This year, the office market will reach 2.9 million sqm in Bucharest, according to Cusman&Wakefield Echinox. And the vacancy rate is droping, but the 7.7 percent now, was more than double three years ago and empty buildings were almost everywhere in the city. Still, empty office remained on the market, and schemes like Millenium Business Center, or Cathedral Plaza are well known.
Millenium Business Center, with 18 stores and a height of 74 meters, developed close to Biserica Armeneasca, was a controversial project from the begining, as the building was basically attached to the parish house of the church. The construction began in 2001, but later the works were stopped, the developer litigating with the church whose structure was affected by work. The litigation was dropped in 2003 after the developer paid damages of USD 790,000.
The German investment fund DEGI (bought in the meantime by UK based Aberdeen Asset Management) aquired the office building in 2007 from the British investment fund European Convergence Property Company, which had also bought it a year earlier from Antonis Kapraras and Euroestate, company controlled by the Kanellas family in Greece.
And the badluck continued.
Two years later, in 2009, the building catched fire, with around EUR 20 million losses. Almost 10 years later, the building is in the same state. It seems that the owner wasn’t compensated by insurers because the investigation did not reveal the exact cause of the fire.
Is hard to fight with God
Delivered in 2010, the 24,000 sqm Cathedral Plaza had issues with the Archdiocese of Bucharest, who opposed the construction, after an initial agreement. Developed by Millenium Building Development, company controlled by Israeli businessman Eyal Ofer, the building was finalised in 2010, and its waging a war with the Catholics went in justice.
The EUR 60 million building case was opened in 2006 by the Roman Catholic Archdiocese in the Bucharest Court, its representatives claiming that the neighboring tower is dangerous for St. Joseph’s Cathedral – a historical monument. The file was transferred to Constanta, Craiova, Pitesti, the Constitutional Court of Romania (CCR), Targoviste, Ploiesti, Suceava, Alba Iulia and Iasi and has been sent several times at the European Court of Human Rights.
The building was acquired by real estate investor Ioannis Papalekas in 2013, just a month after the court ordered the mayor of Bucharest to order the demolition of the Cathedral Plaza
But, for now, the building still stands, empty.
When market hits
But the city has not only fate victims, but business victims as well. Buildings with a pretty bad locations, like Cubic Center in Pipera are occupied only around 50 percent. The same is Twin Tower Barba Center, put on sale few years ago for EUR 60 million and a required rent about EUR 5/sqm/month. To no end.
There are also larger buildings whose construction was started, such as Anchor Plaza Metropol (about 34,000 sqm) and another building in Otopeni (27,000 sqm), which have not yet been completed that stay almost empty.
Same of this buildings were started back in 2006-2007, when the market seemed to accept everything, but the crisis change the reality. Not only because of the unfortunate location, but, as well, for the fact that they are already old buildings.
“I would say there are two reasons why there are such buildings. The main cause is the existence of litigation and until their settlement the buildings can not be rented out. The second reason is to start construction with a purely speculative approach, with no precontracts of hanging, in locations that either do not have all the features required by office occupants, or where demand is lower, ” Florian Gheorghe, head of Research at Active Property Services agency concluded.
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