Romanian statistics

Logistics sector will revive in 2010 due to great demand and high yields

Logistics sector will revive starting 2010, when demand for industrial space will be high again and investors will, once again, focus on this profitable segment.

According to an analysis realized recently by IBC Focus based on the data gathered from the Investment Report, there were 196 logistic centers and warehouses recorded during January-October 2009. When finalized, all these will add approximately 350.000 sqm to the logistics stock recorded at the end of 2008. 

Therefore, if at the end of 2008 newly built logistics space amounted to 880.000 sqm, at the end of 2009 it will reach approximately 1.230.000 sqm.

If in 2007-2008 the trend was renting preponderantly large spaces, in 2009 small rents supported logistics space market. According to the same analysis 75% of the logistics projects recorded in the first 10 months of the year were small and medium sized.

As future trend, IBC Focus considers that investors will migrate towards other interesting parts of the country, after having invested largely in the Bucuresti-Ilfov area in 2009.

Private residential sector leads the top of construction sites in 2009

According to the data taken from the largest database with construction sites in Romania, www.raportuldeinvestitii.ro out of the 10.300 construciton sites recorded in the first 10 month of this year, 2.656 were projects under construction or in the finishing stage.

Out of these projects under construction, private residential projects counted for 26.3%, ranging first sector with the largest amount of sites under construction.

These numbers grounde IBC Focus’ predictions from April 2009, according to which this year there will be more dwellings finalized than the previous years, due to the large number of residential projects started in the boom year.

If previous years were characterized by large housing projects, this year a great part of these projects are in stand-by due to lack of financing. In exchange, medium and small projects continued their development, as you can see below:

Half of the retail projects announced in 2009 are under construction

Approximately 48% out of the 350 retail projects announced since the beginning of this year are under construction or in the finishing stage. The rest are in the intention, designing or auction stage.

According to an internal study conducted in september by IBC Focus, in the 9 months of 2009 there have been announced a total of 350 retail projects - showrooms, cash&carry, hypermarkets, do-it-yourself centres, supermarkets, stores, mall/shopping centres, etc.

Last year was extreme for the local retail market – 300.000 sqm delivered in the entire country, when internal consumption dropped drastically from the highs recorded in 2007 and S1 of 2008.

Still, the retail segment is still supported by the super/hypermarkets and do-it-yourself centres which countfor 65% of the retails projects recorded in september in the greatest database with cosntruction sites in Romania: www.raportuldeinvestitii.ro

Romania ranked 8th in Europe in terms of delivered retail space in S1 2009:

Sources: IBC Focus, Cushman&Wakefield

Scarcity of labor force in the construction market

The lack of labor force in the Romanian construction sector used to be one of the biggest problems companies in the market have been confronted to since 2007, when constructions in the country boomed. Even though this economical sector has been affected by economical recession since the last quarter of 2008, Romania continues to encounter the same problem.

According to a Manpower report on the labor force market in Romania there will be 3 sectors that will boost Romanian HR sector in Q3 2009:

• Construction market
• HORECA
• Financial sector

IBC Focus conducted an internal analysis in June 2009 on the construction jobs existent on the labor market in May 2009, which bring to life the fact that there were 450 jobs available in the construction sector, which represents 30% of the total number of jobs available in that month.

 

Source: Construct Intelligence, HR companies

22 luxury hotels under construction in Romania

The luxury tourism segment was undeveloped until 2008 when investors were mostly oriented towards 3 stars hotels. In fact, by 2008 there were only sixteen 5-stars hotels in Romania and 99 4-stars hotel units. Since 2008, investors saw the potential this market offers and announced many 4 and 5 stars hotel projects, so that the highest growth rates were recorded by these 2 segments in 2008 compared to the previous year:

 

In 2009 economic crisis has affected hospitality sector in Romania, so that in January hotels take up in Bucharest was dropped to 33, 7%! Moreover, according to a study conducted by IBC Focus, at least 25% of the announced luxury projects are stopped based on lack of financing.

 

Still, at the moment there are 22 luxury hotels under construction, all included in the Luxury Hotels Report, conducted by IBC Focus.  According to the Report, there are other eighteen 4 and 5 stars units in the designing stage that will soon start construction works.

Booming infrastructure works in Romania of 2009

Over the last 3 years, the residential market in Romania exploded with new residential projects due to the high internal demand sustained by a greater permissiveness of the credit system. Many small construction companies found a good place in the market and works were rolling. Even if new projects offer more space than Romanians were used to, the livable area is still far behind Western European one.

According to the analysis on Cluj Napoca real estate market, (the second developed city in Romania in what construction sector in concerned, which attracted foreign investment worth over 1 billion Euros by 2008), conducted by Fix UP Company, the average area per dwelling in the city is only 39 m²:

Mesmerized by the residential mania, construction companies as well as customers haven’t paid attention to the necessary infrastructure, which hasn’t developed at the same pace as the new real-estate areas.

This is why, on the Romanian Government priority list of this year is the development of infrastructure in the entire country. Government declarations are sustained by the huge increase of infrastructure projects recorded in the IBC Focus Investment Report in the first quarter of this year as compared to the last three months of 2008, of 31%. Moreover of the total number of construction projects recorded in the first quarter by the IBC Focus specialists, infrastructure projects weigh the most:

The IBC Focus consultants forecast that, for the entire year of 2009, infrastructure works will increase even more than in the first quarter due to the European funds granted for this segment. Authorities estimate that Romania will attract 25% of the total European budget granted for infrastructure projects this year. Alongside highway construction works which will account for 2 billion Euros this year, the Government will budget the rehabilitation and modernization of all 16 international airports in the country as well as the construction of 5 new airports, according to the Romanian Airports Report.

Still, even if the infrastructure sector will record growth rates of 30% for the next 4-5 years, it still lags much behind Western Europe, therefore Romania being one of the European countries with the highest potential for investors with activities in this field!

 

Source: Fix UP, IBC Focus

5 reasons to be optimistic in the construction market

1. The total number of construction projects in the IBC Focus database increased in Q1 2009 as compared to the last quarter of 2008 by 24%. Have a look at the growth rates recorded by each construction segment:

             

2.   According to the IBC Focus database, the  investments realized in the projects under construction in the first quarter of the “crisis” year exceeded 2.6 billion Euros, the industrial segment being the most valuable at the moment:

3.      3.  In the same period, IBC Focus offered contact information to 646 active construction sites in Romania.

4.       4. Some of the biggest commercial banks in the country have already announced that in the next 3 months they will start relaxing loan conditions in order to enhance lending to the population. Reducing the interest rates that are practiced at present depends largely on the National Central Bank’s decision to reduce the key interest rate (of 10%) in the session that will take place on the 6^th of May.  Financial analysts forecast that this key interest will be reduced at least 0.25% at that date.

5.      5.  In April 2009 the economic sentiment in Romania, as well as in the EU rebounded after a down confidence degree in March, with 1.2 points. Out of the 5 indices that form this indicator construction rose by 4 points, consumer by 2 points and retail-trade by 10 points, while services and industry decreased by 3 points each. 

Source: Eurostat, banks, IBC Focus

The ever growing interest in the Romanian construction market

The fact that more and more construction companies are interested in investing in Romania is shown by their ever growing presence at one of the greatest construction fairs in Romania which took place during 3-7 of March. The weight of foreign exhibitors was 41% of the total number of companies. This is the number of international exhibitors by country, figures released by the organizer:

And how could they not be interested in the Romanian construction market when there were over 170 residential and non-residential active construction sites recorded by IBC Focus only in February 2009. This under the circumstance that February is dead month for construction works point of view.

Moreover, the IBC Focus Investment Report included no less than 1030 construction projects at national level only in February.

The National Statistics Institute announced recently that construction works recorded an 8.8% growth rate in January 2009 as compared to the same month of 2008. By types of construction works these are the growth rates recorded:

Why are we so convinced that foreign companies are still very interested in the Romanian construction market? Simply because the number of IBC Focus foreign clients recorded in February 2009 is 7 times higher than in the same month of 2008.

Do-it-yourself (DIY) market in Romania defies crisis

At least 29 DIY and furniture centers will open this year in Romania according to the Do-it-yourself and Furniture Centers Report conducted by IBC Focus.

Source: Iresearch

These projects will add to the actual stock approximately 220.000 sqm this year. According to the same Report, the total DIY and furniture stock in Romania could exceed 1 million sqm in 2010 if all projects verified by the IBC Focus consultants will be finalized next year.

Source: Iresearch

What might be the explanation for the projects boom in this market in a period of crisis?

First of all, for most of the projects under construction presented in the Report construction works started in 2008 and are financed with loans obtained last year. Second of all, these centers sell products that will help Romanians save money in this period. That's why most of the retailers' plans are to be present in most of the big and average cities in Romania.

For more information regarding this market and 50 DIY and Furniture projects please visit www.iresearch.ro

Romania – the next gold mine for industrial parks investors

In 2008 the Romanian industrial and logistic market was ranked 13 out of 25 countries analyzed by Cushman & Wakefield. The 4 factors taken into account for this ranking were: rent level, labor cost, road congestion and freight market. The undeveloped infrastructure is the main factor that deters Romania from climbing to a higher position in the top 25.

Still, Romania is one of the least developed industrial & logistics market in the region with only 1600 ha of land dedicated to industrial parks, while there is strong demand from foreign investors. Seizing the great potential Romania offers on the industrial real estate market, a great number of investments are in the pipeline in the next 3 years, as IBC Focus points out in its Industrial and Logistic Parks Report.

The chart below details the number of investments in the industrial parks in Romania by construction stage, projects that were verified over the telephone by the IBC Focus consultants. For more information on the industrial and logistic parks in Romania please visit www.iresearch.ro

Sources: Cushman&Wakefield, IBC Focus