This report covers the market developments in Q3/2014 and the data available as of December 2014 The construction works index accelerated its decline and dropped by 11.7% y/y in Q3/2014, after having decreased at double-digit annual pace in the previous two quarters. The decline in Q3 was mainly driven by the poor performance of the civil engineering segment, which diminished by 26.7% y/y over the quarter and by 24.7% y/y in January-September 2014. The buildings segment recorded better y/y evolution in Q3, yet its performance has been uneven during the first three quarters of the year. Both the residential and non-residential sub-segments demonstrated temporary, seemingly unsustainable periods of expansion. On the residential segment, demand remains subdued -- but real estate developers have redesigned their projects to adjust to market reality, while banks are also extending mortgage loans under a state-guaranteed programme, likely to encourage the construction of new buildings. The real estate market was more dynamic in terms of investments and transactions, particularly on the commercial segment. According to market data, the value of real estate investments in 2014 increased four times compared to 2013. Of the total, deals involving retail and office properties accounted for a cumulated 75% share. Investment activity on the commercial real estate market is expected to continue growing in 2015, with the office segment projected to record the most dynamic pace. Key points: • Construction works index plunges 11.2% y/y in Q3/2014 • Government scales down road infrastructure plan, to concentrate on lower grade roads • Number of real estate transactions up 2.5% y/y in January-October 2014 • Value of real estate investments quadruples to €1.2bn in 2014 • NEPI pays €148mn for Promenada shopping mall in Bucharest • Immofinanz to invest €85mn in expansion, upgrade of business park in Bucharest