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Romania Real Estate Report Q1 2011
Business Monitor International, Dec 2010, Pages: 61
Romania Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Romania's Real Estate industry.
Our interviews with in-country sources in Romania in early 2010 and in the middle of the year revealed a particularly grim picture of the commercial real estate sector. Market protagonists had not foreseen how severe the impact of the global financial crisis would be. Nor did they envisage the extent thatmultinationals that had planned on building new factories and installations would divert investment to other nearby countries. Business sentiment has also been hurt by Romania’s domestic political problems. The main consequence has been an extraordinary oversupply of commercial property, which is detailed in this report. BMI’s sources report that vacancy rates that exceed 20% are the norm. However, the lack of commercial real estate transactions has meant that there has not been a downwards adjustment in prices and capital values – to fire sale levels. As a result, the recent slump in rents has resulted in a sharp fall in observed net yields over the last year or so.
Our in-country sources remain bearish. In most of the countries surveyed by BMI, commentators are looking for rental rates to improve somewhat in 2011. This is not the case in Romania. At best, our incountry sources are looking for rents to track sideways next year. At worst, rents could fall by another 10% – and from levels that are well below those that were prevailing prior to the onset of the global financial crisis.
In some sub-sectors of the Romanian real estate market, yields were running at an extremely high 20-30% in 2007-2008. Our interpretation of this is that some market protagonists accurately foresaw the extremely difficult conditions which were about to develop. Looking forward, we expect that yields in the Romanian real estate market will rise over the forecast period, from unsustainably low levels. Nevertheless, we doubt that, in 2014, they will be anywhere near the yields that were prevailing prior to late 2008.
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