Bucharest's commercial real estate market is entering a new stage of development and growth, according to the latest 'Emerging City Winners' report issued by the global property consultant Jones Lang LaSalle (JLL). Bucharest is expected to have achieved over 9% GPD growth in 2006, making it Europe's fastest growing city economy. The leading property market consultant, which just opened a new office in the Romanian capital, said the growth and the structural reforms associated with Romania's accession to the EU in January 2007 point to rapid market evolution over the next five years.
Bucharest's commercial real estate market is entering a new stage of development and growth, according to the latest 'Emerging City Winners' report issued by the global property consultant Jones Lang LaSalle (JLL). Bucharest is expected to have achieved over 9% GPD growth in 2006, making it Europe's fastest growing city economy. The leading property market consultant, which just opened a new office in the Romanian capital, said the growth and the structural reforms associated with Romania's accession to the EU in January 2007 point to rapid market evolution over the next five years.
The city is attracting an increasing number of foreign investors, with most inflows coming from other European countries, including the Netherlands, Germany and Austria. JLL expects that take-up levels will remain high throughout the rest of the decade at about 200,000 m2 per annum, of which 100-150,000 m2 will represent new demand.
Prime office yields have fallen from 14% in the fourth quarter of 2003 to sub 7% in the fourth quarter of 2006. Due to several years of low-completion levels compared to take-up, the vacancy rate for grade A offices has remained below 5% over the last five years, and is expected to fall to 2% by the end of 2006. The city has a total modern office stock of 800,000 m2, of which about 282,000 m2 is considered to be grade A. The market is responding to supply shortages and the office pipelines is growing, with 500,000 m2 planned for 2007 and 2008.
Bucharest has a modern retail stock estimated to amount to 150,000 m2. Both retailer and customer demand for high quality retail space in the city is huge, with many international brands eager to enter the market but hindered by the lack of adequate quality retail space. Development in the pipeline is expected to result in a four-fold increase in stock to 600,000 m2 by the end of 2009. By that time, the city will have 10 shopping centres and four retail parks.
Growth in both demand and supply across all market sectors will be supported by rapidly improving real estate maturity and transparency. According to JLL's Transparency Index, the country has made significant improvements in the availability of market information, as well as its regulatory and legal regimes. Pre-EU accession excitement has paved the way for an increase in real estate capital values over the last three years.