Romania is experiencing the strongest acceleration of industrialization in the European Union

Romania is experiencing the strongest acceleration of industrialization in the European Union, according to a Colliers analysis.

Investment in production machinery and military equipment in Romania increased by 80% last year compared to the pre-pandemic period, well above the EU average of 30%, according to Eurostat data analysed by Colliers. These figures also reflect the dynamics of industrial and logistics space rentals, where the volume of activity is significantly higher than in the pre-pandemic period.

“The fact that we are at the top and well above the EU average in terms of growth of investment spending on machinery, production equipment and military systems is not surprising. If we look at the difference between labor costs and average labor productivity in industry, Romania is at the top of the European Union. Moreover, the ratio between wages and productivity puts Romania at the level of countries many manufacturers prefer, including China. Also, although many Romanian companies complain about the availability of labor in certain areas, we are better off than most of our European neighbors", says Victor Cosconel.

The first three months of 2024 saw a slow activity in the industrial and logistics (I&L) real estate sector, with leases of around 150,000 square meters, a significant drop from 270,000 square meters in the same period of 2023. Deliveries of new projects were also limited in the first quarter, with a total modern stock rising to 7.1 million square meters, but the second half of the year is shaping up to be more active, with more than half a million square meters expected to be delivered.

The vacancy rate for prime warehouse space remained in the single digits, often below 5%, in most submarkets in Romania, including Bucharest. This indicates that tenants above a certain size may find it difficult to secure the desired space in terms of cost and location. However, an increase in speculative developments could ease this pressure later in the year. Additionally, there is a significant amount of vacant space among the areas rented by 3PL players, which could influence the overall situation.