buffer for the volatility of the Turkish Lira.
Project Ramnicu Valcea Mall

Developer NEPI
GLA sqm 27,900

17
Office
buildings which do not fit into this paradigm will need to
differentiate themselves in the market or risk competing
solely on costs.
We believe this increased competition will manifest itself
MARKET
on a like-for-like basis: buildings from older established
business districts (e.g. Dimitrie Pompeiu) will have to face
a direct competition from districts such as Central West.
With regards to the latter, we believe there is still a strong
short-term potential for development, particularly as it is
one of the most spread-out business areas in the capital,
1. BUCHAREST Demand spawning over three metro stops. These characteristics
allow for the development of very large buildings, which
OFFICE MARKET Total take-up in the market for 2016 reached 369,000 sqm,
up by 52% from the previous year. IT and BPO/SSC were
along with the development of new amenities may well
result in the buildup of Bucharest first mega-district for
Supply the main drivers behind this expansion and accounted for
business.
a total of 50% of the transactions. In fact, we estimate
The stock of modern office spaces in Bucharest reached
that more than 20,000 people were hired in these sectors Conversely, buildings in the central area with good
2.1mn sqm, after registering new deliveries of 230,000
during 2016, which would mean that IT and BPO/SSC transport connections will have to compete with the
sqm during 2016. In fact, the volume of new deliveries
are on their way to becoming the largest employers in newer ones in the same area, as well as buildings in the
marks the fastest pace of expansion since 2009 and is
Bucharest, outpacing employment in retail trade. Floreasca Barbu Vacarescu business area. Overall, existing
112% more than the yearly average of deliveries in the
landlords will need to move along two directions: 1) offer
post-crisis period. By all means, the Bucharest office Demand for office buildings has been strongest in the
more flexibility for tenants, and 2) reshape their amenities
market is shifting gears. One of the explanations for already established areas such as: Floreasca Barbu
in order to become more relevant for a workforce of which
this increased volume of deliveries is the focus on large Vacarescu (13% of total demand), Dimitrie Pompeiu (17%),
40% are millennials.
projects (with GLAs larger than 25,000 sqm), which and the Central West part of the city (24%). In the case of
accounted for 60% of the total volume of deliveries from the area between Calea Floreasca and Barbu Vacarescu, Demand by sector of activity
2016. At the same time, we have seen an increase in the demand is starting to outpace the volume of office space
number of pre-lease transactions in the market. During on offer, as the vacancy rate continues to decrease rapidly.
2016, pre-leased transactions accounted for 82,100 sqm Consumer goods
Looking at the broader market, it is clear that tenants
(up by 200% from the post-crisis average) 20% Energy/Industrial
continue to have the upper-hand. Net take-up during 2016 19%
In terms of geographical distribution, the highest reached 166,600 sqm, which covers 73% of the area Finance/Banking/
contributors to the stock are Floreasca-Barbu Vacarescu delivered to the market in the same period. We expect Insurance
10% 9%
(42% of total deliveries), Dimitrie Pompeiu (26% of supply to continue outpacing demand during 2017 as well, IT &
total deliveries) and the Central West Area (24% of total which will invariably increase competition in the market. 2.2% Communications
deliveries). In total, these zones accounted for 92% of the 17%
New buildings which offer good connections to the public 23% Pharma
total deliveries in the market. These areas have developed
transport scheme, Green certifications and an interesting Professional Services
considerably in the post-crisis years as accessibility,
mix of amenities will remain the market favorite and will
transportation and proximity to amenities started to rank Other
be able to keep rents around the current levels. Conversely,
higher in tenants requirements.

Sources of demand (2016) Bucharest Rents & Vacancy Rates
24.1%
18.7%
17.3%
15.8%
13.2%
Baneasa
11-13 8-10
6% 28%
7.2%
3.7% Pipera
15-16 D. Pompeiu
6%
11-13
Floreasca Dimitrie Central Pipera West CBD Other P. Presei
Pompeiu West 7%
Barbu 16-18
Vacarescu
12% 14-16 Floreasca
Aviatorilor 7% Barbu Vacarescu
16-18
9%
Victoriei
Rents P.Poenaru 14-15 Romana 13-14
10 9%
M
9%
Over the last two years and a half rents in Bucharest saw Grozavesti Eroilor
Pacii 0% Universitate Piata Muncii
little to no movement, while projects with higher vacancy
Politehnica Izvor Unirii 12-14
rates, showed more flexibility in approaching tenants. We
14-15 26%
expect rents for prime buildings to remain unchanged 18% Vitan
during 2017. Timpuri Noi
Eroii Revolutiei
Forecast 10
39%
More than 265,000 sqm of office area is scheduled for Piata Sudului
delivery in 2017, broadly in line with the level received in
2016. Approximately 50% of these deliveries are already
under advanced negotiations and almost all have managed
to secure anchor tenants during development.
We estimate a net take-up of approximately 175,000 sqm
during 2017, most of which will be generated by new
tenants in the market. During 2016, new entry tenants
generated transactions of over 107,000 sqm, up by 118% n Average headline rent (/sqm)
from the post-crisis average. We expect this optimism to n Vacancy rate
be carried forward into 2017 as well.
19
In order to capitalize on this dynamism, landlords will need Iasi is rapidly becoming a magnet for the BPO/SSC iii) technical skills of the workforce, especially from a
to provide tenants with increased levels of flexibility: either industry as it has a large pool of highly competitive regional stand point (secondary, tertiary cities).
for already existing tenants which will need to upsize (for workforce and has sparked the interest of companies
If the respective shortfalls were to be resolved, we believe
additional hires) or downsize (in cases where tenants such as: Amazon, Xerox, UniCredit and Accenture.
In Iasi, an insufficient number of office buildings is Bucharest could employ an additional 20,000 people every
open new offices in other parts of the country), or for new year, which would be result in an additional demand of
becoming the biggest drag on growth.
entry clients which plan to grow their business over the 160,000 sqm of new office space every year. Similarly,
upcoming years. C
luj Napoca has become a direct competitor for
Bucharest on the IT market. Over the past three years, cities such as Cluj and Iasi could each absorb as much as
We believe demand will remain strongest in the already the city has rapidly moved towards the higher end of 50,000 sqm every year.
established areas such as Central West, West or Floreasca the market. This tendency is evident in the employment Looking forward, we can classify Romanias top cities into
Barbu Vacarescu. Over the longer term, the agglomeration structure of Cluj Napoca, which is more focused three main categories:
of some office areas will encourage developers to explore towards the IT sector rather than BPO/SSC when
new locations which offer the complete package: short compared to other cities in Romania. The existence of 1. The heavy hitters: Bucharest and Cluj Napoca have
commute time, availability of public transport, and retail a large critical mass of IT companies may also create a critical mass of workforce with strog IT skills, but are
areas. We have seen a first example of this trend with during the upcoming period the appropriate conditions already pushing the edge of workforce availability, and thus
for foster innovation and the incubation of new ideas driving up salaries. The solution in this case would be to
the construction of the Timpuri Noi Square by Vastint.
and businesses. During 2016, some of the biggest invest more in technical skills and move up the value chain,
Similarly, we believe there is a latent potential in the area
transaction in the market included Arvato, Impact Hub which would make the rise in salaries sustainable.
on Bulevardul Expozitiei, especially when considering and Sig Comiblock and Magneti Marelli. As in the case
three factors: i) the city of Bucharest plans to construct of Iasi, available office spaces appear to be insufficient 2. The up-and-coming cities: Iasi enjoys an ample
a new metro line connecting this area with the Henri to keep up with market demand. workforce at low costs, which has helped fuel a very
Coanda Airport by 2020, ii) the area benefits from a T
imisoara is another city with an interesting rapid development in the BPO/SSC. We believe Craiova
close proximity to residential areas in the northern part proposition for companies. The mixture between a very is another city with latent potential, and could see an
of Bucharest as well as easy access to the Western area strong industrial sector and IT skills has created the accelerated pace of development over the upcoming years.
via light rail transport and iii) the abundance of land plots basis for an engineering-focused demand for office However, in order to encourage growth, this type of cities
available in the area. spaces. Timisioara has seen interest during the past need to improve their supply of modern office spaces.
year from players such as HP, Continental, or Huawei.
3. The niche players: Timisoara and Brasov are emerging
2. PLOTTING THE Moving forward, the biggest challenge that the city
faces is gathering the necessary workforce to keep up as strong engineering polls at a competitive cost. However,
DEVELOPMENT PATH FOR with demand. the rapid development of the former is already starting to
strain its workforce availability.
B
rasov is showing potential as a prospective center
ROMANIAS MAJOR CITIES focused on engineering and an alternative for
Timisoara, with players such as Siemens (2015), Tata
Over the past five years, the business landscape in Romania Triple threat cities
(2015), or Continental (2016) setting up office spaces
has been reshaped with an increased focus on the services
in the areas.
sector. At a macro level, IT and BPO/SSC have become
With global demand on an upward trend due to corporate
the second largest contributor to GDP growth, outpacing
restructurings, we believe Romania is in the position
industrial production. This switch towards the services
where it could absorb more new investments than it does
industry was most evident on the office market. Bucharest
currently. In order to achieve this, it needs to address three
remains the most prominent Romanian city, but other cities Technical Workforce Office
bottlenecks: i) availability of a large enough workforce at
are seeing a very rapid pace of development: Skills Availability Spaces
competitive costs, ii) availability of office spaces,

Romania - Next Outsourcing Destination
Iasi
Cluj
100,000 Employees
Timisoara Sibiu
Brasov
Craiova Bucharest
Constanta
Data Source: Telus, ABSL, Colliers research
21
THE
different structure with respect to its Eurozone or USA
counterparts, where Baby Boomers and Silent/Veterans
Human TOUCH
account for over 30% of the workforce. Generation X
is by far the largest in the labor market, accounting for
close to 50% of the workforce in the Bucharest class A
office market. Millennials account for close to 40% of
the workforce. However, we currently find ourselves at
a crossroad, as Centennials (Generation Z) are preparing
to enter the labor market. Having these four generations
working at the same time in the same office could prove to
be a real challenge as each generation has specific needs
and different ways of working.
1. THE CHALLENGE Cost structure for a knowledge Technological flexibility

intensive company Over the past seven years, technology has changed
Over the past five years we have observed local companies
pivoting towards the higher end of the market, where 90% 9%1% significantly the way we work, particularly due to the
they can provide more innovative services and a higher mobile revolution. Upon the advent of mobile phones,
added value. Furthermore, market leaders have shown employees were able to remain permanently in touch with
that focusing on the quality of their workforce is the Employee related costs developments at work, even if they werent physically
cornerstone for achieving these goals. In fact, the cost present. Furthermore, services such as Skype, Slack, Asana
Rental costs
structure of local IT and BPO/ SSC companies has started are revolutionizing the way we communicate, track projects
to resemble the one of their western counterparts with Other costs and share information in the office. The exponential curve
human capital costs accounting for the bulk of their cost Data Source: World Green Building Council for mobile technology was also evident in Romania, where
structure. the rate of penetration for mobile broadband internet has
The issue regarding the quality of human capital

2. THE OPPORTUNITIES jumped from 48% in 2014 to 74% in 2016.
is particularly binding in Romania due to the rapid A generational shift 3 Generations in the workplace
development of the market. We estimate the Bucharest
One of the main factors that is affecting the Romanian
office market has generated more than 80,000 new jobs
work environment is the generational shift in the Baby Boomers
for knowledge workers over the past five years, which 10%
workforce. There are three generations currently working
represents a real challenge for local companies that Generation X
together in Romanias offices: Baby Boomers, Generation
want to: attract the brightest employees, engage their
X-ers and Millenials (Generation Y). We estimate that Millenials (Gen Y)
creative and analytical thinking and retain their skills for 40%
Baby Boomers are the most under-represented generation
a prolonged period of time. Against this backdrop, the
in the workplace, accounting for less than 10% of the
workplace should be able to change and easily adapt in a
workforce. This under-representation is directly correlated
way that facilitates and supports the achievement of these 50%
with the enormous shift of the Romanian economy in
business goals.
the post-communist era. Furthermore, this means that
the Romanian work environment has a fundamentally

Furthermore, the digitalization of business processes is
an enabler for a more flexible work environment. The
new technologies available on the market allow for higher
flexibility with regards to when, where and how the
business is conducted.
Productivity
The rise of the business hubs
and
A third major development in the Romanian work New ways of business
environment is the construction of business districts. This working results
tendency is most evident in Bucharest, where we have
seen the emergence of several business districts over the Space
past five year (e.g. Floreasca/ Barbu Vacarescu, Central Optimisation
West Area, Dimitrie Pompeiu). The development of these
hubs means there is a sufficiently large number of people
in order to bring a shift in the way the workplace and
personal life are integrated together. This,in turn, leads to a
of grouping employees just into departments as a single and increase employee satisfaction and wellbeing.
critical demand for day-to-day services such as: food, dry
area of activity, the work environment should focus on Companies can bundle an activity based workplace with
cleaning, childcare, errands management.
accommodating the different activities conducted by the optimization of the office space layout. This means
employees. Concentration areas could be provided for the tracking the way in which the office is used, maximizing
3. I NNOVATING times when employees need to work on intricate reports its utility and optimizing costs. Some examples include the
THE WORKPLACE or detail-oriented work that requires a high degree of

concentration. Similarly, a modern work environment could
arrangement of amenities in the smartest way possible.
First, we recommend the development of common areas
Traditional offices with a plain open-space design include also some small rooms where salespeople can talk which both save space and encourage the interactions
feels outdated and is not a catalyst towards employee freely without disturbing colleagues, can organize video/ between employees. Second, we recommend placing these
engagement and creativity. According to the World Green teleconferences or where small one-to-one meetings can common amenities in a way that they leave the prime
Building Council, 90% of costs for knowledge intensive be held. For innovation-focused companies brainstorming office space for employees (e.g. access to sunlight and
companies are directly related to employees. Increasing areas where employees can bounce ideas and work on green) as well as encouraging them to be more active and
employee engagement and satisfaction leads to increased new projects can also be provided. interact with each other.
revenues. The biggest issue is that the traditional The concept can be further extended in order to include
layout of the office is based on the premise of mutually a hot desking environment, where there are no assigned
interconnected islands. Each workspace is its own island, places and employees can freely choose a place that suits
connected to other islands based on their functional role their activity. Relaxation rooms and informal meeting
in the various divisions of the company. This setup is areas could also be provided in order to facilitate work life
not ideal to stimulate idea generation, cross department integration.
communication or a lean management structure.
The real estate costs represent a much smaller portion
We believe the solution to this problem is a very simple of the total cost of the company. An activity based
shift in the organization of the work environment. Instead work environment can help optimize the office space FROM CONVENTIONAL TO FUN
23
25
THE DEVELOPMENT OF
Green Buildings
1. INTRODUCTION 2. STRUCTURE OF LEED/ BREEAM breakdown
The development of the office market during the past CERTIFICATES
five years has not only seen a quantitative shift, but
Office buildings are the most prominent on the Green
a qualitative one as well. Developers and landlords
certifications market, as they account for close to 80%
have been approaching buildings through a long term
of the existing certifications. The certification of Office
perspective, focusing increasingly more on efficiency
buildings has reached a historical milestone during 2016,
and sustainability. Over the past years we have been
when it surpassed the 1 million sqm threshold. By early
collaborating with both developers and landlords in order
2017, we estimate over 1.22 million sqm of office spaces
to obtain Green certifications for their buildings and we
had Green certifications and provided working conditions
have observed firsthand the rapid development of this
for more than 160,000 employees. The Romanian market
market. BREEAM (Building Research Establishments
remains predominantly driven by the certification of BREEAM
Environmental Assessment Method) and LEED
already existing buildings, which account for 53% of the 44% 56%
(Leadership in Energy and Environmental Design) have
total number of certificates.
become the most widespread standards for evaluating
the environmental performance from an end-to-end
BREEAM and LEED certifications LEED
perspective over a buildings life cycle. This study is based
on official data derived from the certification bodies for by type of building 48% 52%
both LEED and BREEAM standards.
NEW CONSTRUCTIONS EXISTING BUILDINGS
2% Industrial
18%
Office
Retail
80%

3. B
REEAM VS. LEED 4. REGIONAL DISTRIBUTION In the case of LEED, GOLD certification is the most
prevalent in the market, accounting for 62% of the total
CERTIFICATIONS OF CERTIFICATIONS number of certifications. Only one project was awarded
the highest level of LEED certification PLATINUM,
The number of certified Green buildings has been Bucharest remains the city with the largest area of
the office of DB Global Technology in Bucharest, which
increasing constantly over the past five years and has green buildings, with a total of 1.1million sqm of certified
received the certification for Commercial Interiors. Another
reached a peak during 2016, when 29 buildings were buildings. However, other cities are quickly catching up:
7 buildings received the SILVER and CERTIFIED levels of
certified. BREEAM has proved to be the most popular Cluj Napoca has more than 430,000 sqm in green spaces
certification.
certification standard on the local market with 72 buildings, and is followed by Timisoara with 307,000 sqm. Looking
followed by LEED with 21 certified buildings. However, at the pipeline for LEED projects, Iasi is also focusing BREEAM/ LEED -
the balance between BREEAM and LEED certifications increasingly more on Green buildings as it records 177,000 Quality of certifications
may be reversed in the upcoming period considering the sqm under certification (compared with the existing stock
remarkable pipeline for the latter: 40 projects are currently of 66,000 sqm).
BREEAM Certification LEED Certification
under LEED certification.
BREEAM/ LEED - BREEAM/ LEED - Outstanding Platinum

1 1
Annual number of buildings Regional distribution of certifications Excellent 18 Gold
Very Good Silver 13

300,000 Good 41 Certified
25
Pass 5
11
1 2
9 8 760,000 140,000
5 6 6 6 129,000
4
2 1 295,000
1
111,000
46,000
20,000 103,000 178,000
6. TAX INCENTIVES
2011 2012 2013 2014 2015 2016 Brasov Bucuresti Cluj-Napoca Iasi Targu Mures Timisoara
Tax incentives also help to improve the outlook for the
BREEAM LEED BREEAM LEED Green certificates market. Bucharest does not have a
LEED: scheme currently in place, but other cities have made
Certified vs. Under Certification
5. QUALITY OF significant efforts in this area. Cluj Napoca was the first
CERTIFICATIONS city in Romania to have taken the initiative to introduce

tax relief for the design of green buildings (e.g: for a 50%
The most popular level of certification for BREEAM is reduction they must achieve a minimum level of GOLD in
40 VERY GOOD, which represents 56% of all certificates the case of LEED or Excellent for BREEAM). Cluj Napoca
Already Certified awarded. Only one building has achieved the highest level was followed by Timisoara in case of tax incentives for
Under Certification of certification for BREEAM in Use OUTSTANDING green buildings. In addition, there are local initiatives (both
21 (the Maestro Business Center building in Cluj Napoca). public and private) in other cities such as Iasi.
The BREEAM EXCELLENT certification was awarded to
18 buildings, while the BREEAM GOOD certification was
awarded to 11 buildings.
27
Investment
MARKET
were driven primarily by large, sporadic investments,
this trend started to reverse in 2016. Furthermore, new
investors joined the Romanian market, as was the case
with PPF, GIC, Logicor, while others have resumed their
acquisitions in Romania: Catinvest, GTC, First Property,
Smartown Investments. We expect this qualitative shift to
continue in 2017 as well, particularly as some transactions
were postponed for this year due to some administrative
delays.
The interest for CEE properties remained heightened in

Transactions and Investors
Prime yields
2016 and is likely to continue in 2017. Poland is slowly In terms of investment volumes, the industrial sector
making the shift towards being an alternative for western dominated the market registering a total of 255mn or
Bucharest Warsaw Budapest Prague markets, while Budapest and Bucharest are considered 28% of the total market with only two deals. This high
more often as alternatives to secondary Polish cities. percentage is largely attributed to the sale of Europolis
Office 7.50% 5.30% 6.75% 5.05% Park in a large multi-jurisdictional transaction - the
Retail 7.00% 6.25% 6.50% 4.75%

2. ROMANIA acquisition of P3 by the Singapores sovereign wealth
fund GIC. The other industrial transaction was also part
INVESTMENT MARKET of a large cross border transaction: Blackstone acquired
Industrial 8.75% 6.50% 8.75% 6.75% Immofinanz industrial assets through Logicor, its
Overview
European logistics platform.
Source: Colliers Research The real estate investment market in Romania is on an
The retail sector came in second with 25% of the market,
ascending trend as both the volume of transactions as well
1. CEE INVESTMENT MARKET as the interest from foreign investors registered sizable
or 229mn. NEPI continued to consolidate their position
on the retail segment and acquired Sibiu Shopping City
In the Investment arena specifically, 2016 turned out to be increases. The main factors underlying this dynamic are: i)
from Argo Group for 100mn and the 30% share of
a bumper year for the CEE-6 countries, with 11.8bn of a positive macro environment spurring investor confidence,
Real4You in Mega Mall. Catinvest was a new name on the
volumes (Colliers International estimates). ii) increasing market liquidity, iii) an improved financing
market in 2016 with the purchase of Electroputere Mall
environment, and iv) a rapid development of the Romanian
Compared to 2015, when the most sought after properties Craiova from BelRom. As opposed to 2015, when it led the
real estate market.
were the office buildings, followed by the mixed use investment activity, office accounted for only 20% of the
segment, 2016 brought high interest for the retail sector 2016 maintained a comfortable market liquidity, marking a market in 2016 ( 183mn). After years of absence, GTC
followed closely by offices. Industrial and development site total investment volume of 910 mn, up from 820 mn in returned on the market and secured 100% of City Gate by
spaces had also an important weight in the overall volume. 2015. The market not only saw a boost in the total volume acquiring Bluehouse share of 41%. The Israeli fund also
of transactions, but it also registered a qualitative shift acquired two office properties in Bucharest CBD, Premium
during 2016. While 2014 and 2015 investment volumes Point and Premium Plaza.

The Iceberg Effect entries already having occurred. Margins have come
around 350 bps and even lower for core properties, after a
The number of investors in the Romanian market has increased substantially in 2016 and
long period where they used to be between 400 and 500
there are further prospects for new players
bps, and risk appetite for the real estate sector continues
IMMOCHAN/AUCHAN
to improve. In addition, alternative sources of financing
GLOBALWORTH
such as bonds or mezzanine debt have become more
convenient and attainable.
GLOBALWORTH
300 mn
Forecast
SMARTOWN INVESTMENTS
250 mn
Based on the current volume of closed transactions, deals
GIC
PPF REAL ESTATE
200 mn that are currently under negotiation and the current level
SECURE PROPERTIES
NEPI
NEPI
CTP
STRABAG
of interest in the market, the investment volume in 2017
BLACKSTONE
CARREFOUR
CATINVEST
GLL
150 mn
LEROY MERLIN
P3
could surpass 1 bn, marking the best year for real estate
NEPI
GTC
100 mn investment in the post-crisis period. Furthermore, we
REVETAS
50 mn expect the qualitative shift in the market to continue, as

new players are currently prospecting Romania.
0
We expect to see a slight decrease in yields across all
2014 2015 2016 sectors by the end of the year, as investor interest grows
and bidding situations arise while the financing costs
decreases. Prime office yields could reach 7%-7.25%,
prime retail 6.75% and prime industrial 8.5%-8.75%.
Historical Yields
PPF Real Estate entered the Romanian market with the Pricing 11%
acquisition of Metropolis Center, an office complex in the
Although the growing investment activity has already put
city center of Bucharest, from Soravia. The insolvent office 10%
pressure on pricing, the risk-return yield that Romania
project Swan Office & Technology Park was sold by Casa 9%
offers remains very attractive both by Eurozone and CEE
de Insolventa Transilvania, the insolvency administrator, to
standards. The current yield levels are 7.5% for office, 7% 8%
a group of local investors, Smartown Investments. Phoenix
for retail and slightly below 9% for industrial. 7%
Tower and Construdava were another two office buildings
changing hands in 2016 from Aberdeen Asset Management Viewed from a different lens, yields in Bucharest are 6%
to Hoshen Holdings (administered by the co-founder of at a higher spread from 2007 market peak than in all
5%
AdamAmerica). peer countries, showing again an advantage for potential 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
investors in terms of the market cycle stage Romania is in. Office
Industrial
Bank financing is becoming more attractive as more Retail
players are interested to enter the market, some notable
29
Land
MARKET
1. DEMAND Looking at the structure of developers, we have observed

an increase in the proportion of locals which share a very
2. SUPPLY
2016 remained a lively year for the land market. The overall broad experience on the Romanian market. Furthermore, On the supply side, the land market saw an increased focus
number of transactions suffered due to administrative we have seen an increase in the number of partnerships towards old factory plots, or undeveloped plots acquired
hurdles, but market interest was very elevated and is between local players in order to acquire particularly in the pre-crisis period. This dynamic highlights the fact
bound to continue during 2017. Plots aimed towards attractive plots. that the market has reached a point of stability regarding
residential developments sparked the most interest in the both the structure of investors as well as price and
The retail segment was the second driver of demand on
market, as a series of factors have converged towards liquidity conditions. This stability is further emphasized by
the land market during 2016. Three consecutive years
making residential developments very attractive the volume of transactions with assets from banks NPL
of strong consumer spending have helped increase the
(e.g. increases of employment over the past three years, portfolios, as in the case of the Prefa-plot in Brasov.
turnover of companies in the retail sector and increase
higher wages, low interest rates and the development
their confidence in the Romanian market. Consequently,
of new office zones). Developers focused on defining
new residential areas in close proximity to the recently
hypermarkets, discounters, DIY stores as well as furniture 3. PRICES
companies all continued to extend their coverage network
developed office buildings, particularly in the Northern part Land prices remained stable, with isolated slight increases
throughout the country. This appetite for extension was
of Bucharest. Against this backdrop, areas such as Aviatiei, for prime locations where more developers are negotiating
particularly prevalent in secondary and tertiary cities,
Baneasa, Sisesti, Straulesti, Pipera or Militari-Lujerului for the same plot. Looking at the broader situation of the
where the competitive environment is more favorable.
were particularly interesting for the market. The highlights market, the average price has also increased slightly in
of the year were the acquisition of the Automatica land plot Over the short term, the office Bucharest market will taper, 2016, but we attribute this rise to the fact that more plots of
(approx. 32,000 sqm in Floreasca) for 25 mn by One as it will need some time to absorb the deliveries made higher value were traded rather than to a generalized hike
United Properties and Auchan, as well as the acquisition of in the 2016-2017 period. Developers will consequently in prices.
a 48 ha plot in Sisesti by Vastint, one of the largest areas redirect their focus towards: i) plots with exceptional
sold on the Bucharest market in the post-crisis period. In locations or smaller sites with building authorizations
addition, investors have started focusing on mixed projects, which allow for a very short time to market, or ii) plots
particularly residential and office. with a focus on developments over a medium term.

2016 Bucharest Land prices
in major transactions
4. FORECAST
We expect a positive outlook from the land market,
especially as some of the transactions postponed from Sisesti
2016 will reach the market during early 2017. Investors 70-250 /m2
will continue to focus on the evolving needs of consumers. Pipera
Residential developments close to office areas will remain 50-250 /m2
attractive, as will the development of mixed projects
Floreasca -
(e.g. residential and office). Bucharest is leading the way Aviatorilor- Barbu Vacarescu
on investors radars, followed by cities such as Mircea Eliade
500-1,000 /m2
Cluj-Napoca, Timisoara or Brasov. 2,000-2,500 /m2
Dorobanti
In addition, we expect companies in the retail sector 1,300-1,700 /m2
to consolidate their position on the market, either by
extending their coverage network or acquiring smaller Eminescu
1,000-1,300 /m2
players in the market. Center West
The extension of the metro coverage network will bring Lujerului 450-600 /m2
new opportunities for developers. Locations in the area 250-350 /m2
Timpuri Noi
around Piata Presei/ Expozitiei Boulevard are very well 500-600 /m2
suited for the office market. In turn, these developments
could unlock the potential for the broader area in the eodor Pallady
Northern part of Bucharest for residential, retail and hotel 80-200 /m2
developments.
Another trend will be the level of selectivity of land
depending on the status of zoning documentation (PUZ,
PUD, Building Permit). Considering the effervescence
of the residential market, investors seek the flexibility to
deliver projects on the market as quickly as possible and
are, therefore, willing to pay more for plots with permits in
place.
The information is based on the deals concluded in 2016 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 process.
31
Hotel
MARKET
1. OUTLOOK dynamic: i) the modernization of airports in cities outside
of Bucharest (i.e. Iasi and Cluj, and Craiova), and ii) an
Flights Growth Rate between 2009 and 2015
The hotel market in Bucharest continued to improve during increased number of flight companies (from 31 to 37),
2016, seeing growth in all major sectors: business, leisure which brought a commensurate diversity of destinations.
and MICE (meetings, incentives, conferences and events). The market for flight companies has become more focused
Czech
The outlook for the hotel market remains very positive in on low cost companies, as we estimate that WizzAir, Republic 1%
the former two sectors, with the latter being constrained by RyanAir and Blue Air will become the top 3 ranking flight
Germany 26%
a lack of supply for large venue spaces. companies in 2017. Furthermore, we have observed during
The number of tourists who spent their holidays in 2016 a displacement of traditional players by low cost Hungary 27%
Romania has grown by 63% over the last five years, ones, as Alitalia and Airberlin are leaving the Romanian
market. Poland 109%
bringing the annual number of visitors to 2.45 million
people. In spite of the rapid rise of foreign tourism, Even though the leisure segment has been growing Romania 175%
Romania remains a long way from its CEE peers: Hungary constantly over the past two years, it only accounts for
Data Source: EUROSTAT
records over 5.1 million foreign tourists every year, Poland approximately 35% of hotel revenues. Consequently, the
has more than 6.2 million, while the Czech Republic has Bucharest market remains heavily geared towards the Bucharest market is estimated to have a total of 12,000
over 9.1 million. Overall, Romania is a country geared corporate segment. rooms, of which approximately 40% are associated with an
towards the business market, with very limited spikes international brand.
during the summer months.
2. SUPPLY During 2017 Hilton worldwide plans to open a four-
star hotel in the historical area of Bucharest, which will
Romania had a total of 1,530 hotels by the end of 2016
(broadly unchanged from the previous year), and had an During 2016, the existing players in the hotel market were offer 201 rooms. Mariott also plans to open a four-star
average vacancy rate of 37% during 2016, compared with focused on consolidating their position. The competition hotel with 250 rooms under the Courtyard brand in the
34% in the previous year. The number of air flights has was particularly strong in the capital, where the biggest Floreasca Barbu Vacarescu business district. Over the
increased by 8.6% yoy during the first six months of 2016, players are: Radisson Blu Hotel (763 rooms under 3 longer term, the Orbis Hotel Group has announced plans
and we believe it maintained the upward trend throughout brands), JW Marriott Bucharest Grand Hotel (402 rooms), to increase its network of hotels and aims to become the
the rest of the year. Two factors lie behind this positive Athenee Palace Hilton (272 rooms), Sheraton (270 rooms) largest player on the Romanian market by 2019. The brand
and InterContinental Bucharest (257 rooms). Overall, the is currently exploring 3 locations options in Bucharest.

Additionally, we expect players in the local hospitality estimate that the volume of FDIs in the capital has in this direction with the Mariott Courtyard in the Floreasca
market to focus increasingly more on weaving technology increased by 35% yoy. Looking at the structure of Barbu Vacarescu area, but there is also a latent potential
into their offering. This focus on technology relies on corporate demand, we believe there is potential for in the Central West Area of Bucharest. Investors are
two drivers: offering novelties to increase customer additional high-end hotel developments in the Northern more enthusiastic about prospecting the market for new
engagement as well as collecting more information about part of Bucharest, in close proximity to the newly hospitality projects, including reputable brands such as
the customers in order to setup a more personalized developed office areas. Hilton, Kempinski and Hyatt.
relationship. We also remain optimistic about the continuous
development of the leisure sector. Bucharest is enjoying
3. DEMAND improved visibility on the international tourism markets and
Demand on the hotel market is starting to be differentiated 4. FORECAST is currently offering a broad range of entertainment options
at a competitive price. Furthermore, the market for leisure
along two lines: the four- and five-star segment is
Over the past two years, we have observed a constant tourism is starting from a point far from its potential.
sustained by corporate demand, while the three- and four-
trend of higher inflows of tourist as well as increased
star segment benefits from more activity on the leisure This appetite for leisure tourism is also boosted by the new
rates of occupancy in the main hotels of Romania. We
sector. wave of cultural venues, with events such as the Enescu
believe this trend is set to encourage new investments in
Festival in Bucharest, the Untold Festival (300.000) and
Bucharest is increasingly seen as a city-break destination, the hotel sector, with a particular focus on the high-end
Electric Castle (120.000). However, the lack of large
benefitting from low air ticket fares and good connections of the market. The rapid development of office areas in
enough exposition spaces is becoming the main drawback
with continental Europe. Also, the current ADR of five-star Bucharest as well as the other major cities has increased
for organizing more events in Romania, particularly on the
hotels in Bucharest is around 94 , while in Budapest the potential for business travel. We have seen a first step
Bucharest market.
(Hungary) the ADR reached 110 and in Prague (Czech
Republic) - 130-140 . Bucharest Hotel Occupancy Q4 2016
The level of occupancy for the above mentioned segments
(four- and five-star branded hotels on the Bucharest
market) has risen steadily over the past two years,
reaching an average of 70% for Four-Star hotels in
Q4.2016, and of 79% for Five-Star hotels in Q4.2016. The
rise in occupancy has also coincided with a rise in the
average ADR (+8.9% yoy for Four-Star hotels in Q4.2016
and +9% yoy for Five-Star hotels). This dynamic highlights
Occ. 70% Occ. 79%
the improvement of demand in the local market. Growth Rate 3.10% Growth Rate 3.30%
Corporate demand has received a welcome boost from
the rapid development of the IT and BPO/SSC sectors,
particularly on the Bucharest market. The number of
expats has increased over 110.000 in 2016, while we Data Source: Colliers research
33
RECENT CHANGES IN
THE TAXATION OF
Capital Gains
Taxation of Capital Gains in Romania Tax consolidation at the level of the holding;
Throughout the last couple of years, A
n efficient tax administration (giving the possibility to
in the light of the Recent Changes to quickly obtain advance tax rulings or advance pricing
the Romanian government initiated
various tax measures meant to attract the Fiscal Code agreements);
Legislative stability and predictability.
foreign investors and to develop their
Ruxandra Jianu | Partner We need to first look at the corporate income tax rate
long term operations in Romania. of 16%, one of the most competitive taxes in all the EU
In fact, all these initiatives, together Biris Goran SPARL member states. Only Bulgaria (with 10%), Cyprus (with
with the 16% flat tax, aimed to Romania may be viewed as being en route to becoming a 12.2%), Ireland (12.5%) and Latvia and Lithuania (with
put Romania on part with other regional business hub, with several legislative measures 15%) have a lower rate. This 16% rate has been applicable
already implemented: since 2005 almost 12 years and there is no indication
European countries with favourable
that the Romanian government intends to change it
holding legislation, such as the T
ax exemptions for capital gains and dividends (under
certain conditions); anytime soon. This actually contributed a great deal to the
Netherlands, Cyprus or Luxemburg. stability of the Romanian corporate taxation environment
A
lower rate of corporate and personal income tax
(16% represents one of the lowest tax rates in the and, consequently, is one of the factors that will certainly
European Union); attract long-term investments in our country.
A
large number of Double Taxation Treaties (DTTs) Regarding the taxation of capital gains in Romania, related
concluded with various countries. to both asset deals and share deals, we will present
Of course, other steps have to be taken in order to aim for below the main tax issues which need to be taken into
the title of a regional business hub: consideration. As you will see, all these actually contribute
to the overall appeal which Romania has had lately as an
A modern companys Law;
important regional business hub in Eastern Europe.

We will commence our analysis by stating the tax In case of asset deals, both Romanian and foreign
treatment applicable starting 2017 to the capital gains individuals are due to pay an income tax of 3% on the
To conclude, even if the taxation of
obtained from Romania by companies: value of the transactions which exceeds a threshold
of 100,000. (i.e. practically, the income tax is due capital gains obtained from either
In case of asset deals, both Romanian and foreign to be paid on the difference between the transaction asset deals or share deals does not
companies are due to pay profit tax for the gains value and the non-taxable income of 100,000). Also,
obtained from the respective transaction (i.e. the gain compensate entirely the other lacks
no social contributions are due in Romania for capital
is computed as the sale price less assets cost less gains resulted from asset deals. of the Romanian tax environment,
the registered depreciation of the asset less costs Similarly as above, sellers which are resident in you might want to keep all eyes on
related to the sale). The tax rate applicable to the gains countries with which Romania has a DTT concluded
obtained from asset deals is 16%. Romania, as it shows high potential
are allowed to deduct the tax paid in Romania in their
Companies which are not resident in Romania, but country of residency, under the specific provisions of
to become an important regional
which are resident in countries with which Romania the Treaty. hub for the foreign investments,
has DTT are allowed to deduct the tax paid in Romania
in their country of residency, under the specific In case of share deals, the capital gains obtained considering also the future legislative
provisions of the Treaty. following the sale of shares held in a company resident modifications which will hopefully
in Romania are taxed with 16%. Also, a 5.5% social
In case of share deals, the capital gains obtained health security contribution is due to be paid on the
improve the other conditions Romania
following the sale of shares held in a company resident capital gain, should the seller not pay this contribution has to meet in order to be fully
in Romania or in a country with which our country in Romania for other types of income.
has a DTT concluded are tax-exempt if the beneficiary
compliant with the expectations of any
of these gains hold minimum 10% of that companys However, individuals which are resident in countries investor might have from a tax haven.
share capital for a period of more than 1 year. with which Romania has concluded a DTT shall be taxed
according to the capital gain provisions provided in the
If these conditions are not met, then a profit tax of 16%
respective Treaty.
is due for the capital gains obtained from the respective
transaction. Nevertheless, sellers which are resident in Also, individuals who are residents in a member state
countries with which Romania has concluded a DTT shall and provide an A1 form issued by that member state
be taxed according to the capital gain provisions provided shall be exempted from paying the social health security
in the respective Treaty. contribution.
Tax treatment applicable to capital gains obtained from In addition to the above, we would need to highlight the
Romania by individuals is different, as it involves the fact that Romania is one of the EU member states having
application of the income tax provisions, as opposed to the the largest number of DTTs concluded: a total of 85,
profit tax provisions applied to the capital gains obtained by including all EU countries, almost all European countries,
companies and described above. As such, the provisions USA and Canada, Australia, South Africa, Israel, the largest
applicable for 2017 state the following: 4 Middle East countries, 20 Asian countries, 12 African
countries and 2 Latin-American countries.
35
NAVIGATING
Fire Permit
COMPLIANCE IN ROMANIA
Victor Constantinescu | Partner and Head of Real Estate compliance, but other risks for failing to comply: ranging
from fines to questionable availability of insurance
2. H
OW LONG IS
Sorin Aungurenci | Partner
coverage to even criminal implications. The purpose of A FIRE PERMIT VALID?
Biris Goran SPARL this article is to outline some key points about fire permits,
The fire permit is valid as long as the property is compliant
with the aim that owners/buyers not familiar with the issue
with the fire safety conditions existing at the time of
can at least begin to ask the right questions.
At first glance, readers may ask why would lawyers issuance of the fire permit. Thus, in case the fire safety
include in a real estate market overview the topic of fire conditions are not met or once a change is made to the
permit compliance? Surely, there must be more pressing 1. WHAT IS A FIRE PERMIT? property (such as addition of a new floor, re-shaping of the
or interesting issues to consider. interior layout of the premises, etc.) then the fire permit
Protection Against Fire Law 307/2006 defines the fire
loses its validity, and a new one should be obtained.
That may have been the case in the past, but certainly permit as the authorization issued by the Bucharest or
not now. With the Colectiv nightclub tragedy in 2015 in county emergency situations inspectorate (Romanian:
which dozens of poor souls lost their lives in a nightclub Inspectoratul pentru situaii de urgen judeean sau al 3. W
HAT IS THE PROBLEM
fire in Bucharest (which ostensibly could have been municipiului Bucureti) attesting the compliance of the
avoided if proper protections were in place), fire permit property with essential fire prevention measures. In other
WITH COMMERCIAL
compliance is now the proverbial elephant in the room: words, in order to get this fire permit, any property needs PROPERTIES IN ROMANIA?
unfortunately, a large stock of commercial properties to be compliant first with a series of measures that makes
in Romania may not be fire compliant. As a result, this it safer in terms of fire protection. This usually means DO THEY NOT HAVE A FIRE
has become a leading (if not THE leading) issue in due
diligence investigations of sales and purchases of property
equipping the property with sprinklers, fire extinguishers,
a sufficient number of escape routes exits, fire-proof walls
PERMIT?
in Romania, often introducing considerable delays in and/or doors, etc. Commercial properties in Romania do have fire permits,
transactions. Owners and potential buyers have to deal but unfortunately, they have not been updated to take into
No commercial property can lawfully operate in Romania
not only with the expense of remedial works to achieve account changes to the properties over time. Certain plans
without a fire permit (with certain exceptions of a
were submitted to the fire authorities for approval upon
temporary nature).

issuance of the building permit or in the buildings early The combined threat of these issues, coupled with the show remedial actions. The latter normally involves
days, but then structural changes were made, layouts/ often-considerable cost and timing associated with certain works to be performed, e.g., new or additional
partitions changed, the owner may have cut corners, etc. remedial works, have made fire permit compliance, a top fire exits, different internal layouts, fire protection
Many owners did not update their fire permit compliance issue in due diligence investigations in sales of commercial doors and walls, etc. Most of these works likely
documentation as required and, thus, are technically in property. will need a building permit that would approve the
technical specifications of the authorized works. Once
breach of applicable law.
this permit is obtained, a contractor usually executes
5. S
O WHAT SHOULD these works based on these specifications. Once this
4. S
O WHAT? WHAT IF THE OWNER DO?
is done a taking-over of the works is done and finally
the property is ready for final inspection by the fire
THE PROPERTY IS NOT The obvious answer is to become compliant. But this takes
authorities. If the property successfully passes the
COMPLIANT? time, and in our experience advising a number of files
inspection, then the fire permit is issued. If not, likely
additional remedial works are required. The fire expert
involving fire permit compliance, the following should be is critical in this entire process.
Legislators have acknowledged the practical reality that
kept in mind:
many buildings in Romania are not compliant. Thus, at M
onitor your Contractor. The owner should keep a
this time, the Protection Against Fire Law 307/2006 D
ont underestimate the amount of time it takes. close eye on the contractor to ensure that there are
establishes a grace period until 30 June 2017 for owners Fire permit compliance is a long and tedious no deviations between the works and the technical
process lasting many months. The authorities specifications approved under the building permit.
to take steps necessary to get their permits. This deadline
are overwhelmed with requests for updates, as are
has already been extended from 31 December 2016, so it D
irectors Should Have Serious Discussions with
technical experts who handle the files. Get started
may be that further extensions could be contemplated. But their Shareholders. Given the possibility of personal
sooner rather than later.
at some point these extensions will end. financial and criminal liability of directors in the event
T
ake Remedial Measures in the Interim. While the of a fire, directors of property-owning companies
After they end (or even before), owners should be aware of actual permit may take time, take steps to avoid fires in in Romania should not delay in having a serious
the following sanctions that the authorities can apply: the interim. There are firms on the market specializing discussion with their shareholders to determine
in this service, and make recommendations as to an action plan to achieve all of the above. While
F
ines against the owner of the property, ranging
strategic placement of fire extinguishers, escape exits, appropriate D&O insurance may resolve part of the
between RON 20,000 (approx. 4,400 and RON
fire prevention/escape protocols, and the like. While problem, it cannot cover jail time.
100,000 (approx. 22,200)
this is not a guarantee, it is important for owners to
C
losure of the premises/suspension of activity until the demonstrate that they took steps to address the issue.
property becomes fire compliant
S
peak to Your Insurance Provider. The issue
P
otential criminal liability against both the owner (and of insurance coverage is a delicate one. In our
in the case of a company, the companys directors). experience, even in due diligence exercises, we are
In the event of a fire causing bodily injury or death, seeing insurance companies requesting their own due
prosecutors will call the companys directors to diligence to determine fire permit compliance and
account, to determine if they were negligent in any availability of coverage.
way. In the event of a criminal trial, this could result in
H
ire a Proper Expert. Choose a fire technical expert
monetary sanctions or even jail time.
with experience, and not one that promises to fix
Aside from the issue of dealing with authorities, there is things based on old habits. The result of the technical
the practical issue of insurance coverage: policies may audit will determine the degree of compliance of the
exclude coverage in the event that the insured does not premises with the fire safety norms and would also
hold a valid fire permit.
37
Contact
OUR EXPERTS
Ilinca Paun Mihai Patrulescu Robert Miklo
Managing Partner Head of Strategic Analysis | Research Associate Director | Investment Services
+40722 589 323 +40747 287 277 +40728 988 830
Ilinca.Paun@colliers.com Mihai.Patrulescu@colliers.com Robert.Miklo@colliers.com
Stefania Baldovinescu George Didoiu Laurentiu Duica

Senior Partner Associate Director | Office Agency Associate Director | Industrial Agency
+40723 711 522 +40729 047 527 +40737 554 973
Stefania.Baldovinescu@colliers.com George.Didoiu@colliers.com Laurentiu.Duica@colliers.com
Laurentiu Lazar Daniela Popescu Sinziana Oprea

Senior Partner Associate Director | Retail Agency Associate Director | Land Agency
+40 722 308 309 +40729 990 188 +40726 153 295
Laurentiu.Lazar@colliers.com Daniela.Popescu@colliers.com Sinziana.Oprea@colliers.com
Raluca Buciuc
Associate Director | Valuation Services
and Hospitality Advisory Services
+40724 290 922
Raluca.Buciuc@colliers.com
39
About Colliers International Group Inc.
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Colliers International <<Romania>>
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169A Calea Floreasca, Building A, 7th floor
billion square feet 014459 Bucharest, Romania
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Copyright 2017 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.

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20

The Human Touch 22

Taxation of Capital Gains 34

Fire Permit Compliance 36

2 Research & Forecast Report | 2017 | Romania | Colliers International

1. Huge uncertainty externally, 2. Investment transactions will 4. Competition on the office

4 Research & Forecast Report | 2017 | Romania | Colliers International

Data Source: EUROSTAT

6 Research & Forecast Report | 2017 | Romania | Colliers International

8 Research & Forecast Report | 2017 | Romania | Colliers International

10 Research & Forecast Report | 2017 | Romania | Colliers International

Available at New projects 60.4%

2013 2014 2015 2016

Data Source: ANCOM

12 Research & Forecast Report | 2017 | Romania | Colliers International

14 Research & Forecast Report | 2017 | Romania | Colliers International

Project Ramnicu Valcea Mall

Data Source: Colliers research

16 Research & Forecast Report | 2017 | Romania | Colliers International

18 Research & Forecast Report | 2017 | Romania | Colliers International

20 Research & Forecast Report | 2017 | Romania | Colliers International

Data Source: Telus, ABSL, Colliers research

1. THE CHALLENGE Cost structure for a knowledge Technological flexibility

The issue regarding the quality of human capital

22 Research & Forecast Report | 2017 | Romania | Colliers International

THE WORKPLACE or detail-oriented work that requires a high degree of

26 Research & Forecast Report | 2017 | Romania | Colliers International

BREEAM/ LEED - BREEAM/ LEED - Outstanding Platinum

Very Good Silver 13

CERTIFICATIONS city in Romania to have taken the initiative to introduce

The interest for CEE properties remained heightened in

Retail 7.00% 6.25% 6.50% 4.75%

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of interest in the market, the investment volume in 2017

50 mn expect the qualitative shift in the market to continue, as

1. DEMAND Looking at the structure of developers, we have observed

30 Research & Forecast Report | 2017 | Romania | Colliers International

The information is based on the deals concluded in 2016 and not

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Stefania Baldovinescu George Didoiu Laurentiu Duica

Laurentiu Lazar Daniela Popescu Sinziana Oprea

2 Floreasca Business Park

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1. Huge uncertainty externally, 2. Investment transactions will 4. Competition on the office