Hagag Development Europe’s pipeline in Romania tops EUR 280 million

Yitzhak Hagag, Co-founder & Chairman of Hagag Development Europe , spoke to BR about the company’s ongoing investment efforts in Romania across the commercial and residential sectors and the trends shaping growth on the market.

By Ovidiu Posirca

?

What is Hagag Development Europe’s current development pipeline in the commercial and residential segments?

Our pipeline today comprises four residential developments, a retail project, and two hospitality projects—one is a hotel, the other a leisure & spa resort—each in a different development phase. We are talking about seven projects with a combined net development value that exceeds EUR 280 million. Nevertheless, we are considering a further expansion of our portfolio, and we are constantly looking to acquire new assets, both in Bucharest and across the country.

When do you expect to deliver the H Stirbei Palace project in central Bucharest? Have you already engaged in negotiations with potential tenants?

Construction works for H Stirbei Palace are unfolding as scheduled, with the consolidation phase to be completed in about two months. The caryatides have already been restored to their original appearance, and the pluridisciplinary teams we are working with are now invested in refurbishing the stoves. As we speak, workers are organising the site where we will soon start building the C2 annex—the former carriage house—and we estimate that we’ll finalise the works in full by mid-2025.? Moreover, we are delighted to share that the project has aroused the interest of several international luxury brands. When we broke ground last year in October, we were already in discussions with some potential tenants. Since then, demand has continued to grow.

We’ve therefore decided to team up with CBRE Romania, appointing them as the exclusive agency in charge of the leasing strategy of H Stirbei Palace, and we are positive that their know-how and expertise on the retail segment will support us in successfully placing Romania on the map of luxury shopping destinations.

What is your development vision for the building you’ve purchased on Vasile Lascar 5-7?

We acquired the property in early 2022, did some upgrades that allowed us to operate it until all the tenants completed their lease agreements, and used this time to plan the future development concept.

Our intent is to repurpose the building and transform it into a mid-scale category hotel (4 stars/4 stars+), with about 100-150 rooms. But our vision goes beyond opening a mere accommodation unit, as our goal is to transform and revive the area, making Vasile Lascar a desirable destination, not just a location, like we’ve managed to do with our projects on Calea Victoriei.

We have already made our first move and started negotiating with a couple of world-renowned operators that have shown an interest in our project, and we are pushing forward to soon introduce a new hotel to downtown Bucharest. As for the development timeline, after closing the deal with the operator, our forecast is that it will take about two years after obtaining the building permit for H Vasile Lascar to face the world again.

What are the trends in the medium-level residential segment and how are you adapting your projects to meet demands? What is your outlook for pricing in this segment?

The market has long crossed the chasm from ordinary living to contemporary living, while people’s needs and living standards have been evolving year-on-year.

“Better living” seems to be star syntagm of the medium and medium+ segments these days. And modesty aside, we are not adapting to trends; we are foreseeing trends. We have always been innovative, meaning that all our developments are designed to be ahead of their time, encompassing as many “good living” features as possible.

Hagag is present on the medium+ segment in Bucharest with two large-scale projects, H Pipera Lake and H East Residence, both developed under the aegis of the “Gated Community” concept, both emphasising quality, space, safety, security, privacy, connectivity, and services that are usually specific to the premium and luxury segments. These are all attributes that buyers are now looking for in a residential complex. Buyers’ categories, however, remain the same: there are the clients who are buying a residential unit for their personal use, as an upgrade to their previous home; the clients that are making their first-ever purchase; and then there are investors looking to safeguard their capital and make passive income while waiting for their property value to rise. And believe me: it will rise.

Over the past decade, the residential market has witnessed a 5% - 10% increase in selling prices per year, and with the pipeline shortage and permit freeze in Bucharest, high inflation, and rise in global development costs, residential prices will continue on this upward trend in the following years as well.?

How does Hagag Development Europe approach the premium and upper premium residential segments? What are the expectations of home buyers in this niche?

All our developments are experience-driven, be they office buildings, retail or residential projects. But when it comes to the premium and upper premium residential market, our goal is to create luxury residences that mirror living in a high-end hotel, though in a more private and relaxed ambiance, in select locations, and with select neighbours. If you take a close look at our premium and high-end projects—H Victoriei 139, H Eliade 9, and H Primaverii 1—you will see they all have a similar pattern: they are boutique projects, all located in some of the most coveted locations in the city, all emphasising distinctive architecture and aesthetics, top amenities, and services like concierge, housekeeping, pet walking, fully furnished units, and, on request, event art.

At the end of the day, we are talking about elevated, super prime real estate. And this is exactly what buyers expect from this type of property. They expect a prime location, privacy, top-notch quality, hospitality-like services, and a building with unique architectural presence.?

What is your strategy for the office segment considering the limited pipeline of new projects in Bucharest? Will you adapt your new office projects to flexible work arrangements?

When it comes to the office segment, I think we can all agree that Hagag is one of the most flexible and adaptable players on the market. We proved this last year with the inauguration of our first flex-office product H Private Arghezi, and we are reiterating it today, with the results we have achieved so far: a 90% occupancy rate for H Tudor Arghezi 21, a fully leased H Victoriei 109, and an 83 percent occupancy rate for H Private Arghezi.