White Star has been present in Romania since 2006, its most prominent project being the Lakeview office development in Bucharest. In September 2019, White Star together with an US based endowment fund acquired Liberty Technology Park, a former industrial site from Cluj-Napoca converted into an office development project.
Details about the new phase of development and market perspectives are offered by Emilian Balan, Managing Director, White Star Real Estate, Romania.
What type of adaptive measures the company / your project needed? What were the lessons of this period?
The COVID 19 crisis is something that a few months ago nobody expected, nor had anticipated the impact a pandemic like this could have on businesses. The first measure our company took were health and safety measures for our employees and tenants. This included increased hygiene and sanitation measures. For our company we very quickly boosted our ability to work and collaborate on-line, putting to test IT systems we had fortunately upgraded to a little over a year ago. The other major adaptation we made was to help our tenants ensure they could use their premises if they wanted to. For example, throughout our properties in CEE we helped food service providers install take out windows, implemented steps to manage incoming mail, and coordinated deliveries with suppliers. As the work from home initiative was fully set and the end date unclear, we took steps to protect the buildings by reducing energy consumption and protect unused equipment, plumbing systems, ventilation, etc.
The main lessons learned is that being prepared, and having a good channel of internal communication is vital. Although the risk of a global pandemic has been foreseen by specialists and international organizations, the governments and society in general were not prepared for this, with measures varying substantially from country to country. During such periods it’s critical to continuously monitor the situation and maintain excellent communication with all the participants in the daily life of the commercial properties: service providers, local authorities, tenants , lenders, architects.
What is the status of your current project(s) and investments planned for 2020-2021?
We planned to start the new phase of development at Liberty Technology Park in late 2020. We still aim to kick-off the development as soon as we finalize the planning and permitting process for the residential and office buildings planned on Liberty site. In the meantime, we will vigilantly monitor the evolution of local and external markets so as to be prepared for different scenarios. Depending on market conditions we have the flexibility to either accelerate the development plan or spread the construction of buildings over a longer period of time.
Which are the advantages of your business and products going forward? What are your expectations from the public sector, state projects to support future business?
Always our main competitive vector is the quality of our products and services. High quality buildings managed with due care and intelligence are able to better withstand a crisis. We do not underestimate the challenges of this period, but this is a good opportunity for us to differentiate our buildings from other properties and to exhibit our expertise in the real estate sector. Looking at the public sector, most of the times the public authorities are behind the trends which occurred in the economy and I don’t expect this time to be different. The good part of the pandemic crisis is that it forced the public authorities to speed up digitalization of public data and procedures, and to implement modern interfaces between the authorities and the public. Such procedures and modern tools will help the business environment to work more effectively and efficiently. From another perspective, I’m afraid that the public sector is not able to inject substantial “fuel“ into the economy, as considering that the budget inflows are shrinking rapidly and the government’s main task is to obtain financing of the state budget deficit. I expect that sooner or later the government will be forced to increase the taxation level and reduce the costs, which will limit its ability to make investments that stimulate growth.
What transformations you expect in your sector, their effects for the Romanian economy and in a regional perspective?
In the short term we’ll likely observe a downfall of the demand, particularly on the residential market. The volume of transactions in 2020 will fall as a result of the uncertainty for most of the population. However, the prices will not go down so much because the cost base remains unchanged. One of most challenging sectors will be retail buildings, especially those in the shopping mall category. The effect of the sanitary measures imposed by the government, combined with the stresses on the retail sector over the last couple years, will require owners and tenants to agree on special commercial terms until the measures are removed, and the economic effects stabilize. Warehouse properties seem to be the best placed during this period.
The pandemic boosted e-commerce business in Romania, generating additional demand for warehouse spaces. This evolution will probably continue in the next years, with the only bottle-neck being the poor infrastructure. The office sector is pretty stable, with minor corrections on a short term. In the long run, many companies may redefine their strategy with regard to the management of human resources and office spaces. On one hand work-from-home will probably be applied to a larger extent than in the past, on the other hand to keep a safe distance between employees, tenants will have a lower density of people in their offices, meaning more space is needed per person. Technology plays an essential role in the design of future office space and our company has already invested significant resources in creation and implementation of high-tech solutions for our buildings.
The main challenge is the unpredictability of the pandemic and of its consequences on the economic environment. In principle everybody is expecting to return to pre-pandemic activities within 2-3 months from lifting the health and safety restrictions. However, in practice, for some companies could take much longer to reach the pre-pandemic levels of activity.
What is your message to clients and partners?
Regardless of the sanitary and economic challenges we aim to keep the same level of service and to realize our development plans. The fundamentals of success reside in how people manage to behave during the crisis. We are confident that the current difficulties will disappear in the following months and the markets will restore their functionality, therefore we will press forward and focus our efforts on meeting the highest standards of quality in everything we do.
White Star Real Estate is a well-known, international real estate company with a first-class track record. Its team has been active in Central and Eastern Europe since 1997, leading the completion of over 50 development projects throughout the region. These projects include a large portfolio of landmark office buildings, as well as warehouse, retail, leisure and residential properties. White Star Real Estate is also an experienced asset and property manager, providing services to its clients for over 2 million square metres of commercial properties.
An article published in the exclusive supplement – “Market pulse report, Romania – The new normal” | June 2020
A property market tour, including major cities, with projects status and updated opportunities at the end of the lockdown in Romania – June 2020. | Essential news with the current status of further investments, clients and partners relations, new priorities for the post crisis cycle. | B2B communication report – to help you mark your statements during the changes period.
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