Four Major Trends in Real Estate

07 July 2021

 

Throughout their evolution, the real estate markets of Poland and Romania have borrowed elements from various cultures, brought along by international investors, but also responded to specific needs prompted by the local landscape. Urban regeneration, resi-for-rent, sustainability and an increased adoption of technology are the key trends that have taken the spotlight in 2021.

Urban Regeneration & Mixed-Use Projects

Like most other countries in the world, Poland and Romania both have pockets of land inside their cities that are underused or rundown, which diminish the quality of life as well as the general urban landscape. Most often they are a sign of natural evolution and growth, but also of  successive and non-harmonized developments. 

“Urban regeneration” is the concept that has been employed by many states to bring such areas back to life, often with strong support from public authorities. While governments in Romania and Poland have made steps in this direction it is overwhelmingly the industry that pushes the trend forward. Successful urban regeneration projects combine various uses (live - work - shop) so you will hear many developers here gearing their strategy towards “mixed-use” projects. This is further stimulated by the “15 minute city” concept which means everyone in the community is able to meet their basic needs within the range of a short walk or bike ride.

In Romania, and more notably in Bucharest, many factories inside the city became abandoned after the 1990s leaving behind locations that did not have much utility or aesthetical value. At the same time, an overwhelming number of developers were lured by the Northern part of the capital which bloomed through the developments of offices, residences and commercial spaces. This created a circumstance of intense traffic and difficult commutes. 

The trend towards urban regeneration and mixed use projects addresses both these shortcomings, by beautifying certain areas while also bringing work spaces and shopping experiences near people’s homes. Some of the notable projects have been developed by Vastint (Timpuri Noi Square built on the site of a former factory specialized in compressors, pumps and installation materials) and One United Properties (One Floreasca City was built on the former Ford factory).

 

Resi-for-Rent

Home ownership is still prevalent across the EU with roughly 70% of the population living in a household they own. A strong sense of property is particularly visible in Romania which ranks first among EU members with an impressive 95.8% share of ownership, but Poland follows closely with a rate of 84.2%. 

This is to a large extent a legacy of Communist times when, one way or another, everyone had access to a free or very affordable home, which got passed down through the generations. It makes it all the more interesting then, that real estate investors in both countries are now placing their bets on resi-for-rent. 

Developers argue that the continuous migration towards large cities in search for better wages also leads to a better affordability of rent, which is sometimes easier to manage than the substantial down payments needed to buy a new house. Housing prices have been on an ascending trend in both countries and, while salaries increased, they haven’t fully kept up the pace. In addition, Romania and Poland alike are experiencing a cultural shift driven by younger generations who show a preference towards a certain type of flexibility that allows them to move around with ease. The product proposed by developers in this space includes a range of services and amenities that can’t be found easily in today’s rental market: gyms, dry cleaning, coffee shops etc.

Poland is several steps ahead with many commercial developers turning their attention to resi-4-rent, lured by the fast rising rental prices. In 2020 Poland’s rental markets grew by 10-12% on the new builds and 6% on the secondary market, trumped only by Luxembourg. 

 

Sustainability - From Buzzword to Market Reality

Regardless of the business segment, hardly any discussion goes by in Romania and Poland nowadays without developers mentioning their interest in making their projects more sustainable. 

There are several drivers for this not-so-new trend, starting with a general heightened care for the environment within the two countries’ population. Whether the result of a genuine commitment to the planet and environment, and people’s health and wellbeing, or a smart PR move, adding sustainable features to buildings  ultimately translates into a win for local communities. The trend is also driven to a large extent by national and EU regulations. Among them is the European Green Deal which targets a carbon free continent by 2050. The European Commission noted that buildings are responsible for 40% of the energy consumed as well as 36% of energy-related greenhouse gas emissions. Revamping them is essential in order to reduce emissions and, of course, all new developments must be aligned to these objectives. And thirdly, in cases where developers are not motivated by a desire to support the environment, they are still swayed in this direction by their need to obtain financing, as banks are more easily convinced by projects that are sustainable and in this way promise to remain attractive for the long term.In practice, buildings get their “green light” through a series of certifications (BREEAM, WELL, LEED etc.) that developers seek out and for which they need to check a multitude of features, depending on the rating they wish to obtain.

Technology - Real Estate Dinosaurs in the Digital Era

The global pandemic fueled many existing trends and the move towards digital sits atop of the list. Whether we are talking about team collaboration, location scouting or permitting procedures, people were challenged by the restrictions imposed and prompted the real estate industry to reconsider its investment priorities.

Broadly speaking, market players in Romania and Poland have been relatively slow in adopting new, modern tools. Looking at the economy overall, both countries rank low among their European peers in terms of digitalization. It is most often the high (perceived) costs, and the discomfort of change vs. the comfort of methods that have worked well in the past, that hold back transformation.

Even so, throughout our research and discussions with companies that are active in all segments of the real estate markets in Romania and Poland it has become clear that the appetite for technology is on an uptrend. One advantage that both countries hold is an excellent IT talent pool. So far, these resources have been employed mainly to execute ideas proposed by international giants but there is also a vigorous start-up scene taking shape. The solutions they propose range from ways to streamline internal processes to innovative ways of buying, renting and using properties. To come full circle public authorities will also need to step up - while paperwork is still the norm, the pandemic has shown that many procedures can be dealt with online. 




This article was originally published in Real Estate in Romania & Poland 2021 report, available in full here.

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