The real estate industry is one of the most important in the global economy, covering essential needs as housing, offices, land or storage space. The real estate market is among the first ones to react when there are factors that trigger it either booms or crises.


Real estate has been, is and will always be an option for investors, globally, and crises of any kind have shown this. Even if it is one of the first industries to feel the effects of economic growth or a recession, real estate has sailed across them every time and remained on top of every investor’s map“, says Codrin Matei, Managing Partner Crosspoint Real Estate.


Offices a sector going through changes

The office sector has been directly affected by the lockdown and is experiencing the most significant changes. “Market feedback during this period was mixed, and everyone is now just talking about change. As we all know, during this period, many employees work from home, so buildings and office spaces have a low occupancy rate and are undergoing a restructuring process, looking for fit-out solutions or repartitions adapted to social distancing”, said Cosmin Smighelschi, Associate, Office Agency Crosspoint Real Estate.

Many companies currently offer a type of service called workplace consultancy, in order to ensure that employees who return to work in their offices are completely safe. “We estimate that most of the employees will return to the office starting with the second part of the year, although there are companies that accept the fact that they will most likely return next year, which of course puts pressure on the real estate market. Nobody knows what will happen yet, but what we do know for sure is that things will clearly change“, explains Smighelschi.

Productivity critical in working from home

The productivity of working from home is increasing in some market sectors, and some companies are comfortable with the change.

Therefore, office building owners are adopting new strategies, like subleases or the renegotiation of existing contracts” says Cosmin Smighelschi. These two strategies have, of course, many advantages, and in the case of renegotiation, the owners gain stability through extended contracts and tenants will gain a cost cut, along with the same stability – things desired by both parties involved in the office sector. “The subletting of office space can now bring an upgrade for many companies that wanted to relocate in better areas, larger spaces and in A class buildings, at affordable costs. The tenants who offer a part of their space for sublease will optimize their costs and will be able to keep their current contracts”, says Smighelschi.

Predictions made at the beginning of the year were nearly double

If we were to estimate when things will return to their pre-pandemic status, I could say that maybe somewhere between six and 12 months. Because – for example – for 2021-2022, another 500,000 sq m of new office space were expected. But as a result of the pandemic, we will probably see somewhere along half of this surface delivered in the next two years “, estimates Cosmin Smighelschi. Also, the announced deliveries will be delayed by six to 12 months, but everything depends on the length of time for which work from home will continue to operate. If work from home will be adopted for the whole rest of the year, these terms will certainly be extended and the spaces recalibrated. “Another good solution, adapted to this period, would be for under construction or authorized office projects to be redesigned into mixed-use projects. This would be, again, a benefit for everyone, resulting in cost reductions for employees by being close to work and higher sale and success rates for developers“, concludes Smighelschi. Another important aspect that will change, he says, given that work from home will still be necessary for at least a few months, is the one related to the employee remuneration – from hourly pay as it is currently used, to a compensation reflecting real performance.


Residential – the growing up sector

Mixed-use and smart home projects, although already on the map of developers, will now be – as a (positive) effect of pandemic – mandatory for next developments. “People have noticed, especially now – due to work from home – the real importance of home space. And how important it is to have some available spaces for other types of activities, such as a dedicated space for an office or a large terrace, that can offer a comfortable area for productive work“, says Bogdan Iliescu, Associate Director, Residential Crosspoint Real Estate.

Better and better quality

Another great effect is the quality, from all points of view. “The developers will be more careful and look better to buildings efficiency, safe common areas, generous playgrounds for children and all the facilities that a compound needs – things that leads to a quality standard of living“, Iliescu explained.

Post-lockdown the residential market, he says, had of course a gap, but very fast the demand come to pre-pandemic levels, maybe even higher – especially because people have spent all this time at home. “Also, investors see the residential sector even safer now for new investments. We really believe that residential market will register very good benefits and results post-pandemic, especially in quality and this leads to a greatly expected growing of this local sector”, concludes Bogdan Iliescu.


Land, Investment, Retail – a mix of functions

On the investment market the health crisis has led to the cancellation of two of the largest ongoing transactions. “However, we see an interest from new players who want to enter the local market and this is an important and encouraging aspect”, said Cătălin Gavrilă, Associate Director, Land Development Crosspoint Real Estate.

The retail segment was one of the most affected by the pandemic, as we all know. “What we have observed, though, was that non-food players became more aggressive than ever in this context. I believe that starting with the end of the year, things will gradually get better in this sector, despite the current estimations being pessimistic” says Gavrilă.

As regards the land market, the activity did not cease, mainly because this segment performs under almost any circumstances but also because land transactions take a longer period of time until completion. “For example, we have initiated and closed two land deals during the lockdown period. The appetite for this segment remains high in all areas of development, be it residential, retail, office or industrial” explains Cătălin Gavrilă.

Empathy grew among land owners

An extraordinary detail that we have observed in this difficult period, is that the land vendors’ empathy towards the buyers has increased, an aspect seldomly observed before the pandemic”, says Gavrilă. For instance, many landowners were not necessarily open towards discussion and negotiation because hours or days later they would have received a better offer for their plot. “Currently however, we have observed a shift in the sellers’ attitude, they are more understanding and therefore more open to discuss about risks and even find solutions for diminishing them, optimizing the land and the value of the future project and negotiating the price together with the potential buyer. I was happy to observe that it is easier and more enjoyable to work on a transaction where there is much more empathy and availability towards free and efficient communication, when each of the parties involved has the same purpose: the development of a quality project, for which the best solutions are sought out from its inception”, specifies the Crosspoint associate.

Like in every crisis, we will see many positive effects, one of them being that 2021 is estimated to be an even better year than 2019, because the delays that have occurred this year as a consequence of the pandemic will aggregate in a positive way in 2021, creating a beneficial business and working environment.


Industrial – logistics operators are streamlining their processes

E-commerce was the only market segment that benefited from the health crisis. “The volume and value of online purchases have grown significantly during this period. Although in the past two months the online demand did not reach the levels registered in March and April, we believe that the upward trend will be maintained and that the segment will create further demand of logistics spaces”, said Emilian Podaru, Head of Industrial & Logistics Crosspoint Real Estate.

As for the other sectors, this period will lead to the streamlining of the logistic processes. “On a short term, this improvement may generate a decrease in expansions and even a supply of excess space available for sub-lease, but we believe that altogether, the logistics market will remain stable, with a slight tendency towards growth, in the following period”, says Podaru.

Opportunities for new production facilities

According to Podaru, the current health crisis has highlighted the logistic challenges caused by the economic conflict between China and USA, but also the ones caused by the long distances between production facilities based in Asia and the outlets in Europe and North America. The nearshoring concept, i.e. the reestablishment of production facilities in a country located in the same area as the outlets, will drastically change the logistics industry in the near future. “The countries that provide small production costs and a predictable business environment will benefit from relocations in the following years. According to Savills Nearshoring Index, in the EU area, Romania has the third highest industrial potential, after the Czech Republic and Hungary. For Romania this is an opportunity, on a mid to long term, to grow its production capacity and its exports on EU markets” explains Emilian Podaru.


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