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Bucharest

MIPIM: Foreign investors keep a close watch on financing, political situation and justice in Romania


JLL attended MIPIM,  the world's leading property market, which brings together the most influential players from all international property sectors - office, residential, retail, healthcare, sport, logistics and industrial, offering unrivalled access to the greatest number of development projects and sources of capital worldwide.

JLL talked with the investors present at the event and summarize their main concerns regarding Romanian market.

Foreign investors, mainly those who already are in Romania, are aware of the good economic fundaments, but they also keep a close watch on the situation in the justice system, given that corruption remains an open issue, said Silviana Badea, Head of Capital Markets, Associate Director at JLL Romania.

"Investors are looking at the political regimes in Hungary and Poland and they want to make sure Romania does not risk facing a similar situation. On the other hand, everybody knows the economic fundaments in Romania are good (macroeconomic indicators are good and have been on upward trend for three years), but corruption remains an open issue for investors, which expect the outcome of the campaign led by the National Anticorruption Department," explains Silviana Badea.

Unfortunately, some of the investors already present in Romania had to deal with some unpleasant situations when having to solve some commercial issues, which also involved legal aspects. The unpleasant experiences drove the respective investors away.

On the other hand, banks' financing conditions are better this year and banks are starting again to finance real estate projects. However the lack of local investors on the market of real estate transactions is also a problem for the Romanian market.

"Across Europe, pension funds invests part of their money in real estate. In Romania this not happens because the legal framework. Investors were interested about the way this money are spend in Romania (about 6 billion euros, or 3.7% of GDP). Local investments in real estate assets would increase market liquidity and also would be a signal of confidence for foreign investors", added Silviana Badea, Head of Capital Markets, Associate Director of JLL Romania.

Currently, local buyers are only present in the residential sector, high street retail and small office buildings (5-10 million euro).

There is still interest for investment in the industrial sector, such as development and acquisition, given the positive fundamentals and the prospects for improvement, but also the demand from logistics and distribution companies (driven by increasing consumption) and from the industry as well.

Regarding buyers expectations, those which targeting the Romanian market are mostly interested in distressed products or with big vacancy rates. These types of products could bring them added value and higher margins in a shorter period of time.

"From this point of view there is a < divorce > between supply and demand on the Romanian market, as properties available for sale are safe and stable income projects, leased for 5-10 years", said Silviana Badea .

At this year's edition of MIPIM attended by nearly 90 countries worldwide . Poland and the Czech Republic were the best represented countries in Central and Eastern Europe , while Romania had not a stand .

"Romania was not represented by any official authority at MIPIM, while smaller cities from Poland, like Proznan, were very good promoted at the event. It is important for a country such big as Romania to be promoted, after 25 years of bad press throughout Europe. In a moment when we have something good to say, an event so important would be a good opportunity to promote Romania. In these conditions you can't expect to be successful and to attract a larger amount of foreign investment. A constant and concerted promotion and collaboration between the private and the public sectors will help us to convey the right message and to attract institutional investors, not just opportunistic", added Silviana Badea.

Poland and Hungary still attract investors, but for the first time after a long period of time, they began to wonder and to be concerned about the political situation on these markets. These concerns are not yet affecting the investment volumes.

Regarding fund availability for real estate investment in Europe, "Brexitul" and the Russia situation decreased, most likely temporary, appetite for investments, but we see a more exotic alternatives on the capital markets, like money from South Africa (like NEPI). Currently there are another 3-4 South African funds active in Central and Eastern Europe, including Romania.