Romania is the hottest tip for lucrative contracts in Building's analysis of the European construction market. But it's by no means the only one.
Romania may still be known as the land of vampires, but British firms are hoping to tap into the rich vein of work starting to flow from Bucharest. After booms in the Czech Republic, Poland and Hungary, Romania is the country next in line, says Richard Steer, a senior partner at QS Gleeds.

To prove its point, Gleeds is negotiating three project management contracts in the capital – a car part manufacturing plant, an office block and a business park.

Why should this former communist state attract interest? Steer believes the country provides a foothold in central Europe for firms that missed out in Poland, Hungary and the Czech Republic. Banks and supermarkets, including Tesco and Marks & Spencer, are understood to be interested in expanding there.

Another attraction for QSs is its excellent profit margins. "We expect profit margins to be higher than in the UK because of the greater risk and lack of competition," says Steer.

This view is echoed by Charles Lewis, international operations director at QS Capita Beard Dove, which is already working in Romania. The firm was project manager on construction of Bucharest's Hilton Hotel. "There is a lot of interest in Romania at the moment," he says. "Austrian, French and American firms are looking for the next growth market." These are mainly office, retail and communications clients. Consultants' fees can be up to 12% higher than in Hungary, Poland or the Czech Republic, he adds.

Don't expect immediate returns

Of course, firms cannot expect to arrive in Romania and immediately start collecting commissions. "You have to remember there is a lot of knowledge and experience to pick up," says Lewis, "it won't happen overnight." What are the risks involved in emerging markets such as Romania? Steer explains: "When you work in a mature market, there is a system. In newly emerging markets, there might not be a fully developed legal structure, for instance, and a lot of things are being tried for the first time."

Obtaining planning permission is also time-consuming. Detailed planning permission needs to be in place much earlier and consultants have to be prepared for one-to-one negotiations. This means project promoters can tell at an early stage whether a plan is likely to be accepted. Project managers may also find they have to persuade Romanian trade contractors to raise standards. Steer says: "International clients look to us to ensure quality control. When we are using local plasterers, they get used to a certain level of finish and have lower expectations."

Romania may be this season's favourite central European market but the much-publicised Polish boom is still in full swing. "For workload, you would have to go a long way to beat Warsaw and other Polish cities," says Michael Davies, managing director of Mace International. "In developing countries, there is a tremendous appetite for inward investment. Each one is trying its best to prove that it has the right characteristics for people to move there."

Poland continues to profit from large amounts of inward investment from the likes of Burger King and McDonald's. Mercedes Benz and Volkswagen are also major players. Foreign companies invested £18.75bn in Poland, mainly in manufacturing, between 1990 and the end of 1998.

Capita Beard Dove has 50 staff in central Europe – in Bratislava, Prague and Warsaw. The firm also wants to recruit up to 10 QSs in the next few months.

Multidisciplinary firm AYH is working as project and cost management consultant on two Warsaw fit-out schemes for Chase Manhattan and Citibank. Citibank is opening its first branch in the country in anticipation of a credit card boom. If business takes off, it plans to open others. AYH believes it is well placed to benefit from any future work for Citibank.

Polish boom expected to continue

AYH director Nigel Maidment believes the Polish boom will continue. "A lot of people are going out there, and there are tremendous opportunities on the retail and leisure side," he says. "There isn't so much competition and [Poland] is still reliant on the expertise of Western consultants."

One drawback of working in former communist countries is that many items have to be imported, such as sliding doors and specialist cladding materials, and the resulting form-filling pushes up costs and lengthens project times.

Russia looked to be a potential boom area until its economy collapsed last year. But Steer is optimistic about Russia's potential and Gleeds still has a presence there. "We have downtuned it," he says. "But we are hanging on in there."

Maidment, however, wrote off Russia some years ago. "We looked at the feasibility of Russia some time ago but we were concerned about sending staff over there for safety reasons." In the European Union, Spain continues to be a hot spot for developments. "Spain is on the top of many people's lists," says Pierre Baillargeon, director of architect HOK International. "UK developers are very active in Spain and a lot of Dutch developers are pursuing projects. Where they go, architects will follow."

Baillargeon says the opening of the Guggenheim Museum in Bilbao has helped spread the Spanish boom beyond Madrid and Barcelona. The Canary Islands, too, are benefiting from a surge of interest. HOK is working on the detailed design for a 450-room, five-star hotel in Tenerife for Norwegian outfit Finca Erques.

But, again, overseas firms cannot expect to reap the benefits of a boom as soon as they arrive. Specialist mechanical and electrical consultant Roberts & Partners opened an office in Madrid five years ago. International managing director Robert Ward admits: "The first three years were very slow, but we are glad we stayed because the American and British developers started up."

Germany and France may be economic giants but neither one is providing many development opportunities. AYH is working on four offices in Germany but Maidment describes the market as flat. "If anything, we are seeing a downturn in Germany," he says. "Our office is looking for work outside Germany, for example in Hungary. A lot of German consultants are looking for work in Poland."

The picture is similar in France, with the exception of US telecommunications group Nortel, which is investing heavily in new offices. Maidment says France has always been a difficult market to penetrate and to maintain a consistent workload in.

Ward says: "We pick up intelligence from large corporate clients and a number have said that there are fewer opportunities in these countries because it is a mature market."

There are opportunities in Europe but firms have to get in early and stick with a country before they can see a return on their investment. Activity in Spain and central Europe has proved this. The markets may be patchy across the continent, but, as Steer concludes: "More and more companies are embracing pan-European presences."

Romania at a glance

Capital: Bucharest Population: 22.6 million Land area: 238 391 m2 Major investors: Austria, France, Israel and UK (increasing) Development control: City councils control development and issue construction authorisation Active companies in Romania: Shell, Hilton International, Unilever, Emcom-Siemens and Enterprise Oil Work style:
  • Romanians are used to free-market working practices and often work late and over weekends
  • English is widely understood among the professional classes
  • Commercial life centres on Bucharest. Weak infrastructure hinders development outside the capital
  • It’s not all dingy drinking dens. At night, visiting workers can find sophisticated nightclubs, restaurants and casinos in Bucharest.

Hot spots for British firms in the new millennium Europe

France Roissy Porte de France Community of Urban Districts is planning to develop 400 ha of land on five sites near Paris Charles de Gaulle airport. Contact: Roissy Porte de France, +33-134-290306. Nice Municipal Economic Agency has land for a 150 000 m2 business park. Contact: Municipal Economic Agency, +33-492-148814. Germany Alteno-Luckau is a 120 ha development area set in the triangle between Berlin, Leipzig and Dresden. Contact: Gunter Sando, Dahme-Spreewald, +49-35-443801. In Berlin, development opportunities are available at Aldershof. Proposals for science, research and technology buildings are already in the pipeline for this 420 ha site. Contact: BAAG Berlin Aldershof, +49-30-490903. Also in Berlin, a 5 ha site is available in the Lehrter Bahnhof quarter of the city. Contact: Elisabeth Kammermeier, Eisenbahnimmobilien Management, +49-30-692 65275. Hannover Programme 2001 is a planned development to complement the city’s forthcoming Expo. Contact: City Directorate of Planning and Building, +49-511-168 46470. A £100m redevelopment of Mannheim station is set to release 10 ha of development land. Contact: City of Mannheim Office of Economic Development, +49-621-293 3351. Italy The authorities in Genoa plan to build a 33 000 m2 shopping and entertainment centre, complete with offices, schools and housing on a 168 000 m2 site next to the railway. Land is also available for a 17 000 m2 electronic industries park. Contact: City of Genoa, +39-522-682741. Poland Katowice Special Economic Zone comprises 800 ha of development land on 17 sites. Contact: Katowice Special Economic Zone, +48-32-251 0736. Russia The Moscow authorities have plans for a £352m reconstruction of the Russian state library. Contact: Government of Moscow, Complex of Long-Term Development (Moscow), +7-095-956 8134. St Petersburg’s city council has announced a massive regeneration scheme called the Strategic Plan. This includes a new citywide system of roads, metro lines, business parks and restoration of St Petersburg’s historic city centre. Contact: Project office for Strategic Plan, +7-812-316 6246. Czech Republic The mining city of Ostrava is inviting plans to redevelop an existing ice-rink, freeing up 12 500 m2 of space for investors. It is also looking for designs for three sites, one of 102 00 m2, one of 12 000 m2, one of 4252 m2. A 100 000 m2 business park is under way. Contact: Petr Lachnit, deputy mayor, +42-69-222840. Portugal 1999 is set to be another boom year for the Portuguese construction market. The economy is growing and inflation is down to northern European levels. There is demand for shopping centres, where rents are still very high because of space shortages. Office demand is good and UK developer Akeler is investing in office parks, but experts say the market will tail off in 2000. Contact: Healey and Baker (for informations on markets), +351-1-322 4757. Sweden Scancem Real Estate has land in Malmö for a business park, office headquarters buildings, a new train station and landscaped parkland. Contact: Scancem Real Estate, +46-40-165000. Stockholm city council is pushing hotel development. It estimates that 1500-2000 more hotel rooms are needed to service visitor demands. It is also promoting Infra Park, a 40 000 m2 business park 17 km from the city. Contact: The City of Stockholm Development and Promotion Office, +46-8-785 8000. Tallinn, Estonia Tallinn town council is proposing a dockside regeneration project including 80 000 m2 of office space, sports and entertainment facilities, and other commercial property. Contact: Aktsiaselts TSM, Tallinn, Estonia, +37-2-641 0498. Greece Greece is hosting the 2004 Olympic Games and tenders will be advertised this year. The Olympic Village will cover 300 000 m2 and is worth £284m. The yachting centre is a £19.8m project, the rowing centre will be built for £26.4m and the equestrian centre is worth £66m. Other projects include a £33m stadium complex, an £11.8m sports hall, an £11.8m broadcasting centre and a £1.4bn airport (let to German giant Hochtief). Contact: Director general of Olympic works, +30-1-3240004. The Municipality of Loutraki is building a £43m international training centre for the Olympics. Contact: Municipality of Loutraki, +30-744-62187. The Greek Public Real Estate Corporation has a £20m budget for site development between 1999 and 2002. It has three sites for development totalling more than 130 ha. Contact: Greek Public Real Estate Corporation, +30-1-6459700.