JLL's latest market report highlights a different evolution of each market segment in the first quarter in terms of demand, with industrial and logistics spaces continuing to attract the greatest interest, while new deliveries have fallen significantly for almost all asset classes.

JLL presents the most important evolutions of each segment of the real estate market in the first quarter of the year, which emerges from the Bucharest City Report T1 2021.

Investment market

• Volume for Romania is estimated at €73.5 million, a value approximately 50% lower than the one registered in the same period in 2020.
• We see the emergence on the market of a new type of investor - Oresa Ventures, a private equity investment fund, active in Central and Eastern Europe, including Romania since 2005, where it holds stakes in 25 companies in the field of FMCG, construction and services financial. Oresa Ventures entered the real estate market this year through the acquisition of Solo Logistic Park in Iași from the local company Tester Group.
• Although there is much uncertainty ahead regarding the conclusion of the COVID-19 pandemic, there is a consistent pipeline of deals which might potentially close during 2021, estimated at over €700 million.
• The office sector continues to show liquidity, with approximately 50% of the potential pipeline volume.
• There was no change in prime yields during Q1. For offices the yield remained at 7%, for shopping centres at 7.25%, while for industrial properties the prime yield stayed at 8%.

Office market

• Total gross transaction volume in Bucharest during Q1 2021 reached 51,000 m². This is slightly below Q1 2020, when total volume was 55,000 m². On the other hand, net take-up in Q1 2021 accounted for 19,600 m², comparable to the 19,200 m² registered in Q1 2020.
• Relocations had the largest share in total transactions in Q1 2021, with 34%, followed by renewals and renegotiations, with approximately 25%.
• The vacancy rate continued to increase in Q1, from approx. 11.3% during the previous quarter, to 13.4%. Considering that the vaccination campaign against COVID-19 is likely to take the whole year, the return at the office is expected to be gradual. This, combined with significant newdeliveries, will probably further increase the vacancy rate.
• Deliveries during Q1 2021 totaled 29,500 m², bringing the Bucharest modern office stock to almost 2.99 million m². Compared to Q1 2020, new deliveries experienced an over 60% decrease.
• After 155,200 m² of new offices were delivered in Bucharest in 2020, the pipeline for 2021, including what was already delivered during Q1, totals almost 256,000 m². Approximately 42% of planned deliveries are in the Center-West sub-market, followed by the Center, with 17.5% and the CBD, with 11.5%.

Retail market

• 2021 brings two significant new retail projects in Bucharest, after 5 years in which developers have invested exclusively in other cities in the country - the 16,500 m² GLA Colosseum Mall, in the North-Western part of the city, and Fashion House Outlet Centre Pallady, already opened in Q2 by Liebrecht & wooD to the East, adding another 12,700 m² GLA.
• The total modern retail stock in Bucharest remained at 1.176 million m² of

GLA at the end of Q1 2021.

• During Q1 2021, one retail park was delivered outside of Bucharest, Sepsi Value Center, in Sfântu Gheorghe, Covasna County, with 17,000 m² GLA. The project was developed by Prime Kapital and MAS Real Estate. This is the only opening in Q1.
• After 148,600 m² of GLA were completed during 2020, we estimate that approximately 156,000 m² of shopping centers and retail parks are awaiting delivery in 2021, including the already opened Sepsi Value Center in Sfantu Gheorghe.
• Outside of Bucharest, the pipeline activity for 2021 is represented mainly by retail parks, schemes of under 20,000 m² GLA, the largest being the 20,800 m² GLA Prahova Value Center Ploiesti, developed by Prime Kapital and MAS Real Estate.

Industrial market

• Total demand summed to approx. 261,500 m², while net take-up accounted for 63% of the total, or approximately 164,600 m².
• Bucharest had by far the largest share of total demand for industrial and logistics spaces, with almost 77% (approx. 201,000 m²), followed by Brasov, with a 5.8% share (15,200 m²) and Timisoara, with 3.3% (8,700 m²).
• The automotive industry had the largest contribution during Q1, accounting for 29% of total demand, or approximately 75,000 m², followed by the logistics sector, with almost 13%, or 33,800 m².
• Only approximately 30,700 m² of new industrial and logistics spaces were delivered during Q1 2021, representing below 16% of total deliveries in Q1 2020
• By the end of the year, the total stock is expected to reach almost 5.8 million square meters. Thus, developers are still working on projects of 690,000 square meters. For comparison, in 2020 the deliveries of new projects were 590,000 square meters.

Residential market:

• The level of new units transactions in Q1 2021 was situated somewhere at 6,500 units for Bucharest and 1,700 units for Ilfov. This represents a 23% decrease as compared to the previous quarter (Q4 2020). Nevertheless, this evolution is predictable due to seasonality. Overall, the first quarter of the year marked a 33.6% increase as compared to Q1 2020.
• In 2021 the Governmental measures which allowed the postponement of the bank loans installments payments might cease. Therefore, 2021 will reveal the extent of the economic crunch for the population, which might lead banks to review their lending policies and terms.
• The one-year postponement of the 5% VAT threshold increases from €93,000 to €140,000 is likely to unbalance the market transactions within these price margins, as some buyers might postpone their acquisition decisions with at least one extra year.
• The residential supply for Bucharest – Ilfov increased with approximately 3,500 new units in Q1 2021, out of which 2,700 new units in Bucharest and 750 new units in Ilfov county. The residential supply in Bucharest proved to be only slightly affected by the pandemic. The estimated total supply by the end of the year is expected to decrease with 15% as compared to 2020 total supply, given the fact that the delivery of some projects has been postponed from 2021 to 2022.
• Residential prices registered a 1.3% increase in Q1 2021 as compared to the previous quarter, leveling at an average of EUR 1,485/ m². After two consecutive quarters which registered small price decreases (below 1%), the increase in the last two quarters is a clear sign that the residential market was not seriously affected by the COVID-19 pandemic. For 2021 we expect a moderate increase in prices, considering the first quarter evolution and also the positive prognosis of the macroeconomic indicators.