Colliers: Romania’s logistics and industrial market has recorded another good year in 2022

2022 ended with solid activity levels for industrial and logistics, with some 830,000 square meters of leasing deals closed, significantly up from 675,000 square meters the previous year, according to the annual report released by Colliers, with the note that probably none of these results reflect the true depth of the local market, because the only information included is publicly available (either deals reported by the local research forum or deals communicated via press releases or in reports for investors in the case of listed companies).

Colliers consultants estimate that the one million threshold would be surpassed in each of the past three years if direct deals that often end up unreported would be included. The overall stock of modern industrial and logistic facilities in Romania reached almost 6.2 million square meters, up by over 0.5 million square meters compared to the previous year, and there is still significant room for growth compared to other CEE countries.

Around half of all deliveries have been in the proximity of Bucharest, while in terms of active developers, the most important remain CTP, WDP, Global Vision, VGP. Schemes involving multimodal transportation are gathering steam and Colliers consultants also note the addition of the first project with an air cargo from CTP in Oradea. Furthermore, more flexible arrangements aimed at SMEs or those seeking smaller surfaces are also becoming a more frequent occurrence.

Bucharest dipped further in terms of overall leasing share, at around 48% of total versus around 63% in the previous year, Colliers consultants explaining that this is mostly the result of some sizable deals outside the capital, but also the fact that newer/less established submarkets are rising. Therefore, there will probably be many more deals over the medium term in markets like Oradea or Constanta. Such deals should be fuelled by the rapid development of infrastructure, with the many billions of Euros earmarked for Romania via EU funds enabling greater connectivity between certain regions, as well as opening up new ones, like Moldavia, which has been sort of cut off from the rest of the country.

“In terms of leasing deals, last year’s results are impressive when compared to the years just before the pandemic, when the average stood at a bit under the 500,000 square meters level. While the average deal size was unchanged versus the previous year, at below 7,000 square meters, some quite sizable leasing transactions were closed. The year’s biggest was related to the new H&M distribution center in Ploiesti, to be developed by CTP, over a surface of c.88,000 square meters. This is one of the rare instances when a deal is around the 100,000 square meters level, but is a progress compared to 3 or 4 years ago, when no such sizable transactions were present. Furthermore, several other deals with more than 50,000 square meters were closed last year, with more such big deals currently being negotiated”, explains Victor Cosconel, Head of Office & Industrial Agencies at Colliers.

Almost half of all leases were generated by various companies selling consumer goods or large retailers/FMCG operators, plus e-commerce. Since most of the logisticians and couriers (another 17%) are likely to depend greatly on the consumer sector/work for other companies tied to this, it is safe to say that the market remains largely driven by how strong household spending has been in recent years. That said, Colliers consultants expect production to increase substantially in the next few years, given the re-shoring trend (amid the war in Ukraine and larger geopolitical shifts regarding Asia), but a larger part of these new facilities will turn out to be occupier-owned, so not showing up in statistics.

Vacancy rates remain at single-digit levels and are quite low in some submarkets, like Bucharest or Cluj-Napoca, though others do seem to have a bit of an oversupply issue, like Timisoara. Meanwhile, rents have remained under pressure from both the inflationary backdrop as well as the increased construction costs. This has meant that rental levels have gone as high as 4.5 euro per square meter in Bucharest, maybe around 4.3 euro per square meter on average, with levels in other parts of the country not that much smaller compared to the latter figure.