Investitors are diverting their focus from real estate

In this new light, developers such as Sonae Sierra, one of the major players on the Portuguese market, and Energoconstructia, one of Romania’s largest construction companies, have abandoned local real estate projects..

“We decided to abandon the project which we intended to build on land we own in the Berceni area, because the real estate market is confusing at the moment, and fluctuations are significant on this market. We are already negotiating with an investor to sell a piece of land of some seven hectares in the Progres area, and are asking €500 per square meter, without VAT,” according to a statement for Business Standard by Constantin Tabacaru, the company’s Technical Manager. The company stands to make some €35 million from this transaction. At the beginning of this year, representatives of Energoconstructia had announced they would begin construction of 15 four to eleven-floor buildings, with some 3,000 apartments, on a piece of land of 67,000 square meters, in an investment worth some €100 mln. This has now been cancelled.

In June, Portuguese Sonae Sierra developer and Irish Caelum Development decided to abandon the development of one of the residential towers included in the original Park Lake Plaza project, one of the largest mall complexes announced for Bucharest, considering that the current market justifies a reduction in expenditures, even if such a move will mean less income for the developers. The companies decided to build a sports facility in place of the residential project.

Last week, representatives of the CB Richard Ellis Eurisko real estate advisory company warned that the residential market blockage could scare away several developers from the Romanian market.

“I think that if there had not been a financial crisis, this year’s market growth would have equaled last year’s, according to a statement for Business Standard by Ilinca Paun, Residential Division Manager for Colliers International.

The luxury apartment segment appears to be the only still relatively unaffected by the current sales blockage, even though the number of agencies selling such homes has dropped by half since the second quarter of 2008.

“The luxury apartment market is affected by the fact that potential clients are no longer considering the acquisition of a home a priority, because of personal business problems,” said Andrei Sarbu, Project Manager Colliers International for Business Standard. According to Sarbu, the company he represents, which is the exclusive agent for the Stejarii project, developed by Tiriac Imobiliare, was forced to adjust its sales target due to unfavorable market conditions.