Hagag

06.02.2025

What were the main business results for 2024?

From a legal perspective, 2024 was marked by a resurgence in real estate transactions, particularly in the industrial and retail sectors. We assisted clients in navigating complex acquisitions, lease agreements, and regulatory compliance, particularly in transactions involving ESG-compliant properties. While the office sector remained slow, investment in logistics and prime retail assets drove market activity, requiring careful legal structuring to mitigate risks associated with financing and permitting challenges.

What are the company’s business targets and plans for 2025?

Our firm’s focus for 2025 will be on providing strategic legal advisory in real estate investments, infrastructure developments, and asset repositioning projects. Given the increasing emphasis on sustainability and ESG regulations, we are strengthening our expertise in green leases, urban regeneration, and compliance with new regulatory frameworks. Additionally, we anticipate moderate increased M&A activity in real estate, requiring sophisticated structuring and risk assessment for cross-border investors.

What are the most significant legal and regulatory changes impacting the Romanian real estate market in 2025, and how should developers and investors prepare for them?

The regulatory landscape is shifting toward stricter environmental and sustainability requirements, influencing both new developments and existing asset management strategies. Taxation changes and fiscal adjustments following the 2024 elections may impact financing structures and transaction costs. Additionally, potential zoning law reforms and digitalization of permitting processes could streamline, but also complicate, development timelines. Particularly for Bucharest, the draft of the new general urban plan is still pending, being currently delayed due to the preparation and correlation of various studies. Its approval would represent, though, a game changer for the current real estate scenery, which is marked by a perpetual blockage due to the suspension and cancellation of the sector zonal urban plans and specifically due to the central municipality’s reluctance in approving any sort of new zonal urban plan.

All the more, investors, developers and practitioners alike are aiming for the approval of the Urbanism Code, which is aimed to revolutionize many of the old approval procedures for urban plans and regulations, as well as to facilitate the development of real estate projects, for example based on detailed urban plans instead of zonal urban plans, as well as via a simplified submission process through a centralized and transparent plaform.

Investors and developers should conduct proactive legal due diligence and seek expert guidance to anticipate compliance risks and secure project approvals efficiently.

Which areas or segments of the Romanian real estate market (residential, commercial, industrial) are facing the most legal complexity in 2025?

The office sector faces challenges related to lease renegotiations, space optimization, and tenant rights under evolving workplace regulations. Industrial and logistics transactions involve increasing complexity due to ESG standards, land use constraints, and supply chain regulatory shifts. Meanwhile, the residential sector is dealing with supply shortages, financing hurdles, and stricter urban planning policies, which require careful structuring of acquisitions and permitting strategies. Our role is to help clients mitigate legal risks and structure their deals to align with the latest legislative developments and market developments and trends.

04.02.2025

What are the main challenges & opportunities for the real estate market in 2025?

As we look ahead, Romania’s real estate market poses positive long-term prospects, with promising opportunities both in Bucharest and across its secondary markets. On the other hand, when looking at a short- and medium-term timeframe, our industry faces more than a fair share of significant challenges. Inflation, economic uncertainty, the cost of financing, the lack of predictability, fiscal changes happening overnight, rising development costs, and stricter environmental regulations are just some.

Nonetheless, there is some degree of optimism about the long-term growth potential, primarily supported by the latest investments in infrastructure, the recent Schengen accession, tourist volumes that are close to surpassing the numbers from before 2020, and the still favorable productivity-cost gap in the labor market. Moreover, statistics point to a net positive migration flow generated by the Romanians that have previously migrated to Western Europe and are now relocating back into the country. And this is something that will generate demand and stimulate the market, and even encourage the further development of the PRS segment.

What were the main business results for 2024?

All turbulences considered, our company performed quite well. Especially taking into account that most of our investments are concentrated in Bucharest – where we all aware what the urbanistic situation is. On the commercial side, in terms of leasing dynamics, we wrapped up 2024 with a 96% occupancy rate across our entire office portfolio, 85% for H Private – our serviced offices product, 75% of H Stirbei Palace pre-leased, and ongoing discussions with several potential tenants interested in the commercial component of H Pipera Lake – soon to be completed.

Pre-sale results for our middle market residential developments are, too, looking good, with close to half (45%) of the 728 residential units currently available for sale in H Pipera Lake (buildings 6-10) and H East Residence (phase I) either reserved or pre-contracted. Furthermore, when it comes to our two upper-premium projects to be developed in Primaverii neighborhood we are proud to say that we have quite an impressive waiting list. But last year marked yet another important milestone for us, as we reprised our plans to diversify into hotels and started working on the concept behind our first project dedicated to this segment.

What are the company’s business targets and plans for 2025?

We entered 2025 with ambitious plans but with a cautiously-optimistic forecast about the timeline of our developments in Bucharest. We estimate that we will receive the building permit for phases II and III of H Pipera Lake over the following months, then break ground on the first five residential buildings that are currently in marketing. By the end of Q2 we will finalise construction on the commercial building in Pipera, and we plan to reprise works on H East Residence – where 48% of the apartments in phase I have already been pre-contracted. Moreover, we are focused on completing H Stirbei Palace, and move forward with the reconversion of the old office maze on 5-7 Vasile Lascar which will mark our fifth renovation/redevelopment project in central Bucharest.

On the other hand, with Bucharest indefinitely on hold, we are now more determined than ever to expand to regional cities, and we are currently looking into Brasov, Timisoara, and Cluj.

How will anticipated economic conditions, government policies or EU funding programs influence the residential real estate market in Romania?

From fiscality, government policies, and EU directives that are already putting pressure on budgets causing an increase of at least 15% in development costs, to VAT adjustments, and the cancellation of tax incentives for certain industries that could lead to future layoffs, all will largely influence the dynamics of the residential segment.

When talking about Bucharest, the zone planning and permitting situation has already led to a pipeline downfall that will most probably make prices skyrocket over the next couple of years. Likewise, this urbanistic blockage is now topped by the ungrateful situation with the traffic commission within the General City Hall which makes it even harder for developers to complete ongoing projects. Therefore, all investor-developers activating in the capital city will not only need to cope with all taxes and regulations, but are obliged to pay higher taxes, in an era where local authorities are not fostering a stimulating environment for future real estate developments. As consequence, we see ourselves forced to look for opportunities outside Bucharest. For some of us regional cities are an option, though some might move their capital abroad.

How will Romania’s economic outlook, labour market trends, and regulatory changes affect office space absorption rates and new project launches in 2025?

Compared to before the pandemic, new demand is still low. Most of the transactions signed over the course of last year were either expansion, either relocation deals. In the context of hybrid work and fiscal instability, companies tend to cut down costs. This new paradigm is reshaping the market’s dynamics, highlighting an increased appetite for smaller surfaces (up to 500 square meters), or serviced offices – demand that led to a very good performance of the serviced offices segment and to a growing occupancy rate in modern, boutique buildings from central locations. And although tenants will continue to look for quality, services, and modern office spaces in ESG compliant buildings that are well-positioned and well-connected, given the current economic climate, the price/square meter, the value of the service charge and the incentives offered by the landlords will be the holy trinity to guide the decision-making process.