Sonae Sierra is a property company and full real estate services provider committed to delivering solutions to meet its client ambitions. The company has been present in Romania since 2007 and developed ParkLake, in Bucharest, and is in the process of expanding its residential portfolio in Romania.
Nearly three years into your career with Sonae Sierra, what vision did you bring on board and what is the current footprint in Romania?
I come from an engineering/construction background, but life spun me in all kinds of directions. I came to Romania in 2007 heading a construction business where I stayed for several years before jumping into real estate with Sonae Sierra. For those unfamiliar, Sonae Sierra has an extensive and specialized experience of developing and managing real estate assets for different continents, and a proven knowhow on own projects, which also ensures the right advice for investors with whom it has long term and reliable partnerships.
So, I was very pleased to join them and delve into this exciting new field. ParkLake had just opened in 2016, and on a personal level I sensed how much further the market potential would eventually allow the company to grow and diversify.
Out of Sonae Sierra’s international markets Romania and Poland were chosen in CEE, how was this selection made and how does Romania fare as part of the overall development portfolio?
Romania was (back in 2007 when we entered) and is still a market with immense potential, especially in contrast with Portugal, France, Spain with much more maturity in the sector. At first Romania had a large potential for shopping centre development. However, today, we see a clear opportunity in the expansion and refurbishment of existing assets and improvement of Property Management solutions for optimization and new income streams. Another great potential in combination with refurbishment is the development of multiple-use assets which are strengthened by the diverse elements creating a destination which is greater because of its combined offer, solutions and services. Retail is always strengthened by the addition of different services and uses and we see that Romania has a great potential for developing new retail solutions in this direction.
Visitors have been happy with ParkLake and we knew we wanted a form of continuity. After analyzing the market fundamentals and demographics, residential emerged as the clear way forward and we decided to explore this complementary use.
By 2023 we are planning to build roughly 240 boutique apartments. This will be a mid to high range product and we want the differentiator to be quality, given the ever more sophisticated client base, while keeping the prices grounded into the area’s expectations.
What was the number one challenge you encountered, specific to the local market?
From a developer’s point of view the biggest challenges are the licensing and permitting. Processes can be lengthy and strenuous but things do happen and we are hopeful for improvements in the near future. After all, everyone needs projects to move forward, authorities included, and historically we have seen an evolution and an awareness of the business environment. We have also been pretty successful with our project, hence the optimism, and expectation to have all permits obtained by the end of 2021.
Leaving the developer hat to the side for a moment, you also offer a range of services to the real estate industry at large, what kind of demand is there for this in CEE?
First and foremost, we cover the full property lifecycle. This is: A to Z property management, and development, by which we mean taking care of any given project from design, permitting, procurement, construction and down to operation. This allows us to implement our know-how and international experience to develop innovative products that create value for our clients and other stakeholders. We work most frequently in partnerships, so we need to guarantee our clients will have access to a team with full service capabilities that covers the entire real estate lifecycle, that understands local markets and has the know-how to manage complex and diversified projects.
Why now, has the pandemic encouraged you to become more service oriented in light of what retail has been going through?
No. Sonae Sierra has always worked in partnerships and has been providing services for a long time. We have an extensive portfolio of project development and management for third parties. As an example, we own 27 shopping centres but are responsible for the management and/or leasing of 77 real estate assets.
If you look at our development pipeline you can see that most is done in partnerships or for third parties. This is the result of over 30 years of experience. Providing services has been a focus for over 5 years, where we pushed for more clients and proved to be the right partner of choice.
Aren’t most companies opting to cater to their service needs in house, as you did yourselves, in order to cut costs?
Depends a lot on the companies, and in this case each country is also different. More mature markets have large institutional investors, pension funds, banks, insurance companies, focusing on owning the asset and leaving the management and refurbishment/expansion and new multi-use developments to the hands of specialized companies like ourselves. This way each company is focusing on its expertise and therefore being more effective.
Making everything in house for the sake of cost saving, may not always bring the most correct solution and results in the long term, given the possible lack of experience in some areas.
Looking ahead, what are the priorities for Sonae Sierra in Romania in the coming two to three years?
We have three residential projects on the horizon for 2025 and are currently analyzing locations and formats to ensure they match the local identity as well as the market demand. The big test will come from this initial 240 apartment project, which we target for 2023, and beyond it, I believe we should set out higher ambitions for residentials.
On the other hand, land availability is an issue in our locations of interest, so it will also depend on this aspect. Last but not least, we are focused on retail based urban living spaces, where we can combine our retail expertise with office and/or residential. Romania is a core market for Sonae Sierra, and we wish to bring this further into light and make our mark on the urban landscape.
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