ROMANIA - Charlemagne Capital's €110.5m sale of three Romanian property assets last week indicates a significant shift in that market, according to investors.

This latest sale, from Charlemagne's European Convergence Property Company (ECPC) to German insurer Allianz, was the first major disposal by an institutional player.

Spokeswoman Varda Lotan downplayed the disposal, pointing out the investments had delivered their expected return.

"We are not disillusioned with the market - far from it. Our other vehicles still have investments there. But that specific investment has fulfilled its remit," she said.

Both Lotan and ING Real Estate country director Gijs Klomp pointed to growing institutionalisation, with pension funds taking over from earlier, more aggressive, investors as yields compressed. 

"It depends on what you're looking for. Double-digit yields are unlikely but an investor looking for single-digit yields would still be very happy," said Lotan. "German and Austrian pension funds are still entering the market - and finding more opportunities than in mature markets."

ING Real Estate last week made its first foray into the market with the €40m acquisition of an Iasi shopping centre via the purchase of its Belgian parent company. The fund manager plans to invest €250m in Romania over the next three years for its €1bn second Central and Eastern Europe fund.

In an interview with IPE Real Estate, Klomp said: "What you're seeing is early movers starting to sell because their strategies are based on capital gains and yield compression. It's a more mature market, and less risky, yet demand still outstrips supply."

With limited asset acquisition opportunities available, investors - including ING Real Estate - are looking to development. The firm opened its Bucharest investment office in April and a development office this month.

Although the firm has not set out a ratio for acquisition and development in the market, the percentage of development projects will likely remain low - around 10—15% of the fund.

"You just don't usually have that development capacity. You can't build, say, three shopping centres simultaneously. It's too labour-intensive," Klomp continued.

Opportunities to pursue a value-add strategy are similarly limited - though for different reasons.

"It's difficult if you buy a standing investment because in Romania the pricing is the same for prime and secondary real estate so there are few options to add value," said Klomp. "The exception is where there are retail parks with excess land because of strong demand from retailers, including outside the capital.

Chances of oversupply are slim, at least in the short term.  However, Klomp predicts further investor differentiation of assets, claiming: "A lot of what's now sold as prime certainly isn't."