You have been spearheading AHK in Bucharest since its inception, witnessing cities undergo real transformations – how do you look back on the past eight years?
Living here for such a long period of time (it will be nine years in January in fact) is a statement in itself. Watching things on a day to day basis, it feels like Romania could be developing even faster, but the reality is that it has already come a long way and grown in a positive direction. From a real estate perspective eight years ago Bucharest was still in “kindergarten” with few international projects, but in the past five years the industry sky rocketed, not only in terms of new buildings, but also that of quality standards, technology and energy efficiency. People’s mentality and the economy progressed hand in hand. Romania is really a great country and I am happy to be here.
Putting things into perspective, how have German-Romanian bilateral relations developed since we last spoke, and what chunk does real estate play as part of AHK’s member base and efforts?
Looking at bilateral relations, 2019 saw a boost of 12% to EUR 33 bn and Germany remains the no. 1 foreign direct investor with over 250,000 direct employees. There is a palpable footprint across many industries, however in real estate there are very few German developers. Why? We believe that there is a lack of promotion and awareness about just how much potential the Romanian real estate market has. Large scale investors have come from South Africa, Austria, Holland and Belgium, among others. AHK is in fact actively promoting the local sector through international trade shows such as MIPIM or EXPO REAL. Naturally, due to Germany’s overall footprint we are on the flipside one the biggest users of real estate, be it commercial/retail, offices or industrial segments.
There is a palpable footprint across many industries, however in real estate there are very few German developers. Why? We believe that there is a lack of promotion and awareness about just how much potential the Romanian real estate market has.
The ample real estate market offer in Romania is in fact one important aspect that drew German companies here, and one of the backbones of overall economic development. Our AHK office is also responsible for Moldova, which by contrast does not have sufficient projects as yet, particularly in the industrial segment, and this in turn limits companies that might want to set up shop there. On the other hand, this means that there is quite an interesting business potential in this sector in the Republic of Moldova. We must promote the available real estate infrastructure not only in Bucharest, but across all regions, so that companies can take advantage of the land offer, human resources, universities and training centers, favorable permitting and business demand.
Perhaps German developers are weary of a lack of stability and predictability from the legislators, or other local challenges?
The business environment is not without faults and the government can certainly be doing more in terms of administration and clarity. For instance property restitution is a big problem in Romania, as is lack of city planning and overall infrastructure leading to congestion. The administrators must do a better job in keeping pace with the dynamism of the private sector, and synchronize efforts. Part of our work lies in actively promoting sustainable, future-ready cities.
And are the authorities listening?
They are, but the problem is not listening, it is implementing. In this regard, not all cities are equal – some have a good understanding of what needs to be done and invest in the right areas for growth and evolution – you can spot them easily, as they are moving fast and attracting knowledge, business and infrastructure. On the other hand, others lag behind, leading to a divergence of economic and social development. There is a gap between urban and rural, and a gap between the cities themselves. In my opinion, this is one of Romania’s biggest problems.
You address topics like these during your Cities of Tomorrow Conference, which saw its 8th edition this year – what were some of the topics breached?
This year’s September conference took place in a hybrid format, streaming everything online but also allowing people to visit under socially distanced norms. The main idea is to transfer know-how and best practices from Germany and beyond – this time around we had speakers from Singapore who spoke about strategic city development. This year’s topic was new waves of urban migration which, I explained already, is a very hot topic for Romania. Another key theme in previous years was that of brownfields reconversion, with examples from Jiului Valley and the revitalization of previous mine sites. As a rule of thumb, a well planned city is a well though-out maze – a good education system is the starting point, which should go hand in hand with a robust job market, infrastructure and real estate ecosystem.
How far are we from reaching such urban oases in Romania?
My big dream is simply seeing more cohesion. We can jest about this being a “German perspective” but really the “island solution” we sometimes see in Romanian cities is not how it should be. The real estate private sector is already doing its part, with new project emerging all the time. But we need a plan for integrating them so that they fit, and this cohesion needs to come from the city planners and administrators, even if we start small, on a block by block basis.
We are at an interesting point in time, on the one hand projects keep sprouting and on the other we are all battling a global pandemic – what are your expectations for the near term in the property sector?
So much is happening at the same time and different segments, such as commercial, are seeing the worst of it, while others, like the industrial segment, are doing quite well. I believe the key is to maintain perspective. COVID-19 accelerated some structural problems within the sector which were already there, such as the rise of e-commerce. We are also expecting a rise in working from home and fall in office rentals. Romania is and will remain an attractive place for production, so industrial/logistics is poised for growth. It is beyond doubt an excellent real estate market to invest in, especially at a time when near shoring will be driving some of the production from Asia into Eastern Europe.
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