Constructii Erbasu is a family founded Romanian constructions company, that they put their mark throughout the past 30 years on various urban infrastructure and civil buildings projects, such as the Steaua Bucharest Sports Club, Exhibition Complex Constanta, or BILLA commercial center.
Erbașu has a long tradition in Romania - what are some of the most noteworthy moments in your evolution and the company's current footprint on the local market?
Constructii Erbasu was founded by my father in 1990 as an urban infrastructure company (sewage systems, district heating, water pipes, etc.) with 20 employees, but during these 31 years of existence, we shifted our focus multiple times. The company was divided into various domains of activity and we had a strong start in civil constructions: offices, apartment buildings, retail - we built the first Metro hypermarket in Romania, first Ibis boutique Hotel in Bucharest, and so on. By 2000, Erbasu was already a big company with a turnover of USD 10-15 million, 1,000 employees and a strong focus on real estate projects. At the moment, our turnover is over EUR 150 million and we plan on growing the real estate division in the coming years.
Based on your solid experience - how will the Romanian real estate market look like in the near future?
The future will bring lots of opportunities on the market, but will also pose challenges to construction firms since the workforce that returned during the pandemic will migrate once again, and raw materials prices keep on rising.
Romania can offer profit margins as high as 40-50% while in Poland these are only as high as 20%. This local advantage is generated by constructors' lower fees (but also quality), as well as smaller property taxes. This perspective is starting to shift and the Romanian market will soon catch up with the rest of CEE and WE, and even though the profit margins will decrease, the investment context will become more predictable and secure.
Final clients are not paying attention exclusively to the initial investment anymore, but they are also becoming increasingly interested in the operational cost of the building, as well as the overall quality of the project. In fact, they would rather pay a bigger acquisition cost than deal with monthly maintenance and utilities bills that break the bank.
Despite the pandemic, the construction sector thrived last year - what do you think were the catalysts that contributed to this situation?
This incredible growth was influenced by two elements: an important number of projects were rolling since the year before and employees' salaries were increased (from EUR 500 to EUR 800-1000), so migration slowed down. The construction sector became more attractive to young people thanks to automatization and robotization systems that streamline processes. Although the real estate sector is lagging behind digitalization wise, the pandemic will have a positive impact on it, and in the next ten years the construction medium in Romania will look totally different. It's indubitable that this health crisis is going to be followed by a financial crisis, and the only way to recover from it will be through investments in the construction sector. As the workforce is going to become scarcer in the future, automatizing processes will be the go-to solution that will push the industry forward.
The continuous rise in raw material prices is causing ripple effects in the market, have you been affected at this stage?
The pandemic acted similarly to a socio-economic global shock, the supply and demand ratio got seriously distorted. Moreover, there was a production crisis with many factories closing. Construction materials costs are directly influenced by transport fees, and as naval transportation increased three times in the past few months, the result is as bad as it gets. Unfortunately, Romania produces only a small batch of materials so we are totally dependent on imports. Until now, Erbasu wasn't influenced by all these market shifts, but in the near future, we expect to see some of the consequences take a toll on us. NSI Romania is trying to hide the real indicators so as to avoid a negative reflection on the market. As a result, they are stating there is a decrease in raw material prices, while the market clearly indicates an increase of up to 40%.
What are some of the plans that you are pursuing with priority over the next two to three years?
There are a lot of investment opportunities on the Romanian real estate market and we intend to cover projects in all the sectors. Arbo Residence Mogosoaia that we are working on at the moment is evidently going to be inaugurated in the coming years, but we are also keeping an eye open for infrastructure and public buildings projects. The trademark buildings we developed in Romania in the past few years could be a launch pad for future international ventures in neighboring countries such as Serbia or Bulgaria.
What is your final message on the Romanian real estate market?
I'm certain that in the next few years, Romania is going to become an ideal market for investors who are after an average and safe profit. If the past 15 years were ideal for risk takers that wanted bigger but more unstable profits, the future will reverse this situation and provide smaller, yet safer profit margins. Since it's situated at the convergence of Europe, Asia and Africa, Romania is offering the best investment opportunities in an enviable location.
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