The y-o-y inflation rate reached 14.8% in September in Romania, one of the highest levels in the European Union and, although expected to stabilise in Q4, it is likely to remain in double digits at least until late H1 2023. The monetary policy rate has also been increased by the National Bank of Romania, up to a most recent level of 6.25%, with further increases expected in the following months. The Q3 2022 economic growth has been solid (+ 7.1% y-o-y), but a slowdown may be observed in Q4, as most agencies and analysts forecast a GDP growth of around 5% for the whole year.
The real estate market in Romania continued to show positive signs in Q3 2022, as all segments registered important new deliveries and strong take-up levels, while the inflationary pressures are starting to have an impact on the headline rents which may record upward movements in the following the 6 - 12 months.
More than 916,000 sq m of industrial and logistics spaces have been transacted in the first 9 months of the year, a level representing a 63% growth when compared with the same period of 2021. Therefore, a new yearly record is expected in terms of transactional volumes considering that the total for the whole last year was of 1,003,000 sq m. Moreover, the development activity for the Q1 - Q3 period reached 525,000 sq m, while there are also new projects under construction with a total leasable space surpassing 570,000 sq m across Romania, a robust pipeline which confirms the developers’ confidence in the local market.
A total office demand of 223,000 sq m has been recorded in the first 3 quarters in Bucharest, reflecting an increase of 5% compared with the same period of last year. The overall vacancy rate in the city has slightly decreased to 14.4% as a result of a lack of new deliveries. The currently under construction pipeline totals 129,000 sq m GLA, a relatively low pipeline compared with the last few years, which comes as a result of the present bureaucratic issues in Bucharest, as very few real estate projects received their building permits during the last 12 - 18 months.
Retail parks remained dominant in terms of development activity in 2022, accounting for 80% of the total new supply registered in the Q1 - Q3 (75,000 sq m) period, while almost 250,000 sq m of new projects are currently under construction and are due to be delivered by 2025, the new investments consisting of both shopping centres and retail parks. The Consumer Price Index (CPI) increase has also impacted the retail sales, which registered a lower y-o-y growth rate in Q3 2022, a rate of only 1.7% compared with 9.3% in Q3 2021.
17 Aug
Vlad Saftoiu
Research Analyst
The y-o-y inflation rate reached 15.1% in June in Romania according to the National Institute of Statistics, one of the highest levels in the European Union and, although expected to stabilise in Q3, it is likely to remain in double digits at least until the end of the year. The monetary policy rate has been constantly increased by the National Bank of Romania in order to tackle this inflationary trend, up to a most recent level of 5.50%, with further increases expected. The Q1 2022 economic growth has been solid (+5.1% q-o-q and +6.4% y-o-y), but a slowdown may be observed in H2, as the latest European Commission forecast implies a 3.9% GDP growth for the whole year, which is still a good level considering the overall impacts of the inflationary pressures and also of the side effects caused by the war in the Ukraine.
The total office stock in Bucharest reached 3.3 million sq m at the end of H1 2022, with around 93,000 sq m being completed in 2022 so far. 156,600 sq m of office space has been transacted in H1, corresponding to a 32% increase compared with H1 2021. Net take-up had a consistent share of 66% in H1 2022 (compared with 59% in H1 2021), a positive aspect which has also resulted in a slight q-o-q overall vacancy rate decrease to a level of 14.9% (from 15.3% in Q1).
The industrial and logistics property market registered a strong leasing activity in H1 2022, with a gross take-up of more than 542,000 sq m, representing a 50% growth when compared with the same period of 2021. Renewals had a share of only 14% in H1, the activity being mainly driven by new demand, which indicates a sustained attractiveness of the Romanian industrial and logistics sector. Moreover, the vacancy rate has declined for five quarters in a row, reaching a national level of 3.6% at the end of H1, the lowest since 2019. However, the development cost of industrial and logistics projects is increasing mostly due to the surge of the construction materials’ prices, developers thus being forced to increase the asking rents in new projects.
New modern retail schemes totalling around 140,000 sq m are presently under construction and are due to be delivered by 2025 at national level, while other projects of around 610,000 sq m GLA are under different planning stages, thus confirming the market’s potential for a further robust expansion.
The elimination of all the pandemic related restrictions in March resulted in a consistent initial increase in both footfall and sales in physical stores. However, the high inflation is expected to impact the retail market in the short term, as the overall retail sales growth in H1 2022 has been lower than the corresponding figures for inflation.
05 May
The sanitary situation is Romania is quite stable, as the number of daily cases has significantly decreased, and all the pandemic related restrictions were lifted in early March. An overall GDP growth of 5.9% has been recorded in 2021 (lower than the mid-year forecast of 7%) due to a q-o-q contraction of 0.1% in Q4, a contraction which came mainly as a result of the abovementioned restrictions imposed to tackle the spread of the then-prevalent Delta variant.
Romania has also seen high inflation levels during the last few months (10.2% y-o-y in March 2022) and the monetary policy rate has been increased to 3% and it is expected to reach a level exceeding 4% by the end of 2022, both as a result of the inflation and also of the ongoing conflict in Ukraine, with a more positive outlook for 2023.
In regard to the real estate market, the Q1 office supply has been consistent with three new deliveries in Bucharest totalling 73,500 sq m, while 80,800 sq m have been transacted during the same period, an increase of 69% and 54% when compared with Q1 2021 and Q1 2020, respectively. Moreover, the net take-up (excluding renewals) had a consistent share of 72%, significantly higher than the last 2 years’ average of 56%, with the gross take-up being expected this year to break the 300,000 sq m threshold for the first time since 2019.
The demand for industrial and logistics spaces remained consistent in Q1 2022, with a total leasing activity of over 300,000 sq m, reflecting a 50% increase when compared with Q1 2021, thus maintaining the positive trend observed during the last two years. Renewals represented only 15% of the transacted volume, the activity being mainly driven by new demand. This has encouraged developers to continue their investment plans and therefore new projects totalling 178,000 sq m were completed across Romania during Q1 2022, while the pipeline for the rest of the year is robust, as new projects with a total area of more than 500,000 sq m are currently under construction in various cities.
New retail schemes totalling around 100,000 sq m are presently under construction and are expected to be delivered by the end of 2022, while the first quarter of the year has seen the largest retail delivery in Bucharest of the last 6 years. Moreover, an increase in footfall and sales in physical stores has been observed during the last month as a result of the government restrictions being lifted, while the Romanian retail market continues to attract new brands which have announced their plans to enter the country, such as Primark and Footlocker, among others.
22 February
The Omicron variant is slowly becoming dominant in Romania and the number of new cases significantly increased in January, reaching a daily average of around 30,000 by the end of the month. However, there have been less hospitalisations and deaths associated with the virus than in the previous wave and the Government, although not outlining a clear plan yet, has indicated that most restrictions could be lifted from March/April onwards if the sanitary situation clearly stabilises.
The Romanian real estate market benefitted from a solid 2021 despite it being another year marked by the uncertainty caused by the pandemic. For example, the total investment volume in 2021 (€916 million), has been slightly higher when compared with 2020 (€914 million), while a consistent yield compression of around 50-75 basis points has been recorded in the second half of the year.
Moreover, a further compression is expected in 2022, especially in regard to a series of properties which are currently on the market and which may be the subject of landmark transactions in the following period.
New office projects of 244,000 sq m have been completed in Bucharest in 2021, a 57% increase when compared with the 2020 new supply, while the total take-up has also recorded a year-on-year growth of almost 60% by nearing the 300,000 sq m mark. Considering the existing pipeline, and the absorption potential of the currently available office spaces, there is a strong indication that yearly take-up volumes in excess of the above-mentioned mark will be the norm during the next 4-5 years, thus decreasing the current vacancy rate which stands at 14.9%.
The industrial and logistics market continued on its upward trend, as more than 1 million sq m have been transacted for the first time in Romania in 2021, while 530,000 sq m of new spaces have been delivered. The strong demand for industrial properties combined with low vacancy rates, encourages developers to continue their portfolios’ expansion, with the pipeline revealing that almost 600,000 sq m of new spaces are planned for delivery in the next 12 months.
The retail segment has also been active, as new projects totalling almost 100,000 sq m were completed last year, mostly in secondary and tertiary locations, with a clear preference towards retail parks being observed, as these projects have been less impacted by the pandemic and the subsequent Government restrictions, a development trend which is expected to continue going forward.
09 February
The Omicron variant is slowly becoming dominant in Romania and the number of new cases significantly increased in January, reaching a daily average of around 30,000 by the end of the month. However, there have been less hospitalisations and deaths associated with the virus than in the previous wave and the Government, although not outlining a clear plan yet, has indicated that most restrictions could be lifted from March/April onwards if the sanitary situation clearly stabilises.
The Romanian real estate market benefitted from a solid 2021 despite it being another year marked by the uncertainty caused by the pandemic. For example, the total investment volume in 2021 (€916 million), has been slightly higher when compared with 2020 (€914 million), while a consistent yield compression of around 50-75 basis points has been recorded in the second half of the year.
Moreover, a further compression is expected in 2022, especially in regard to a series of properties which are currently on the market and which may be the subject of landmark transactions in the following period.
New office projects of 244,000 sq m have been completed in Bucharest in 2021, a 57% increase when compared with the 2020 new supply, while the total take-up has also recorded a year-on-year growth of almost 60% by nearing the 300,000 sq m mark. Considering the existing pipeline, and the absorption potential of the currently available office spaces, there is a strong indication that yearly take-up volumes in excess of the above-mentioned mark will be the norm during the next 4-5 years, thus decreasing the current vacancy rate which stands at 14.9%.
The industrial and logistics market continued on its upward trend, as more than 1 million sq m have been transacted for the first time in Romania in 2021, while 530,000 sq m of new spaces have been delivered. The strong demand for industrial properties combined with low vacancy rates, encourages developers to continue their portfolios’ expansion, with the pipeline revealing that almost 600,000 sq m of new spaces are planned for delivery in the next 12 months.
The retail segment has also been active, as new projects totalling almost 100,000 sq m were completed last year, mostly in secondary and tertiary locations, with a clear preference towards retail parks being observed, as these projects have been less impacted by the pandemic and the subsequent Government restrictions, a development trend which is expected to continue going forward.
11 January
There has been a relatively stable situation in regards to the number of daily COVID-19 cases in December, but an increase has been noticed in early January which is mostly related to the new Omicron variant, thus marking the early stages of a new wave of infections in Romania. The vaccination rate, although progressing better than in the summer period, is still quite low, as only 41% of the population is fully vaccinated, with 11% also receiving the booster dose.
In economic and financial terms, Romania remains extremely resilient, posting growth for 5 consecutive quarters since Q3 2020, with an overall increase of more than 7% expected to be announced for 2021, as 2022 will also be good year, with a GDP growth between 4.5-5% being forecasted.
Moreover, consumption has been robust in the first 11 months of 2021, recording a 10.5% year-on-year increase, a trend which should remain constant on the short and medium term, despite any potential new restrictions which may be imposed in order to tackle the spread of the Omicron variant.
However, the Romanian economy has also been impacted by the inflationary wave which has been observed all around Europe, reaching an year-on-year level of 7.8% in November, while the gas & energy prices recorded an year-on-year increase of almost 50%, as a price cap has been set by the Government during the winter period in order to halt this trend.
The monetary policy rate has been increased by 50 bp during the last two extraordinary sessions of the National Bank of Romania to 1.75% and most analysts expect it to reach a level of around 3% by the end of 2022, as inflation will remain at high levels for at least 6 more months.
16 November
The COVID-19 situation in Romania has somehow stabilised in early November as a result of a series of restrictions adopted in late October in order to deal with the most difficult phase of the pandemic so far. Therefore, the number of daily cases has seen a consistent decrease of almost 50%, combined with a surge of vaccinations during the last month, as 35% of the population is fully vaccinated compared with less than 30% at the end of September, while the booster (third) dose has also been performed to more than 5% of the population already.
The Covid digital certificate is now required all around the country in order to enter shopping centres, restaurants, DIY units and many other indoor spaces and it is still unknown for how long, as this measure is due to be extended or not at the end of November.
Regarding the real estate market, Q3 2021 has been an impressive quarter for most segments. For example, we have seen the highest ever office quarterly new supply in Bucharest, as 132,000 sq m of office spaces have been delivered during this period, while the Q1-Q3 take-up has increased by 33% when compared with the same period of 2020, as a consistent pipeline of around 280,000 sq m is under construction and expected to be delivered in the following 18-24 months.
The demand for industrial & logistics spaces remained solid in Q3 2021, the total leasing activity reaching 202,000 sq m. After three quarters, a cumulated take-up of 562,000 sq m has been recorded, a level only 3% below the same period of the previous year, as the vacancy rate continued to decrease to less than 5% at national level. Moreover, more than 600,000 sq m of new spaces are currently under construction, thus setting the scene for a positive 2022.
The retail market, even without a robust new supply in 2021, benefits from a pipeline of around 120,000 sq m of under construction projects, while developments amounting to more than 460,000 sq m are under different planning stages.
20 October
The number of COVID-19 cases has been relatively low during the summer, but the Delta variant has become predominant and thus caused a surge of infections starting from September onwards, as an average of more than 10,000 daily cases have been recorded in October. Moreover, the vaccination campaign has strongly faded since May and less than 30% of the population is fully vaccinated, one of the lowest rates in Europe.Therefore, new restrictions have been imposed in the areas with a high incidence of infections, as a Covid digital certificate is required to enter restaurants, cinemas, sporting arenas and other spaces, while a large number of schools have also been closed as a result of the increasing number of infections amongst students and teaching staff.
Regarding the economic environment, Romania is showing resilience after posting growth for 4 consecutive quarters since Q3 2020, with an overall increase of around 7% being expected in 2021, the country being one of the best performers in the European Union.
Consumption has picked up significantly in H1 2021 (+13.4% y-o-y), a trend which is expected to continue going forward despite the restrictions.
A number of important investment transactions in excess of EUR 50 million have been closed this year, as office yields are forecasted to record a small compression for prime assets by the end of 2021, while we are seeing more activity by investors, with a number of ongoing deals.
The office and industrial market segments remained active all throughout 2021, as almost all new projects were delivered on time, while a significant pipeline is expected to be completed in the next 2 years with no relevant delays.
27 July
Romania has seen a significant decrease of new COVID-19 cases from April onwards and many Government restrictions have been lifted in the last two months, as almost all indoor and outdoor spaces have reopened (schools, restaurants, cinemas, sport venues, playing grounds etc.).
Q1 2021 produced a surprising q-o-q growth of 2.9%, as a yearly GDP increase in the 5-7% range is now being estimated by both Government and analysts, the Romanian economy is recovering faster than expected.
The industrial and logistics market has been the spearhead segment once again, as the total take-up in H1 2021 was 21% higher compared to H1 2020, thus confirming its position as the leading real estate sector during the pandemic.
Both office and retail markets will record a consistent supply in 2021, with most projects due to be completed in the second semester. Moreover, the office take-up in Bucharest has begun to pick-up the pace in Q2, as an overall y-o-y increase of more than 20% is highly expected in 2021.
Romania still has some of the most attractive yields in the CEE region and the market liquidity should remain healthy in H2 2021 as well, the local investment market has produced a number of important transactions of landmark assets in a period of uncertainty during the last 12 months.
20 April
Romania has been in a state of alert since 15 May 2020, this has been extended monthly. Most schools reopened following a decrease in the number of daily infections in January and February, but March has seen another surge of COVID-19 cases. A new wave of restrictions has been imposed from April onwards in order to combat this trend and to support the vaccination programme which has fully immunised only around 8% of the Romanian population so far.
H2 2020 was very solid in terms of economic recovery, with quarter on quarter GDP growths of 5.6% and 4.8% respectively being recorded in Q3 and Q4 2020, as preliminary data indicates a yearly GDP decline of -3.9% in 2020 - a better performance than was expected at the beginning of the pandemic. The outlook for 2021 is quite positive, with a GDP growth in the 4-5% range being estimated by both the Government and analysts.
The demand for industrial and logistics spaces remained on an upward trend in Q1 2021, since the total take-up recorded a 65% year on year increase, a trend which is expected to continue going forward.
The office and retail sectors have both seen new deliveries in the first quarter of the year, and the new supply will be more consistent in 2021 compared with 2020. Moreover, the share of the office net take-up has considerably increased in Bucharest in Q1 2020, thus the market is making its first steps towards the pre-pandemic levels.
Market liquidity held impressively throughout 2020 and should remain healthy in 2021 as well, several important transactions are expected to close during the year.
26 January
Romania has been on a state of alert since 15 May 2020, with limited restrictions compared to the previous State of Emergency, as all shopping centres, hotels, churches, museums, exhibition halls and public parks reopened by 15 June.
Following an increase in the number of new infections in October and November to around 10,000 daily cases, new prevention measures were adopted on 9 November, measures which helped in terms of decreasing the number of new daily cases to around 3,000 from mid-December onwards.
Several signs of recovery appeared as retail sales recorded a surprising 2.1% y-o-y increase during the first eleven months of the year, while construction works registered an impressive year-on-year increase of 17% in the January-November period. Moreover, a GDP growth of 4.5% is projected for 2021.
The industrial and logistics segment produced an outstanding performance in 2020 as the total take-up almost doubled compared to the 2019 figures while the new deliveries amounted to a 30% y-o-y increase.
The office and retail sectors were more impacted by the pandemic, both recording y-o-y decreases in terms of new supply. Consequently, several planned retail and office projects have been put on hold, while most of the launched developments are going forward as planned.
The investment market was also solid, especially considering the CEE/SEE context, as the Romanian market was the only one which recorded a growth in 2020 compared to 2019 (+28%).
30 April
There have been more than 11,000 confirmed cases of coronavirus in Romania so far and the country is currently under a State of Emergency until 15 May. An almost complete lockdown has been enforced in order to encourage social distancing during this critical period. The President announced that a relaxation plan will be considered after 15 May if the number of infected people decreases.
In the real estate market, the industrial sector has shown encouraging signs as both demand and supply were at almost similar levels compared to Q1 2019, a trend expected to continue going forward.
However, all retail projects have drastically reduced their activity in late March as a precautionary measure dictated by the current State of Emergency. Several scheduled deliveries have been postponed for the second part of the year.
Moreover, while the level of new office space delivered in Bucharest was similar to Q1 2019, the leasing activity recorded a 50% y-o-y decrease in Q1 2020.
The most relevant investment transaction in Q1 pertained to the CTP purchase of Equest Logistic Park in Bucharest, a transaction brokered by Cushman & Wakefield Echinox, as the total investment volume saw a 15% y-o-y increase. Otherwise some important transactions have been either postponed or cancelled altogether mainly as a result of the present climate of uncertainty.
