Romania’s commercial real estate investment market has the potential to exceed last year’s result of EUR 500 million, with around 70% of this volume having already been closed in the first half of the year, according to Business Review.
This year, the market seems to be more balanced as transactions involving industrial and retail assets are taking place alongside offices and hotels. In the previous years, dealmaking had been driven extensively by office projects, according to Anca Merdescu, CEE Investment & Debt Advisory Director Investment Services at Colliers.
In Q1, Romania was one of the most active investment markets across the CEE region. While EUR 200 million was invested locally, transactions in Hungary and Greece each reached EUR 100 million, while Poland recorded deals with a combined value of EUR 300 million, according to BNP Paribas Real Estate data.
In Europe, commercial investments amounted to EUR 32.7 billion in Q1 2024, down 10% versus the same period of last year.
On a rolling-year basis, the decline between Q1 2024 and Q4 2023 is only 3%, showing the first signs of stabilisation.
On the European market, offices continued the strongest decline of 27% due to difficult pricing plus structural changes from energy compliance and hybrid working. Retail accounted for a 21% decrease of the investment market, while logistics investment experienced a smoother decline of just 4%. On a positive note, hotel investment was up by 2%.
“With the pace of volume declining slowly, investment volumes have reached the bottom or are likely to reach it over 2024 depending on the country,” wrote analysts of BNP Paribas Real Estate in a report.
Locally, commercial property investments reached EUR 350 million in H1 2024, up 93% compared to H1 2023, according to data by Cushman & Wakefield Echinox. The industrial segment had a 52% share in the total volume of transactions, followed by retail with 40%.
“Transactions cumulating around EUR 400 million are in advanced stages of negotiation, as they equally target office buildings and retail projects, with around 50% of the assets being located in Bucharest,” says Vlad Saftoiu, Head of Research at Cushman & Wakefield Echinox.
The stock of modern real estate spaces (office, retail, and industrial) exceeded 16 million sqm in H1 2024, with over 8 million sqm located in Bucharest and its metropolitan area.
Bucharest remains the primary destination for real estate investments due to its constantly growing economy, while the high demand for modern real estate spaces continues to encourage investors to expand their real estate portfolios in the capital city, says Saftoiu.
Regional cities of the likes of Cluj-Napoca, Iasi, Timisoara or Brasov have also seen significant real estate investments. The stock of modern spaces in these cities reached almost 3.5 million sqm, driven by the growing population, the high number of students, and the overall demand for high-quality spaces, explains the Cushman & Wakefield Echinox representative.
With the ongoing construction of new infrastructure projects, some regions of the country could start to attract more investments, thus limiting the development gap that has widened against emerging cities.
“Romania’s diverse investment landscape, coupled with the focus on infrastructure and EU fund utilisation, creates a compelling proposition for businesses across various sectors,” says Mihai Patrulescu, Head of Investment Properties at CBRE Romania.
Bucharest has always been one of the most attractive business destinations in CEE and this status has continued to improve in the past few years.
“Firstly, the current GDP and future projected growth reflects a healthy business environment but also signals continued growth opportunities for investors and enterprises alike. Secondly, Bucharest is home to flexible, multicultural, and highly skilled talent, it is a melting pot of diverse cultures and professional expertise, drawing in talent from across the region and beyond,” says Mihai Paduroiu, CEO of the Office Division at One United Properties. “The city’s workforce is known for its adaptability, linguistic skills, and high levels of education, particularly in fields such as technology, engineering, and finance, which draws in multinational companies looking to establish or expand their presence in the CEE region. Thirdly, the overall cost structure of doing business in Romania is today the most competitive in the entire EU, from taxation to real estate.
Paduroiu further notes that Romania’s business-friendly tax regime, combined with relatively lower operational costs compared to Western Europe, creates a compelling case for companies seeking cost efficiency without compromising on quality.
“The real estate market in particular offers attractive commercial spaces at competitive rates, making it easier for businesses to set up and scale their operations. Furthermore, the future improvement of public management and the acceleration of major infrastructure projects will support the enhancement of Romania’s position and attractiveness,” the One United Properties executive adds.
Real estate prices likelier to settle in 2024
Last year, the European real estate market went through a yield decompression stage marked by protracted price discovery processes across all assets. This year, the rethinking of the prices being paid for assets has a clearer framework and prices have a better chance to settle, according to BNP Paribas Real Estate analysts.
On the Romanian market, prime yields have seen upward movements across all segments, in line with the trends registered in Europe, as the office and retail ones each recorded 50 basis point annual spikes, with a lower 25 bp rise for industrial and logistics assets. Saftoiu of Cushman & Wakefield Echinox explains that even though the high interest rates continue to put a significant pressure on exit yields, Romania remains an attractive market. This is because the spread between the local benchmarks and those in other CEE countries, such as the Czech Republic, Poland or Hungary is relatively high on all market segments (generally in the 100–200 basis points’ range).
“The highly anticipated interest rate cuts of the coming months are expected to contribute to a yield stabilisation throughout 2024 in Romania,” Saftoiu notes.
Meanwhile, Colliers’ Anca Merdescu says that yields will remain unchanged over the shorter term.
“The overall context is still quite challenging, particularly given the still-elevated funding costs—despite a brief respite underway as the European Central Bank has started cutting rates—and rather low liquidity, meaning a lack of transactions. That said, there are some encouraging signs on the way, and we look forward to some deals in the works closing that could get us a better level of understanding of the market by creating some benchmark levels,” Merdescu explains.
Commercial property yields in Romania continue to be some of the highest in the region. At the end of last year, prime office yields hovered between 7.25 and 7.75%, while for retail projects they ranged between 7 and 7.5%. For the industrial sector, prime yields stood between 7.25 and 7.75%, according to Colliers’ data.
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