Colliers International Romania: Dealing with the black swans

Part of a leading global real estate services and investment management company with operations in 68 countries and 14,000 enterprising people, Colliers International Romania’s local managers aim high and the local prospects look also good enough to validate the company’s ambitions.

Founded in 1996, Colliers International Romania established to assist multi-national corporations and foreign developers present in Romania or looking to invest locally. Talking with Laurentiu Lazar, Managing Partner Colliers International Romania, The Diplomat – Bucharest wanted to know which are the company’s milestones and breakthrough endeavors so far, while keeping an eye on the future.

Timing, the epitome of doing business in real estate

As stated by Laurentiu Lazar ”if you look at various development metrics for the Romanian almost all the real estate market subsegments, you come to the same conclusion: there is lots of room to grow both in terms of quantity and quality (yield-wise)”.

Bucharest is in the top 5 administrative regions in the EU based on the share of the high-tech employees in the total number of local employees and yet, on a per capita basis, the modern office stock is some 40% lower than that of Warsaw and several times smaller when compared to developed markets in Western Europe. For retail, the nationwide per capita stock is one third smaller than Hungary’s or Poland’s, yet actual consumption per household (consumption, not spending) is comparable or even above neighboring peers.

For real estate investments, Romania has lagged most of its CEE peers in terms of yield compression in recent years despite being the overperformer in terms of GDP growth. These suggest that there is big upside potential, including in 2020.

23 years in Romania: Milestones, hopes, ethics 

As the Colliers International Romania’s manager stated for The Diplomat – Bucharest, there are many milestones Colliers International Romania has reached during its 23-years’ activity on the Romanian market. “Given our history, we’ve had our fair share of ups and downs, but all that aside, I’d say 2019 was definitely-our best of the last 10 years in terms of both turnover and profitability. What is even more promising is the fact that these numbers were generated by a variety of business lines rather than just a few. Our strength came from four different departments – office, valuation, real estate management services and industrial –, as they all enjoyed record numbers, the best in 10 years,” Laurentiu Lazar says and added: “We’ve always focused on ethical behavior, team spirit, long-term relationships and education and we’ll continue doing so, as they are values that define us both globally, locally and personally. I like to think that all the efforts we’ve placed in this direction started to pay off”

Education, the paramount premises towards higher goals

Romania undoubtedly needs an educational system that can tackle on today’s demands from, but not limited to, the business community and which can adapt fast and successfully to any future challenges, as stated by the Colliers International Romania’s manager.

“Putting this into perspective, us at Colliers have decided that our major internal focus for 2019 and for the future should be on education, more specifically on how we can improve not only our business acumen, but also on how we can become better persons ourselves. For example, we started the year with an internal educational program called Colliers Academy, divided in two modules: leading yourself – specifically tailored for those in the entry levels to those in the middle and senior levels, and leading others – specifically tailored for top management. Both modules received a great deal of positive feedback, which convinced us of the demand for such activities and, consequently, of their success,” Laurentiu Lazar adds.

Taking on the regional bet

Along the past years, Colliers International Romania saw many of their projections come true. A few years ago, Colliers’ managers anticipated that Romanian regional cities will become increasingly popular and attractive for investors and foreign companies wishing to come here. The sale of three office projects in Cluj-Napoca – Maestro Business Center, The Office and Liberty Technology Park – advised by Colliers, in 2018 and 2019 respectively, stands as solid, concrete proof of our prior estimates and our hard work in this direction.

Moreover, seeing the development of the Romanian economic context, the company’s managers were confident that new investors will enter the market. And just a few weeks ago, Morgan Stanley Real Estate Investing entered the Romanian market through the acquisition of America House office building and White Star Real Estate partnered with the endowment fund of a top private university in the US to buy the above-mentioned

Liberty Technology Park, a premiere for the Romanian investment market. Colliers was involved in the completion of both transactions.

With these transactions and many others, the company’s goal to create liquidity in the office investment market is near completion: by end-2019, Colliers International Romania hopes to reach 700 million Euro for the last two years (2018 and 2019). On the industrial segment, in 2016, the company was expected the north of Bucharest to emerge as a future logistic hub, especially for e-commerce players. Last year, our arguments regarding the potential of the area convinced WDP, a Belgian investor, to buy a 44 hectares plot of land in Stefanestii de Jos, and in less than a year we managed to attract the first tenant: the Polish fashion retailer LPP. LPP inaugurated the warehouse developed by WDP just a few weeks ago.

Leading by knowledge

In the meantime, the business has been growing also from and for other service lines such as their Property Management services, expanded from just the operational tasks to community building. “We’ve also been strengthening the one-stop-shop type of services for the office and retail departments. Colliers is known in the industry as being a knowledge leader. I believe that our growth wouldn’t have been possible had it not been for our relevant market reports,” Laurentiu Lazar says.

The Colliers International Romania’s manager also states that, for the remainder of the year and for the next one, my senior team and I have chosen three main areas to develop: sales, education and spirit/brand. “At the same time, we are committed to working together and driving Colliers from Good2Great. In terms of figures only, our aim for 2020 is to remain the most profitable real estate agency,” the company’s manager adds.

According to Colliers International Romania’s manager, current trends point downwards for Romania’s major external partners, while uncertainties regarding the US’s trade policy and maybe geopolitical tensions, mean that next year’s growth will undoubtedly be slower than what we may have grown accustomed to in recent years; a GDP growth in the 2-3% range looks reasonable, though the uncertainties cloud the outlook.

“Otherwise, the inertia which I was mentioning before means that some businesses may be caught off-guard by the cooler economic activity, which means that prudence is generally warranted on all fronts (for all actors in the economy, including real estate players),” Laurentiu Lazar says.

Maybe the biggest challenge, as the manager says, “would be probably learning to live with these huge uncertainties or what Nassim Taleb calls “black swans” – events with a low chance of occurrence, but which can turn your world upside-down if they do materialize. Each of these years since the global financial crisis has come with its own “black swans”, but maybe in 2020 it may be even more difficult to cope with these than in previous years since the global economy has peaked and we are heading towards a lower cruising speed.”

(From the print edition)