"The high prices of construction materials have determined significant budget increases for projects in the field"

Written by Emilia Olescu
English Section / 25 august 2023

"The high prices of construction materials have determined significant budget increases for projects in the field"

(Interview with Mr. Cătălin Chimir, Managing Director SENARIA Project Management & Real Estate Development)

Versiunea în limba română

The current context presents certain challenges for the construction market, and inflation, rising interest rates, the energy crisis and geopolitical tensions are some of them, emphasizes Cătălin Chimir, Managing Director of SENARIA Project Management & Real Estate Development. His Highness explained to us, in an interview, how they influence the construction market.

Reporter: How do you assess the evolution of the construction market, in the current context (inflation, increased interest rates, energy crisis, border war...)?

Cătălin Chimir: The current context presents certain challenges for the construction market, and inflation, rising interest rates, the energy crisis and geopolitical tensions are some of them.

The increase in the prices of materials against the background of the pandemic led to significant increases in the budgets of construction projects, almost exponential in the case of some of them. The dynamics of inflation, which came immediately after reaching a normal of this unprecedented situation, means that prices will still remain far above the level of 2019. Of course, they have moderated, but we will certainly not return to a pre-pandemic cost level. Practically, here we are already talking about a cost increased on average by 40% compared to the respective period for construction materials, respectively by 20-25% in terms of the labor force. This situation is corroborated with the increase in interest rates, which makes financing more expensive and problematic, thus influencing the investment decisions of developers - most of the time in a negative way.

Despite these challenges, the construction market in Romania continues to present opportunities for development and growth. There are significant needs in terms of affordable housing, modern office space, industrial facilities and infrastructure.

At SENARIA, we have focused in the last two years on improving operational efficiency, optimizing construction processes and identifying innovative solutions to meet our customers' needs.

Reporter: How is the real estate market evolving in this macro-economic and geo-political context?

Cătălin Chimir: As I mentioned above, the increase in inflation can have a direct, visible, significant impact on the real estate market. The costs of construction materials, labor costs and financing costs have increased, which influences both the prices and the profitability of real estate projects.

Geo-political tensions and instability can affect investor confidence in the real estate market, but even though we are on the brink of such a major conflict, I can't say that I have felt this instability. Rather, we are affected by the crisis in Ukraine through the lens of the fact that our neighbors were an extremely important supplier for the construction materials sector. In the same vein, the context in Turkey also affects us, because it is also an important supplier, which is now focusing on rebuilding its own infrastructure, and not only that, against the background of recent events.

However, despite the obvious and not to be neglected challenges, the real estate market in Romania is based on the constant demand for housing, office space, commercial and industrial space.

In terms of luxury housing, Romania is still at the beginning. Regarding office spaces, the context has made this market to be in a continuous reconfiguration, and on the side of commercial and industrial spaces, Romania is a destination sought by large international retailers and not only, and the large infrastructure projects announced will encourage these investments and developments.

Reporter: Do you think that a new real estate crisis is approaching and if so, is our profile market prepared for such an event?

Cătălin Chimir: The real estate crisis has a more complex definition. We usually think of huge prices, especially for the end customer, of a low buying-selling rhythm, of a subsequent price collapse. However, I believe that the real estate and construction industry have learned many lessons from the previous crisis. This experience led to improved risk management practices, project evaluation and financial discipline.

The growth in recent years was no longer uncontrolled, exponential, but rather a constant, healthy one, even if it was reduced. Also, in Romania, the real estate market has developed in recent years, benefiting from a constant demand for various types of properties, not only for mass-market ones.

Of course, it is important to maintain a cautious approach and closely monitor economic developments and potential risk factors. But this period, when certain projects stagnate, when interest rates rise and financing possibilities are limited, represents an opportunity for some investors.

I believe that this is a very good time for those who have the capital to invest in special projects, not mass-market, in projects that understand the demands of the emerging market - energy efficient buildings, with premium finishes, that integrate innovative systems and optimize the client's costs final.

On the other hand, we, at SENARIA, have focused on integrated services, which include risk management strategies, a careful analysis of the project, in all its phases, but at the same time we remain agile and flexible to changes in the market .

In fact, this is also the role of the construction project manager: to develop a detailed project budget, which will include all the costs associated with it, such as labor, materials and equipment, but also possible risks such as delays, overruns costs or safety issues.

Cost control techniques are used to track actual costs against budget and to identify potential deviations, allowing the project manager to take corrective action if necessary and thus optimize costs.

In my experience, working with an efficient and experienced project management team means completing projects on time - otherwise, delays range from 1 to 6 months on average - without additional budget allocations, which, also from experience, average of 30%, but the percentage can increase even more in some situations.

Reporter: How do I see the prospects of the profile market?

Cătălin Chimir: The following period, from my point of view, will be marked by a consolidation of the positions held by the players in the industrial sector, by an increase in investments in the hotel field - where we are in deficit and the need to have premium destinations is growing - and an evolution with small steps in the retail segment, based on the existing consumption.

At the same time, in the residential segment there are signs that it will be built in the next period only in those areas where the value of housing units will not be majorly influenced by the evolution of the market - such as central areas of cities, land on which there are already approvals construction, neighborhoods where the price level remained constant, regardless of the context. And those projects will continue where there is no need for credit for their completion, as investors have the necessary capital. Mass-market projects, where profitability depends on volume, will stagnate, because the period is not favorable for real estate developments.

Taking into account these factors, I believe that the market of design, project management and site management, as well as that of construction works, will suffer a setback in terms of private investments.

But, just as the entrepreneurial environment in Romania has always been adaptive and imbued with a great capacity for innovation, I believe that new perspectives are opening with the appearance of the PNRR National Recovery and Resilience Program. Thus, the big projects in the public domain will represent a breath of fresh air for the players in the market, an opportunity that will replace the lack of works in the private sector.

Reporter: How has the demand in the field evolved (most requests in the market come from those who want to build or from customers who want renovations)?

Cătălin Chimir: The demand for new constructions, such as residential houses, office buildings and industrial facilities, has increased in recent years, marked by continuous urbanization, economic development and the need to provide modern and functional spaces for various activities.

In the commercial sector, demand is increasing due to the development of industry and the need for spaces adapted to the activity. Here we include commercial centers, industrial parks, office buildings and other facilities to meet the requirements and needs of companies and investors.

However, given the specifics of the current context, with many companies still practicing remote or hybrid work, the last two years have been marked by constant requests for redevelopment of work spaces. In addition, I have noticed in the fit-out projects that I managed recently, a growing interest in collaborative, versatile spaces that adapt their functionalities in agreement with the employees.

Reporter: How did the furnishing segment evolve in the context of telework? How has the office market changed in this new context?

Cătălin Chimir: Current layouts emphasize flexibility and adaptability, allowing buildings to adapt to future needs and changes. We have learned in recent years to be agile and ready for any change, no matter how big or fast. Multifunctional spaces, modularity and flexible layout solutions allow users to customize their spaces according to their requirements and optimize their use.

An increasing percentage of companies want employees to return to the office, at least 50% of the working hours, therefore those who have reduced their activity want to be able to accommodate the teams effectively. For example, companies invest in spaces that can easily be converted into meeting rooms or private offices, in modern spaces with premium finishes that offer employees a high degree of comfort.

Moreover, a preference for energy efficiency, for sustainability, for innovative solutions, such as the use of environmentally friendly materials and technologies, is clearly observed.

Reporter: How do you assess the real estate developers' interest in our market? Where do we stand on the European real estate market?

Cătălin Chimir: The Romanian market is attractive for foreign investors due to the increased yields, much higher than those in other European countries. We are a growing market, an emerging market, with great development potential in the logistics segment.

On the other hand, however, from the point of view of large investors in the office segment, such as investors from China, we do not necessarily represent a point of interest. Romania is a market where large investment funds cannot create portfolios, being dominated by a single pole - Bucharest, with small attempts in this segment in important secondary cities. It is reason enough for them to go to markets like Poland or the Czech Republic.

However, Romania remains a point of interest, especially in the industrial segment, because it can offer these high yields and still has enough room for growth, both in the Bucharest area and in the rest of the country.

Reporter: How do you appreciate the way it is built here, from an architectural point of view?

Cătălin Chimir: As project managers, we notice an increasing boldness from an architectural point of view. And this is manifested both externally, i.e. what the end customer sees, and from the perspective of the internal structure.

It is built more with premium, durable, energy-efficient materials. Energy efficiency is a major concern in construction. Modern buildings are designed to minimize energy consumption by using efficient lighting systems, advanced thermal insulation, intelligent air conditioning systems and renewable energy. We see more and more projects with integrated, hidden heating/cooling systems, so that the spaces are as free and clean as possible.

In our recent fit-out projects, we have also noticed an orientation towards the ergonomics of the space, towards functionality, much more obvious than in previous years, when the focus was more on aesthetics and on the quick completion of the project.

The projects are based on an integrated design, which involves close collaboration between architects, engineers, construction specialists and project managers, an approach that ensures an integration of the functional, aesthetic and technological aspects of the construction.

Reporter: Thank you!

(Interview taken from Bursa Construcţiilor magazine)

Comanda carte
Apanova
digi.ro
aages.ro
danescu.ro
boromir.ro
librarie.net
Mozart
Schlumberger
arsc.ro
Stiri Locale

Curs valutar BNR

11 Dec. 2024
Euro (EUR)Euro4.9684
Dolar SUA (USD)Dolar SUA4.7338
Franc elveţian (CHF)Franc elveţian5.3533
Liră sterlină (GBP)Liră sterlină6.0241
Gram de aur (XAU)Gram de aur409.9933

convertor valutar

»=
?

mai multe cotaţii valutare

Cotaţii Emitenţi BVB
Cotaţii fonduri mutuale
contragarantare.ro
Mirosul Crăciunului
petreceriperfecte.ro
novaplus.ro
Studiul 'Imperiul Roman subjugă Împărăţia lui Dumnezeu'
The study 'The Roman Empire subjugates the Kingdom of God'
BURSA
BURSA
Împărăţia lui Dumnezeu pe Pământ
The Kingdom of God on Earth
Carte - Golden calf - the meaning of interest rate
Carte - The crisis solution terminus a quo
www.agerpres.ro
www.dreptonline.ro
www.hipo.ro

adb