Don’t mention the crisis

The economic situation is the big elephant in the room dominating  everything else in Romanian real estate, but at Eurobuild CEE’s  ‘Back-to-Business’ conference in Bucharest, there was also a sense of weariness with talking about it. “We know it’s there,” was the prevailing sentiment, “but do we have to talk about it all the time?”

Unfortunately not mentioning the credit crunch is easier said than done. The extremely harsh economic situation still overshadows all real estate activity – or the lack of it – and there’s no escaping this. The opening presentation by Iulian Circiumaru of AT Kearney set the scene, with the sobering admission that Romania has the lowest FDI per capita in the CEE region and that it will take several years to get back to the GDP level it had in 2008. However, for the first time in a couple of years of Eurobuild conferences in Romania, prospects seemed a little better and there were some glints of optimism. This was evident in the office panel, led by Tim Wilkinson of DTZ, where Liviu Tudor, chairman of Romanian developer  ID Grup, said he remained positive and was still making plans for development; and in the retail panel, which featured Anca  Damour, development director for Carrefour in Romania, and Yann LeBlay, expansion manager of French clothes retailer  Kiabi. Both said that the last couple of years had been good for their respective companies, with Mr LeBlay claiming that Kiabi’s entry a year ago had proved an excellent time to enter the market.
However, it was the warehouse panel which seemed to offer most hope. Both Craig McGuire, PointPark Properties’ managing director for Poland and Romania, and Leslie Warren, leasing director of Helios Phoenix Real Estate, represented investors who remain committed to the Romanian market. Helios Phoenix, as Leslie admitted, is fortunate to have the backing of GE Real Estate – who, according to him, did not change their pre-crisis development plans at all in light of the subsequent upheavals. He also claimed that at a recent meeting in Constanta, the delegates, who were mainly logistics end-users, clearly stated that they were interested in leasing modern, efficient warehouse space, but they lacked confidence in developers delivering on their promises, rendering pre-leases – from their perspective – unviable. Both Craig Maguire and Silviana Badean, Romania country manager for Valad Property Group, argued that back in the UK, where their head offices are located, there is much more positive feeling about Romania than is evident on the ground. Day-to-day realities, it seems, are obscuring the bigger picture, which is that Romania remains a solid long-term market.
But this doesn’t help with the severe difficulties facing some companies at present, as Victor Constantinescu of law firm Biriş Goran reminded the audience during the retail panel, which was moderated by Monica Barbu from The Advisors/Knight Frank, citing the example of a shopping centre where all the tenants had demanded rent reductions. He pointed out, however, that his perspective is that of a lawyer who is called in when the going gets tough, not when things are going well. In other words, he often sees the unhappier sides of the deals. He reiterated what he had previously said in public, which is that landlords have to be extremely vigilant in monitoring their tenants for signs of trouble before things get out of hand.
In the ‘green’ presentation, Simone Favat of IQ Facilities Management reminded the audience that, despite the hard times we are living in, buildings are long-term assets, and cost-cutting where sustainable and environmentally-friendly aspects are concerned should be avoided. The increasing prevalence of minimum ‘green’ standards as part of international tenants’ corporate policies should discourage developers and investors from cutting corners in this regard.
The cares and concerns of everyday business were left behind as participants gathered to catch the last rays of the summer sun at the cocktail party on the hotel terrace, where they swapped summer holiday anecdotes and mused about what lies ahead. The crisis is still here for the foreseeable future, but life goes on. (RS)