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Q3 2009 Contents Executive Summary Economic Overview Offices Retail Industrial Key statistics Investment Definitions

Q3 2009

Contents

Executive Summary Economic Overview Offices Retail Industrial Key statistics Investment Definitions Contacts

1

2

3

5

7

9

11

13

15

Contacts

Tim Wilkinson Joint Managing Director +40 21 310 3100 tim.wilkinson@dtz.ro

Oana Iliescu Joint Managing Director +40 21 310 3100 oana.iliescu@dtz.ro

Bogdan Sergentu Head of Valuation & Consulting +40 21 310 3100 bogdan.sergentu@dtz.ro

Magali Marton Head of CEME Research +33 1 49 64 49 54 magali.marton@dtz.com

Property Times Romania

Deterioration of Romanian economic outlook is reflected by the GDP downturn of -8.7% registered in Q2 2009 year-on-year.

In the light of economic and financial instability, consumer demand decreased due to income uncertainty and a stronger orientation to save.

The annual office supply for 2009 is expected to reach 410,000 sq m which combined with a poor demand and a decreased take-up volume has generated rising vacancy rates.

Retail development pipeline has contracted since 2008 and we expect the annual supply to register approximately 210,000 sq m GLA which raises the total retail supply to 1.2 million sq m.

Within the investment activity an unprecedented fall is reflected by the volume of transactions accounting for a cumulated amount of €39.4 million until the end of Q3 2009, which reveals the sharpest decrease since 2003.

Economic overview

The Romanian economic outlook has turned to the dark side of the statistical projections with GDP falling abruptly to -8.7% in Q2 2009 year-on-year. Romania secured a financing package in the form of an instalment amounting to €19.95 billion from the IMF, European Commission, World Bank and EBRD aiming at financing the budget deficit, nourishing reforms in the public sector and sustaining public sector borrowing.

Against the background of a reduced consumer demand, financial market instability and uncertainty regarding prospective incomes of the population the inflation rate diminished successively to around 4.95% in August with further expectations of a decrease, targeting 4.3% by the end of 2009, according to the National Bank of Romania’s (NBR) forecast.

Industrial production decreased in August by 0.3% month-on-month and by 5.0% year-on-year. There are positive expectations for further improvements encouraged by the recovery in the economic activity across the Euro zone as well as by the Craiova based Ford plant announcing to start production in September. The largest under-performance was registered in the construction sector which decreased by 7.9% (August versus July 2009) mainly on account of housing construction (-22.3%) followed by civil engineering (-4.4%) benefiting from a slight capital injection for infrastructure.

Turnover of retail sales improved as in August the figure advanced by 0.4% month-on-month mainly on account of food products and beverages; compared to August 2008 retail sales decreased to 12.1%, however a shorter decrease versus previous three months. A slight improvement was also observed in the unemployment rate which decreased from 6.9% in Q1 2009 to 6.3% in Q2 2009. However during the third quarter unemployment returned to 6.9%.

In September the Central Bank agreed to reduce the base rate by 50 basis points to 8%, meaning that this year, the accumulated reduction was 225 basis points. Moreover, NBR applied reductions to the minimum reserve requirements for both national and foreign currencies.

Lending and deposit rates for new business continued to go down March through May 2009. The average interest rate on new deposits fell by 3.82% to 13.3% whilst the average interest rate on new loans fell 3.12% to 17.56%.

According to Oxford Economics, 2010 would be characterized as a lean year, offering little nourishment for the economic recovery with both consumer and business confidence remaining oppressive. Nevertheless, the institution projected 1% GDP growth for 2010.

Table 1

Indicators and economic forecast, 2009–2012

(year-on-year comparison basis, %)

Indicator

2009

2010

2011

2012

GDP

-7.34

1.03

4.85

6.63

Consumer Price

Index (CPI)

5.43

2.91

3.57

3.47

Unemployment rate

6.53

7.83

6.60

5.28

Consumer spending

-10.31

2.30

5.29

6.46

Industrial production

-7.21

3.95

8.35

7.30

Source: Oxford Economics

Offices

Bucharest has faced significant changes with the office market experiencing new challenges given by unprecedented falls in demand and rising supply. Nevertheless annual business space supply is expected to almost double in 2009 compared to the amount delivered in 2008. The reason for this increase is explained by the projects that had secured finance and building approvals before the fourth quarter of 2008 and subsequent economic recession.

By the end of Q3, total existing supply slightly surpassed 1.42 mil sq m of office premises. Should we compare local market office stock with other European cities it results that Bucharest represents 54% of the one registered in Prague, whilst the Romanian capital city stands at 45% compared to Warsaw’s existing supply and at 61% when measured against Budapest.

Development pipeline for the remainder of 2009 is composed from buildings having net areas ranging from 1,200 to 50,000 sq m and covering almost all business districts. Should all announced projects be completed, the total development pipeline to be delivered in the fourth quarter would account for approximately 180,000 sq m.

Leasing activity continues to decrease as there is a negative economic sentiment among companies and therefore a weakened need for office spaces. Since the beginning of the year leasing transactions were scarce and of mainly reduced volumes. Major deals include the relocation of Banca Romaneasca to BOC Tower for 15,000 sq m and the space leased by District 1 City Hall in PC Business Center of 6,235 sq m. The average transaction size decreased to 1,220 sq m representing a 46% reduction compared to the previous year.

In the first 9 months of 2009, take-up has changed not only by volume but also by location; the interest remained focused on the northern area (48%) but the gain was for the CBD (22%) as companies were forced to relocate and so availability for this area rose. Space requirements for the central district range from 150 to 1,000 sq m, whilst demand for larger spaces of above 1,000 sq m was limited and came mainly from the banking sector. The number of recorded pre-leases reduced by 84% year-on-year. At the end of the third quarter 2009, pre-lease commitment accounted for 28% of the total take-up.

Figure 1

Bucharest office take-up volume & availability ratio

1 Bucharest office take-up volume & availability ratio Source: DTZ Research Table 2 Office Projects Completed
1 Bucharest office take-up volume & availability ratio Source: DTZ Research Table 2 Office Projects Completed

Source: DTZ Research

Table 2

Office Projects Completed in Bucharest, 2009

Project

Subzone

GLA (sq

Developer

m)

 

Global

Global City

North

42,000

Finance

Floreasca Business

Centre-

36,000

Portland

Park

North

Trust

Cubic Center

Fabian/Expert

 

North

27,000

RoInvest

Twin Towers Barba Center (Ph. II)

 

Private

North

18,000

Individual

MultiGalaxy BC I North

14,504

MultiGalaxy

Source: DTZ Research

Table 3

Major Pipeline Office Projects in Bucharest, ‘09–‘12

Project

Subzone

GLA (sq

Developer

m)

Platinum B&C

Centre

North

55,000

Willbrooke

 

Arca

Swan Office Park

North

55,000

Invest/Chayton

 

Capital

BOC Tower

North

53,000

Upground

Estates

 

Centre-

Orhideea Towers

West

45,150

Europolis

City Gate

North

43,000

GTC

Source: DTZ Research

Offices

There is a real tendency for renting spaces within projects already delivered or at an advanced construction stage. In turn the market experiences an increase in the supply of sublease space resulting in a decrease of the average rents and an increase in the overall vacancy rate.

The level of supply has increased each quarter due to a continuing weakened demand and with large annual supply (delivered until Q4 2009). According to our research, in Q3 the vacancy rate increased almost 20% quarter-on-quarter reaching 14.46%.

Figure 3

Total Office Stock split by Subzone in Bucharest, percent, Q3 2009

6.5 0.5 6.5 2.2 7.3 46.6 15.4 15.0 Source: DTZ Research
6.5 0.5 6.5
2.2
7.3
46.6
15.4
15.0
Source: DTZ Research

North0.5 6.5 2.2 7.3 46.6 15.4 15.0 Source: DTZ Research Centre Centre - North Centre -

Centre6.5 2.2 7.3 46.6 15.4 15.0 Source: DTZ Research North Centre - North Centre - West

Centre - North7.3 46.6 15.4 15.0 Source: DTZ Research North Centre Centre - West East Centre - South

Centre - West15.4 15.0 Source: DTZ Research North Centre Centre - North East Centre - South Centre -

EastDTZ Research North Centre Centre - North Centre - West Centre - South Centre - East

Centre - SouthDTZ Research North Centre Centre - North Centre - West East Centre - East West •

Centre - EastCentre Centre - North Centre - West East Centre - South West • Rental levels have

West- North Centre - West East Centre - South Centre - East • Rental levels have

Rental levels have decreased since Q1 2009 to about 18% for prime locations, 21% for semi-central areas and 25% for the outskirts. A typical headline rent for the prime areas is €21/sq m whilst in non- central areas rents range from €10 to €19/sq m/month.

As economic growth is anticipated to remain negative in the short term we expect letting activity to remain subdued. This coupled with the expected supply will push availability towards unprecedented levels. DTZ estimates that the vacancy rate will peak to 18-20% at the end of 2009.

On a short to medium time basis (3-12 months) DTZ believes that rents will continue to decrease with

further stabilization apparent in the second half of

2010.

Figure 2

Bucharest prime office rents

€ per sq m

350 per year 300 250 200 150 100 50 0 Source: DTZ Research Figure 4
350
per year
300
250
200
150
100
50
0
Source: DTZ Research
Figure 4
Office Take-up by Occupier Sector in Bucharest,
percent, Q1–Q3 2009
10 4
4
BPS
10
CRE
FS
2
ICT
37
IM
17
RET
A&M
PUB
16
Source: DTZ Research; BPS – Business/Professional Services, CRE – Construction & Real
Estate, FS – Financial Services, ICT – Information, Communication, Technology, IM –
Industrial, Manufacturing, Trading, RET – Retailers, A&M – Advertising & Media, PUB –
Governmental, public sector, non-profit sector
Figure 5
Office Take-up by Subzone in Bucharest, percent,
Q1–Q3 2009
3
6
3
North
5
Centre
Centre - North
2000
13
48
Centre - West
2001
West
2002
Centre - South
2003
East
2004
22
2005
2006
2007
2008
Source: DTZ Research
2009
2010
2011
2012
2013

Retail

After a period characterized by continued strong growth, from the second half of 2008 consumer demand started to drop significantly.

Consumer demand dropped significantly proven by the doubling of the volume of new bank deposits made in Q1 compared to the similar period of 2008.

Household consumption decreased three times in Q1

2009 versus Q4 2008 mainly from the goods and

services sectors. Retail operators estimate relative economic stability for the next three months. In Q1

2009 total expenditure per household was 88% of the

total income whilst consumption expenses represented 72.2%.

The volume of modern retail stock 1 delivered on the Romanian market is expected to increase in 2009 by only 210,516 sq m GLA, representing a 46.9% decrease year-on-year, out of which 93,016 sq m GLA is already delivered. In 2009, the new supply of modern shopping premises is 67% concentrated in Bucharest, meaning a 5.7% decrease year-on-year.

If, at the end of last year, the 2009 new supply was expected to increase by an additional 25 modern retail schemes (including as well the extension of two existing shopping centres), as we approach the year- end we conclude a total of only 9 projects to actually be completed.

Supply scheduled for delivery in 2010 amounts to a total of 389,446 sq m GLA (corresponding to ca. 31% of the total stock projected at the end of 2009). The majority of the schemes announced for 2010 are actually projects initially planned for 2009, but postponed due the difficult economic environment and still likely to slide further.

This year, the market experienced a new retail concept as well, through the delivery of the first strip mall, Militari Shopping Center, comprising of 25,000 sq m GLA. Significant changes consist of the first cases of shopping centre closures – Armonia Braila, after 9 months of operation (16,459 sq m GLA commercial gallery attached to a 13,000 sq m Carrefour Hypermarket developed by Red Management with a €45 million investment) and Trident Shopping Center in Sibiu, after 4 months of operation (5,500 sq m GLA commercial gallery attached to a 6,000 sq m Trident Hypermarket and a total investment of €15 million).

1 Comprising retail schemes in the form of urban malls, retail parks, commercial galleries, outlet stores and strip malls.

Figure 6

Modern Retail Stock per 1,000 inhabitants in Q3 2009

sq m

700 600 500 400 300 200 100 0 Bucharest Iasi Cluj - Timisoara Constanta Craiova
700
600
500
400
300
200
100
0
Bucharest
Iasi
Cluj -
Timisoara
Constanta
Craiova

Napoca

Existing modern retail supply per 1,000 inhabitantsIasi Cluj - Timisoara Constanta Craiova Napoca Existing and pipeline retail supply by 2012 per 1,000

Existing and pipeline retail supply by 2012 per 1,000 inhabitantsNapoca Existing modern retail supply per 1,000 inhabitants Source: DTZ Research Table 4 Retail Projects Completed

Source: DTZ Research

Table 4

Retail Projects Completed in Romania, Q1–Q3 2009

GLA m)

Project

City

(sq

Developer

 

Euroinvest

Grand Arena Mall

Bucharest

35,000

Intermed

 

Atrium

Militari Shopping

Center

Bucharest

25,000

European

Real Estate

Piatra

Galleria

Neamt

12,252

GTC

Galleria

Suceava

10,514

GTC

Plaza Romania

Anchor

(extension)

Bucharest

6,000

Group

Source: DTZ Research

Table 5

Major Pipeline Retail Projects in Romania, 2009–2010

GLA m)

Project

City

(sq

Developer

AFI Cotroceni Park Mega Mall

Bucharest

75,000

AFI Europe

Sun Plaza

Bucharest

76,500

EMCT

West Gate Center

Craiova

40,000

Trio Holding

 

& Immoeast

Iulius Mall - extension

Timisoara

33,000

Iulius Group

 

Atrium

Atrium Center

Arad

30,000

Centers

Source: DTZ Research

Retail

Vacancy rose in Bucharest, nevertheless to a smaller extent compared to those of secondary and tertiary cities. A major impact in the capital city was felt within newly delivered shopping premises, located in decentralized areas. Availability for prime units in mature shopping centres in Bucharest still remains limited.

Subsequent to the economic outlook and to the financing difficulties, many retailers have put on hold their expansion plans and focussed more on cost reduction to the detriment of gaining market share, whilst others such as Inditex, Deichmann, Takko, Humanic, New Yorker, Hervis, Decathlon, Sephora, Mango, Debenhams are still active on the market and looking for expansion opportunities.

During the last 9 to 12 months, the rents for premium properties on the main thoroughfares of the capital city registered decreases from 25 to 35%, whilst the outskirts and semi-central locations have been more exposed recording a drop of 50%.

The retail market so much related to key factors such as economic stability, consumer confidence or access to credit is expected to grow beginning with H2 2010 although at a much slower rate than experienced in previous years.

Figure 7

Modern Retail Stock in Romania, 2000–2010*

years. Figure 7 Modern Retail Stock in Romania, 2000–2010* Source: DTZ Research; *Forecast, data subject to
years. Figure 7 Modern Retail Stock in Romania, 2000–2010* Source: DTZ Research; *Forecast, data subject to

Source: DTZ Research; *Forecast, data subject to quarterly reconsideration

Figure 8

Prime Retail Rents in Major Cities in Romania

€ per sq m per month

Brasov Craiova Constanta Timisoara Cluj - Napoca Iasi Bucharest 0 20 40 60 80 100
Brasov
Craiova
Constanta
Timisoara
Cluj - Napoca
Iasi
Bucharest
0
20
40
60
80
100
Shopping centre
High street

Source: DTZ Research

120

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Industrial & logistics

In 2009 the Romanian logistics real estate sector can be described as a prudent market from both the developer’s and the logistic companies’ perspective most of whom put on hold their expansion plans for the moment.

In this context we are witnessing a small number of transactions, while the general trend of tenants is to expand in their existing locations.

Bucharest encountered a slowdown in the supply of modern logistics projects as well as in the level of transactions due to the global economic crisis over the last nine months, though in the last two months the market showed signs of recovery. The total amount of transactions concluded by the end of Q3 2009 was 50,000 sq m out of which almost a third is represented by relocations. Larger transactions of over 10,000 sq m have not been registered.

In Bucharest, 50,000 sq m was delivered in existing projects, raising the total stock to 830,000 sq m.

Outside Bucharest a total of 37,000 sq m of modern logistic warehouses was delivered, out of which 25,000 sq m were completed in Brasov (15,000 sq m by Helios Phoenix in their Olympian Project and 10,000 sq m by Icco) and 12,000 sq m in Timisoara by Invest4See, a newcomer on the market. We estimate total A grade logistics supply available for lease throughout the country at around 450,000 sq m – 500,000 sq m, located in cities such as Timisoara, Arad, Ploiesti and Brasov.

In Bucharest the occupancy rate currently stands at around 85–90% as compared to other secondary cities (in logistic centres as Timisoara or Arad), where lower levels are registered.

DTZ forecasts the vacancy rate to remain stable at around 10% both in Bucharest and in the regions.

Over the past two months we have noticed a slight improvement in the demand for modern warehouses, as companies gain confidence in their expansion pla ns and developers become more optimistic in continuing the development of their projects.

Figure 9

Bucharest prime industrial rents

90

80

70

60

50

40

30

20

10

0

€ per sq m

per year
per year

Source: DTZ Research

Table 6

Major Pipeline Industrial Projects in Bucharest, 2009–

2010

Project

GLA (sq m)

Developer

A1 Business Park

10,000

Cefin

Chitila Logistic

5,000

UBM

Park

Olympian Park

10,000

Phoenix/Helios

Mercury Logistic

10,000

Phoenix/Helios

Park

Millenium Logistic

10,000

MLP

Park

Source: DTZ Research

Figure 10

Industrial Supply and Take-up in Bucharest, 2005 –

2010*

sq m (thousand) 300 250 200 150 100 50 0 2005 2006 2007 2008 2009*
sq m (thousand)
300
250
200
150
100
50
0
2005
2006
2007
2008
2009*
2010*
Annual Supply
Annual take-up

Source: DTZ Research; *Forecast

Industrial & logistics

In terms of new developments or land acquisition, we have seen a higher interest coming from developers or end-users to identify advantageous opportunities in the market, with land prices decreasing due to a lack of transactions.

We believe it is a good period for companies to rethink and set up their strategy for expansion, creating presence in a certain region or building a new distribution centre/hub, taking advantage of the current conditions of the market, in which buyers have more power to negotiate than in the previous years.

Key statistics – occupier market

Table 7

Bucharest office market

Q3

Q4

Q1

Q2

Q3

Q/Q

Y/Y

Directional

2008

2008

2009

2009

2009

change

change

outlook

Take-up (rounded)*

54

40

30

25

15

-40%

-72%

Take-up (rounded)* 54 40 30 25 15 -40% -72%

Total supply (rounded)*

1,120

1,190

1,281

1,378

1,427

+4%

+27%

Total supply (rounded)* 1,120 1,190 1,281 1,378 1,427 +4% +27%

Vacancy (%)

1.16

2.43

6.88

12.05

14.46

+20%

+1,147%

Vacancy (%) 1.16 2.43 6.88 12.05 14.46 +20% +1,147%

New supply (rounded)*

49

70

91

97

49

-53%

0%

New supply (rounded)* 49 70 91 97 49 -53% 0%

Prime rents**

25–26

25

24–25

22–23

20–21

-9%

-20%

Prime rents** 25–26 25 24–25 22–23 20–21 -9% -20%

* Data expressed in thousand sq m; ** Rents expressed in €/sq m/month.

Source: DTZ Research

Table 8

Leasing transactions in Bucharest (Q1–Q3, 2009)

Office building

Submarket

Tenant

Occupier sector*

Area (sq m)

BOC Tower

North

Banca Romaneasca

FS

15,000

PC Business Center

North

District 1 City Hall

PUB

6,235

Elefterie Building

Centre

MKB Romexterra

FS

2,700

West Gate Business Park

West

Ericsson

ICT

2,300

Floreasca Business Park

Centre-North

Xerox Romania

ICT

1,930

Iride Business Park

North

Cosmote

ICT

1,800

Rams Business Park

East

Enel Energie Muntenia

IM

1,500

* ICT – Information, Communication, Technology; IM – Industrial, Manufacturing, Trading; FS – Financial Services; A&M – Advertising & Media; PUB – Governmental/NGO’s/Embassy/Public sector/Non-profit sector

Source: DTZ Research

Key statistics – occupier market

Table 9

Bucharest industrial market

 

2004

2005

2006

2007

2008

2009

Y/Y

Directional

change

outlook

Annual take-up (rounded)* Total supply (rounded)* Vacancy (%) Annual supply (rounded)* Prime rents**

40

75

113

222

260

90

-65%

take-up (rounded)* Total supply (rounded)* Vacancy (%) Annual supply (rounded)* Prime rents** 40 75 113 222

110

185

300

530

785

830

+6%

110 185 300 530 785 830 +6%

0

0

2

3

4

10-12

+175%

0 0 2 3 4 10-12 +175%

-

75

115

230

255

45

-82%

- 75 115 230 255 45 -82%

6–6.5

5–5.5

4.5–5

4.25–4.5

4.2–4.5

4–4.5

-5%

6–6.5 5–5.5 4.5–5 4.25–4.5 4.2–4.5 4–4.5 -5%

* Data expressed in thousand sq m; ** Rents expressed in €/sq m/month.

Source: DTZ Research

Table 10

Leasing transactions in Bucharest (Q1–Q3, 2009)

Industrial scheme

Submarket

Tenant

Area (sq m)

Europolis Park

A1, Bucharest–Pitesti

Delamode

10,000

Equest Logistic Center

A1, Bucharest–Pitesti

KLG/Domo

9,000

Prologis Park Bucharest A1

A1, Bucharest–Pitesti

Geodis

8,400

Prologis Park Bucharest A1

A1, Bucharest–Pitesti

Omega Logistics

6,700

Atlas Project

North

Tornado

5,000

NordEst Logistic Park

North-East

Fresenius Medical Care

3,500

Equest Logistic Center

A1, Bucharest–Pitesti

Map Merchant

3,000

Equest Logistic Center

A1, Bucharest–Pitesti

Lagermax

2,500

Source: DTZ Research

Investment

Transaction activity practically froze in H1 2009 w ith a volume of approximately €26 million, representing a 97% decrease year-on-year. The volume diminished by a third (quarter-on-quarter) in Q3 when institutional transactions amounted to €13.3 million. The average sale value decreased by 36% in Q3 compared to the previous quarter and by 87% year-on-year.

With reference to Q1-Q3 2009 the capital city accounts for 62% of the total investment volume and it is also the location of the most significant transaction undertaken, the purchase of the 2 star Hello Hotel for €9 million. The market is dominated by a small number of transactions and reflects activity levels to that of the year 2003. Economic instability and limited access to debt financing have generated changes in the type of transactions, therefore the first deals of distress type sellers with examples in the residential and retail segments, have been registered.

The fourth quarter of the year marks the most significant transaction closed since August 2008. The South African fund, New Europe Property Investments (NEPI) acquired the European Retail Park Braila from Belrom, for the amount of €63 million. The transaction has a cash and share base issued by NEPI and allows for a further purchase of two other retail parks of Belrom with locations in Bacau and Focsani.

Investment activity is controlled by international investors in the form of corporations, private property vehicles and quoted property companies although the scaled back volume of money reveals a critical difference compared to the values registered in previous years. Decreases in the price of assets combined with the deteriorating economic outlook ha ve been the main challenges for property owners as purchasing has harden in an increasing investment risk environment. In the light of this, potential buyers have become more selective in their search for real estate property gains.

With the actual yield margins, evidence shows that we are now returning to 2005 levels. Since the end of 2008 we have seen yield uplift of about 250 basis points in the case of retail and 300 basis points in the case of office and industrial. Surveys of DTZ Research revealed that among other CEE countries marginally levels are shown in Prague, Budapest and Warsaw for office, retail and industrial as well.

Figure 11

Total real estate purchasing activity by sector

€ million 250 200 150 100 50 0 2008/Q3 2008/Q4 2009/Q1 2009/Q2 2009/Q3 Residential Office
€ million
250
200
150
100
50
0
2008/Q3
2008/Q4
2009/Q1
2009/Q2
2009/Q3
Residential
Office
Retail
Industrial
Mixed
Other

Source: DTZ Research

Figure 12

Prime Yields in Bucharest

Source: DTZ Research Figure 12 Prime Yields in Bucharest Source: DTZ Research • Signs of resurgence
Source: DTZ Research Figure 12 Prime Yields in Bucharest Source: DTZ Research • Signs of resurgence
Source: DTZ Research Figure 12 Prime Yields in Bucharest Source: DTZ Research • Signs of resurgence
Source: DTZ Research Figure 12 Prime Yields in Bucharest Source: DTZ Research • Signs of resurgence
Source: DTZ Research Figure 12 Prime Yields in Bucharest Source: DTZ Research • Signs of resurgence
Source: DTZ Research Figure 12 Prime Yields in Bucharest Source: DTZ Research • Signs of resurgence

Source: DTZ Research

Signs of resurgence can be observed across Europe where investment activity rose to 30% within the third quarter, the UK (London and major cities) gained positive figures followed by Germany, France, Spain and Sweden. It is estimated that Romania will see the light at the end of the tunnel starting H2 2010. Should GDP trends follow the anticipated pattern of stabilisation projected for the last quarter of 2009, we shall have slight increases for the next year thus leading to greater confidence from investors and financial institutions.

Investment

Signs of market recovery so much related to the lending activity is anticipated along with the narrowing cost of finance expected to generate effects after the NBR decision to cut the base interest rate to a level of

8%.

Table 11

Within transaction market, DTZ believes that Q1 and Q2 2010 will be similar to this year and we will see a slight return of the market values putting pressure on yield margins so that prime yields will contract from their anticipated Q1 2010 level by the end of 2010.

Significant deals Q1–Q3 2009

 

Price

Property Name

Sector

City

Purchaser

Vendor

(million)

 

(initial yield)

Central

TNG Real Estate & Baumeister

 

Apartments

Residential

Constanta

Westhouse Group

0m (n/A)

Prodas

Retail

Bucharest

Delhaize Group

Prodas Holding

€5m (n/A)

Supermarket

Zenith Shopping

Retail

Ploiesti

Black Pearl Real Estate

Lewis Charles

- (n/A)

Center

Various real

Industrial/

Bucharest/Brasov/

Immoeast

European Future

Group/Eyemaxx

€20m (n/A)

estate properties

Office/Retail

Ploiesti/Timisoara

Real Estate

Office building

Office

Bucharest

Private Individual

Private Individual

1.1m (11%)

Modul Shopping

Retail

Anakes Investment

Equest Balkan

€4.3m (11%)

Center

Targoviste

Limited

Properties

Hello Hotel

Hotel

Bucharest

Immorent

Continental Hotels

9m (n/A)

Source: DTZ Research

Definitions

Offices

Stock: Total completed or refurbished office space (occupied and vacant), newly built since 1993, A and B class offices, owner occupied and for lease.

New supply: Practical completions (obtaining valid occupancy permits) of new developments in a given time period.

A-Class office building: Reflects an above average fulfilment of the following criteria: air conditioning system, suspended ceilings, floor to ceiling height minimum of 2.7m, flexibility of internal design, either three compartment trunking for telephones, electricity and computer cable or raised floors, modern high speed elevators, maximum waiting time of about 30 seconds, good quality fitted carpets and wall finishes, provision of secure dedicated car parking, reliable telephone and communications equipment, dual power supply and/or power supply system back-up, humidity control.

B-Class office building: Reflects an average or typical property in that market based on the above mentioned criteria.

Take-up: The total floor space known to have been let or pre-let to tenants or owner-occupiers over a specified period of time.

Pre-lease: A lease signed prior to the practical completion of the development.

Sublease: Space offered for lease by a tenant who is contractually obliged to occupy the premises for a longer period than needed.

Vacancy rate: Ratio of empty/vacant space in existing or newly completed buildings on the total stock.

Prime rent: Headline rent level achieved in new prime, high specification units in prime locations.

Retail

Stock: Total completed space of modern shopping premises (urban malls, retail parks, commercial galleries, outlet stores, strip malls) completed since 1999.

New supply: Completed newly built schemes that obtained a use permit in the given period.

Prime rent: Headline rent level achieved in the most attractive shopping centres for units of approximately 100 sq m leased to a fashion operator.

Industrial & logistics

Stock: Total completed modern industrial/logistics space (occupied and vacant) developed since 2004 and offered for lease.

New supply: Completed newly built schemes that obtained a use permit in the given period.

Take-up: The total floor space known to have been let or pre-let to tenants over a specified period of time.

Vacancy rate: Ratio of empty/vacant industrial/logistics space in existing or newly completed schemes on the total stock.

Prime rent: Headline rent level achieved in new prime, high specification units matching the needs of logistics corporate.

Definitions

Investment

Investment transaction: The purchase of commercial real estate for the purpose of receiving an income or rent.

Initial yield: The initial net income expressed as a percentage of the gross purchase price including the purchase costs at the date of the acquisition.

Contacts

Business Development Cristian Ustinescu

+40 21 310 3100

cristian.ustinescu@dtz.ro

Office Agency Madalina Cojocaru

+40 21 310 3100

madalina.cojocaru@dtz.ro

Retail Agency

Aura Voiculescu

+40 21 310 3100

aura.voiculescu@dtz.ro

Industrial Agency Rodica Tarcavu

+40 21 310 3100

rodica.tarcavu@dtz.ro

Residential Agency Mihaela Pana

+40 21 310 3100

mihaela.pana@dtz.ro

Land Agency

Ionut Ciocan

+40 21 310 3100

ionut.ciocan@dtz.ro

Property Management Brigitte Schmitt

+40 21 310 3100

brigitte.schmitt@dtz.ro

Investment

Mihaela Cnobloch

+40 21 310 3100

mihaela.cnobloch@dtz.ro

Marketing Department Evelina Necula

+40 21 310 3100

evelina.necula@dtz.ro

Valuation & Consulting Dan Orha

dan.orha@dtz.ro

Claudia Scarlat

+40 21 310 3100 +40 21 310 3100

claudia.scarlat@dtz.ro

Cristina Baloianu

+40 21 310 3100

cristina.baloianu@dtz.ro

Disclaimer This report should not be relied upon as a basis for entering into transactions

Disclaimer

This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, DTZ can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced or referred to without prior approval. Any such reproduction should be credited to DTZ.

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© DTZ November 2009