Romanian Real Estate Market Ends First Half of the Year with Favorable Outlook
Large infrastructure investments, significant salary growth outpacing inflation, a stable external economic context, and central banks’ success in combating inflation have helped the Romanian real estate market maintain a favorable outlook. However, the results are mixed, according to Colliers Romania experts in their market report for the first half of the year, set to be released at the end of the month.
In the first half of 2024, real estate transactions in Romania totaled 419 million euros, more than double the amount from the same period last year. The construction sector has reached historic highs, driven by massive EU fund investments and a very active private sector. The logistics and industrial space sectors are also showing promising results, with leases continuing their migration to areas outside the capital. Meanwhile, the retail sector continues its rapid development. In the land market, Colliers consultants note lower interest but anticipate large transactions in the future due to deals started previously. The office sector sees relatively strong demand despite limited deliveries.
“The economy is sending mixed signals. Delays in the EU’s Recovery and Resilience Plans, geopolitical uncertainty, and the uncertainties from the US elections, along with the prospect of significant tax tightening in Romania starting in 2025, are tempering optimism. However, there are reasons for a slightly positive outlook, especially given the large investments—both private and public—taking place in Romania. The local real estate market is influenced by these developments, but the impact varies by sector. Prospects remain quite solid in the region, with ESG criteria becoming increasingly relevant for real estate investors, banks, and tenants in the decision-making process,” said Silviu Pop, Director of CEE & Romania Research at Colliers.
Romania has seen the best performance in real estate investments among the major economies in Central and Eastern Europe (Bulgaria, Czech Republic, Hungary, Poland, and Slovakia) this year. This is notable given the reduced regional market activity and low transaction volumes.
In the first six months of 2024, the volume of commercial real estate assets traded in Romania reached 419 million euros, more than double the 167 million euros recorded in the same period in 2023. Although the context remains challenging due to risk costs, prospects for 2024 are good, with potential interest rate cuts and signs that the market has reached its lowest activity and price levels in the West. Therefore, the market outlook for the year should surpass the average for the previous decade, above 600 million euros.
The local industrial and logistics space market was strong, with modern space stock reaching 7.3 million square meters. Bucharest accounts for nearly half of this, with about 800,000 square meters of modern space under construction due for delivery in 2024 and 2025. Infrastructure work is progressing rapidly, opening new areas of interest for the industrial market, including production. The nearshoring/friendshoring trend remains strong, supporting the production sector. Rental demand for logistics and production spaces decreased by approximately 29% in the first half, to 342,000 square meters, but this reflects a lack of very large contracts rather than a market decline.
In the office market, new demand was moderate in the first quarter of this year, and there were no new deliveries. Approximately 160,000 square meters of modern office space were leased in Bucharest in the first half of the year, a slight decrease compared to the same period in 2023. However, new demand reached around 64,000 square meters, up 7% from 2023, but still below peak levels. The IT&C sector remains dominant, but demand is now more diversified. Colliers consultants note a growing gap between top buildings and older ones, with new deliveries expected to accelerate starting in 2026.
The retail sector remains attractive, with active transaction activity, new brands appearing, and large schemes re-emerging post-2026. Colliers consultants anticipate that the threshold of 5 million square meters of modern retail space will be exceeded in 2026-2027, from a current stock of 4.6 million square meters. Salaries are increasing by approximately 14-15% annually compared to 5% inflation, offering good prospects for medium-term consumption.
In the land market, 2024 is shaping up to be a strong year for strategic acquisitions in areas where investors are already active. Although the number of newly started transactions is decreasing, many previously initiated deals are closing, suggesting that 2024 will be a good year overall. Owners are not too willing to offer opportunities to buyers, confident in the post-2025 market prospects. This confidence is supported by consolidations around large projects, a generous supply of land for mixed-use developments, and good interest from residential and retail clients.
The residential segment faces a delicate balance with rising buyer appetite and a dip in new supply. House purchase intentions are near all-time highs, and rising purchasing power coupled with potential interest rate cuts should support demand. However, both authorization and deliveries have dipped substantially, creating the potential for significant housing price acceleration over the medium term.
“Massive investments via EU funds and an active private sector have pushed construction works near record highs. The competition between private and public sectors, rising salaries, and elevated commodity prices have strained the market, leading to increased construction costs since the second half of 2023. However, today’s investments support tomorrow’s economic growth, promising bright prospects for Romania’s real estate sector in the medium and long term,” concluded Silviu Pop.
Source: Colliers Romania
Photo: Silviu Pop, Director of CEE & Romania Research at Colliers
