BREC (Bucharest Real Estate Club) was founded in 2018 to develop an institutional image of the real estate sector in Romania and international markets. Despina Ponomarenco has a background in real estate that spans over 16 years. She is the co-founder of BREC and presently sits as its Executive Director. The club is in its fourth year of existence and among its members we can mention: One United Properties, Element Industrial, CA IMMO, Vastint, Gran Via, S IMMO, Immofinaz, Akcent Development, WDP, Sppedwell, River Invest or Tiriac Imobiliare.
Through the founding of BREC you took on a mission to promote Romania's real estate market around the world. What makes Romania an exciting destination for investment in real estate?
The first thing that comes to mind are yields, which at the moment are the highest among CEE countries. There is a perception that risks are also higher but it is important to note that this is not, in fact, the case - the difference stems from the fact that those who sell do so at lower prices compared to other markets in the region. Another aspect is the quality of projects, on par with what you would find in locations like Warsaw or Prague.
Just like you noted we want to make these things known far and wide, from the US to Asia to the Arab Gulf. Romania is already on the international maps and we aim to strengthen more the ties between the local market and international ones.
You mentioned a "perceived risk", can you explain what generates it?
What creates this perception is the instability which tends to define our political landscape. There have been many changes especially from a fiscal perspective and this obviously influences business plans. Yet, this is normal for emerging countries and also important to note that creates many opportunities.
I believe that Romania holds important competitive advantages. The tech sector has been growing consistently for many years now - Cushman & Wakefield actually published a study which showed that, between 2009-2019, the main 50 technology companies have increased their revenue and their teams four-fold.
This means they occupy larger office spaces; people receive good salaries, and they afford to rent or buy houses, consume goods etc.
As a former socialist state Romania has kept a certain legacy of excellence, the Polytechnic University for instance reflects this. On this foundation the IT sector grew immensely - UiPath is an excellent example of that, a Romanian born company which is now listed on the New York stock exchange and valued at over USD 10 bn.
The IT sector is indeed growing, but employees in this field usually only need a computer to do their work - technically they can work from anywhere. Why do you think they will continue to rent office space?
Because performance is easiest obtained through teamwork. I was mentioning UiPath earlier and their CEO openly expressed this idea, that performance is tied to a team. The current set up in which people are dispersed and working from home is only a crisis solution.
Chances are that in the future we will see a hybrid system and modifications in terms of office layouts, but the need for offices will continue to exist. Looking at what is happening at an international level companies such as Netflix, Amazon or Facebook (all visionary companies) have increased their office space notably in the past months.
The Northern part of Bucharest has become relatively crowded, and we notice a tendency for new projects to be spread out in new areas. What can you tell us about the hubs that are taking shape?
The tendency in Bucharest is towards urban regeneration projects, which will facilitate a "work near home" system.
A good example is what One United Properties is doing with One Cotroceni Park, a former industrial platform. The first phase is already in the works, a vast office space with suspended gardens and direct access to the nearby subway station, Academia Militara. What will follow is a retail and also a residential component.
This area is part of the so called Central-West hub, where we already have remarkable developments like AFI Cotroceni, The Bridge (developed by Forte Partners), Orhideea Towers (by CA Immo) etc. Another hub is Central-South where Vastint is developing a mixed project on the former Timpuri Noi industrial platform.
The beauty of these projects is that we are talking about abandoned areas which are converted in valuable assets and are also, in this way, returned to the community. Besides, they already have in place good infrastructure, transportation means, and allow retail spaces to be integrated. This is important to note because I don't expect to see new, large malls developed from scratch in Bucharest any time soon, given the pandemic context and its impact on retail activites.
You hold an optimistic outlook, and it's easy to understand why given that the real estate sector has been flourishing in Romania in the past few years. But how does it hold up in the context of the global pandemic?
I do not see reasons to panic or think that the market would crumble. Many people talked about a V-shape recovery and so far, this seems to be the case. The World Bank forecasts a 3.5 % increase of Romanian economy for 2021 and a 4.1 %boost for 2022. Sure, we will have to see what happens, but so far there eare more reasons to remain optimist.
We had a very pleasant surprise in the residential sector in particular, which recovered spectacularly. According to data of the National Cadastre Agency, the volume of transactions in 2020 registered an increase of 12% as compared to 2019. The result is even more worth mentioning, given the two months of total blockage in the spring during the two months of state of emergency.
Every market comes with its particular set of challenges - which ones stand out in Romania?
Workforce has been and continues to be a sensitive spot. Especially in the construction sector it is difficult to find workers. During the lockdown there was an expectation that many workers will return from abroad but this did not happen in the end. It is difficult to start a construction site nowadays, not impossible but difficult.
You are partially addressing the issue through BREC Real Estate Academy, though in matters of highly skilled professionals. Can you tell us more about this initiative?
So far there have been few initiatives like this in the market, and those that appeared were very reliant on theoretical insights. What we decided to do was to invite professionals, people who are hands on in the industry, to teach. The fact that it worked is a testament to how mature the market has become.
What type of roles would graduates occupy after taking these courses?
Middle management mostly, but we also have participants who come from top management and who see this as a good opportunity to learn about other market segments.
This is the first year (a pandemic year nonetheless) and we enrolled 20 participants, as we wanted to comply with the sanitary regulations. The aim of Bucharest Real Estate Club is to gradually reach a number of 80-100 graduates per year in the next editions. Market feedback is excellent, and we are thinking of diversifying the scope as we move forward.
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