The first half of 2024 ended with a modern stock of industrial and logistics space in Romania of about 7.3 million sqm, and developers have more than 700,000 sqm under construction in various stages, indicating that it could reach the 8 million sqm threshold next year, according to Colliers’ report on real estate market developments for the first half of the year. Total demand in the first six months reached around 342,000 sqm in leasing transactions, a 24 percent decline compared to the same period in 2023, but still in line with previous highs. However, these figures do not fully reflect the size of the local market, as only publicly available information is included, and Colliers consultants estimate that actual demand could be 20-30 percent higher.
Compared to previous years, the first half of the year saw an almost equal distribution of rental activity between Bucharest and the rest of the country. Colliers consultants view this as an exception rather than a reversal of the previous trend, where rental growth was much faster in other regions as employers sought to capitalize on better labor market conditions and upcoming infrastructure improvements.
“A notable transaction in 2023 was related to a capital source largely absent from the local investment market: domestic institutional investors. In 2023 the asset management arm of the largest local bank, BT Asset Management, bought the real estate properties of Amethyst Romania in a sale-and-leaseback deal of EUR 12 million. It is important for the local real estate capital markets that this sector grows in the future”, explains Robert Miklo, Director | Investment Services at Colliers.
Over the past year and a half, the limited availability of financing, coupled with higher interest rates, has caused prices to fall and yields to rise across much of the world, including Romania. However, Colliers’ consultants point out that Romania missed much of the downward yield movement over the past decade and is now seeing less of a correction than others. So, in the absence of major benchmark deals to really show where the market is, they are currently quoting yields in a range. As a result, prime office yields in Romania were between 7.25 percent and 7.75 percent at the end of last year (compared to 6.75 percent at the end of 2022), prime retail yields were between 7-7.50 percent (compared to 6.75 percent at the end of 2022) and prime industrial yields were between 7.25-7.75 percent (compared to 7.50 percent at the end of last year).
“Although down compared to the same period last year, the performance in terms of demand is far from weak. In fact, it is better than most of the pre-pandemic period, with 2017 being an exception due to its atypical nature. In strong years prior to 2020, annual rental demand reached 400,000 to 500,000 sqm, and we are now approaching those levels within just a six-month period. It’s important to note that our report only includes officially reported transactions—whether from local research agencies, press releases, or listed company reports. However, we know that many direct transactions, particularly lease renewals, often go unreported, meaning that gross demand is likely much higher than our official figures suggest. Factoring in lease terms and BTS (build-to-suit) schemes that are not initially reported, we estimate that actual demand could be at least 20-30 percent higher over longer periods”, explains Victor Cosconel, Head of Office & Industrial Agencies at Colliers.
By sector, transactions involving manufacturing or light industrial activity accounted for nearly 40 percent of all leases, up from their share in 2023 and significantly higher than the 10-15 percent share observed before the pandemic.
The vacancy rate for prime warehouse space has remained in the single digits, typically around 5 percent, in most Romanian submarkets, including Bucharest. This suggests that for tenants needing larger spaces, it can be quite challenging to find a suitable warehouse that meets both cost and location requirements.
