‘Money is marching eastward, and the numbers clearly support this shift,’ said Paul Hallam, managing partner, GalCap Europe. ‘The trend will become obvious in 12 months’ time or even less. The conversations we have with investors now all point to a move east to countries like Romania which are growing and opening up.’

As capital allocations to real estate continue to increase, some money is earmarked for western or Central Europe, but not all of it, as investors are increasingly willing to look beyond the well-trodden markets.

‘There is new money allocated every year and the borders between CEE and SEE are under strain,’ said Robert Miklo, director, Romania, Colliers International. ‘We see positive signs of trading volumes increasing in Romania, Bulgaria and other SEE countries.’

Taking the plunge
Many investors who for the last few years had been looking at the region but were hesitant are now taking the plunge and committing capital.

‘We are seeing a lot of funds who have looked at the good deals that South African, Austrian and other investors have done and have realised they need to follow suit,’ said Victor Constantinescu, partner and head of SEE Real Estate at Kinstellar. ‘The narrative is changing, we are seeing many new entrants to the market, and the challenge now is to provide them with adequate supply.’

Romania is at the forefront of this shift in attitudes, panellists agreed. ‘In the last year Romania has done a very good job of promoting itself as a good destination for investors, a high-yielding area in contrast with low-yielding Continental Europe,’ said Lila Pateraki, chief investment officer of Zeus Capital Management. ‘Risk tolerance has increased, the yield gap matters more and more investors are coming to have a look.’

Buoyant economy
The strength of the real estate sector is underpinned by a buoyant economy and higher wages which are fuelling domestic consumption. ‘Romania had GDP growth of 7% last year, outperforming almost all European countries,’ said Miklo. ‘Real estate assets continue to have significantly higher yields than CEE peers, so we expect exponential growth.’

In the office market in Romania, yields are 7.5% and the sector has seen a lot of activity recently. ‘We complained of lack of liquidity but it was lack of product,’ said Miklo. ‘Now we are getting institutional quality office stock, so we predict that liquidity in that market will accelerate markedly this year and next.’

Colliers International’s forecast is of a four-fold increase in investments in the office sector, from €150 mln last year to over €500 mln this year, with several big-ticket transactions over €100 mln, which would have been unthinkable until recently.

Logistics and light industrial
Another fast-growing sector is logistics and light industrial, thanks to the region’s strategic geographical position, a strong manufacturing base, especially in the automotive sector, the growth of e-commerce and consumer spending picking up.

‘We entered the Romanian market because it was very under-supplied, there was a shortage of warehouse space and we saw recovery ahead,’ said Remon Vos, CEO of CTP. ‘Since then demand has exceeded our expectations. We plan to double our portfolio within five years, because the market still offers opportunities.’

Retail is also doing well, as people have more money in their pockets. ‘Spending power has increased by 70% in the last 10 years since the crisis,’ said Laurentiu Lazar, managing partner, Romania, Colliers International.

He also pointed out that e-commerce is growing but does not represent a threat: ‘We believe that the dominant shopping centres will not be affected in the medium term, because we don’t have a high street in Romania, so everyone goes to the malls.’