Opportunities and risks of construction projects in new EU member nations Romania and Bulgaria

Drees & Sommer continues to record an increase in orders from the new EU member nations. This is shown by a first stocktake ten months after the EU's eastern expansion with the accession of Romania and Bulgaria. This is largely the result of an increasing number of international investors wishing to secure professional binational project management for their real-estate projects. Drees & Sommer maintains its own offices in Bulgaria and Romania and is using its extensive expertise to provide development management, master planning and project management services.

The accession of Bulgaria and Romania has had the expected result: Both countries are undergoing dynamic economic growth, particularly in the construction industry. Over the next two years, demand remain higher than the supply of premium real estate. Drees & Sommer expects the building boom to continue at least until 2010. However, both countries will require far-reaching reforms of the public sector - for example of the inadequate infrastructure and investment in the education system - in order to boost the investment climate in the long term.

Also, the boom should not blind one to the fact that investments in Romania or Bulgaria are still associated with risks. For example, there is a shortage of experience skilled personnel. Corruption is still found in many areas. There is much bureaucracy, and legal predictability is not comparable to Western Europe. There are also deficits in the area of material availability. These are reflected in above-average price increases, for example in the energy sector or for building materials. This results in "anxiety margins" in tender calculations. Strong demand also means that capacity and delivery problems can be expected. Gaining the greatest possible benefit from investments in the new EU nations, will require project managers who can combine knowledge of West European standards with local know-how. 

Growing investor interest in Romania
Since its accession to the EU, Romania has seen growing demand for retail space and offices. One reason for the growing interest of foreign investors is improved legal predictability: If careful legal and technical due diligence are undertaken, the residual legal risk involved in land and property purchase is minimal. Headquartered in Bucharest and with offices in Timisoara und Cluj, Drees & Sommer has been active in Romania since 1996.
A team of 40 employees provides project management, due diligence and site supervision services. Major investments are made primarily in the Bucharest area, but there are also first projects in the cities of Timisoara, Constanta, Brasov, Cluj, Iasi and Craoiva. These include, for example, the ModaTim City Center, which will be officially opened in October 2007. Drees & Sommer ensured in-budget and on-schedule completion of a new Class A office building for the textile manufacturer in Timisoara. The project managers also ensured the timely completion of the Baneasa Airport Tower in early 2007. It has rental space of some 6,100 sqm, suitable primarily for offices. Drees & Sommer is also managing the construction of 20 new Kaufland supermarkets in Romania.

Bulgaria - great interest in retail properties
The newcomer to the EU has been enjoying a booming economy since 2006, with annual growth rates of well over ten percent. Bulgaria has become even more attractive for investors since accession - and is seeing an increased influx of foreign capital and growing domestic demand. Drees & Sommer has been supporting the construction of high-quality buildings in Bulgaria with real-estate consulting and project management services since 2005, as well as  providing supplementary project monitoring and quality control services. Drees & Sommer Bulgaria also carries out technical due diligence for property purchases and sales, increasingly for institutional investors. The 25 German and Bulgarian employees' expertise and knowledge of local conditions is the basic precondition for successful project management in the country.

The focus is on residential and hotel properties, as well as on office and retail space. An example is the Sofia Outlet-Center. Costing some EUR 18 million, the shopping center is scheduled to open at the end of 2008. Also, a total of nine Kaufland supermarkets have opened in Bulgaria since last year. Drees & Sommer is supporting the retailer's expansion with project control and overall technical management services. As a result of long-term market presence in Bulgaria, the project managers have the necessary expertise to support Kaufland and other clients tapping into the Eastern European market.´

Download this press release
Word
 

 

 

back   forward