The stock of modern industrial spaces in Romania reached 7.02 million sq.m in the first three quarters of 2023, as it was expected in the beginning of the year. 49% of the area is located in Bucharest and its proximities, while the remaining half is distributed in the rest of the country. During Q3 2023, about 85,000 sq.m were delivered throughout the country and only 126,000 sq.m of industrial and logistics spaces were leased (value with 66% lower compared to the same period of 2022 and with 49% less than Q2 2023). Altogether, the demand coming from the logistics sector, as well as the positive evolution in the automotive industry, were the main growth engines in 2023. At the same time, the retail market has experienced significant growth over the past year, which is also confirmed by the stock of modern premises coming into use in 2022 and the first six months of 2023. The fashion, food plus beverage and leisure sectors have recorded the largest annual increases in business in 2022, with 33%, 26% and 23% compared to the previous year.
The industrial real estate market was very active in 2023. There were lease requests for spaces starting from several hundred square meters, both from SMEs and from companies in fields other than production and logistics, but which needed an authorized ISU storage facility, as well as requests for 10,000-20,000 sq.m. Also, the demand is very diversified, both production and logistics, from the most varied segments, from FMCG to automotive, from IT to courier and retail, explained Daniel Cautis, managing partner Dunwell RO.
The stock of modern industrial spaces exceeded the 7 million sq.m mark at the end of Q3 2023, as it is also shown in the last CBRE analysis. Between September and November 2023, about 85,000 sq.m were delivered throughout the country in four projects. 81% of the new delivered area is located in Bucharest in new phases of existing industrial and logistics parks, followed by East/North-East region, with 12%, and Southern one, with 7%. At the end of Q3, about 287,000 sq.m were under construction nationwide and were expected to be delivered by the end of 2023.
During the first nine months of the year, 686,000 sq.m were transacted overall country, while take-up (total leasing activity excluding renewal and renegotiations) represented 85% of the total leasing activity. A little over a quarter of the newly delivered spaces in 2023 were in Bucharest, the capital being closely followed by the West/North West region. The other half was distributed to the East/North-East, Center and South industrial regions, which hold 17%, 16% and 15% of the total area.
It should be noted that the regional cities claimed in total a larger area of industrial and logistics spaces than the Capital, respectively 73% compared to 27%. However, the global distribution of modern stock continues to point to Bucharest as the main logistics hub, with a share of 48% of the country’s modern industrial space stock. With a quarter of the stock, the West/North-West is the main regional hub, followed by the South, Central and East/North-East regions.
32% of the total nationwide leased area was for logistics purposes, followed by production, with a share of 25%. For the upcoming quarters it is estimated that the latter will increase its share in total leasing activity, even overpassing the space for logistics use.
The evolution of the first nine months confirmed the fact that both local and foreign developers active on the Romanian market wanted to diversify their portfolio and expand throughout the country, along with the development of the road infrastructure.
E-commerce, which experienced a meteoric rise in recent years, remained at a relatively similar level to the same period of 2022, with an increase of only 2%. In absolute numbers, however, the volumes are not at all negligible. Despite the difficult economic conditions, which have caused procrastination among both investors and consumers, the estimates for the end of the year, but also for the period 2024-2025, are optimistic.
Net rents starting from 4 euros/sq.m/month
At the end of Q3 2023, Romania’s industrial modern stock vacancy rate remained below 5.0%, being recorded an overall vacancy of 4.3%. Analyzing Bucharest distinctly versus the other four industrial regions, the CBRE market report indicates that the vacancy rate in the capital city stands at 5.1%, while the regional vacancy rate is 3.5%.
The level of rents has seen an upward trend since the beginning of 2023, reaching 4.25 euros/sq.m/month, while the effective net rent is around 3.75 euros/sq.m/month for a unit standard of 5,000 sq.m. In Bucharest, the prime rent increased from the beginning of the year by 0.4 euros, reaching 4.5 euros/sq.m/month.
Rental price increases can be easily linked to inflation/indexation and construction cost developments, as well as sustained demand and limited availability (for large areas in delivered space), as CBRE’s research data for the previous year showed. Moreover, in the short to medium term, rents for industrial and logistics space are expected to continue their upward trend, along with a limited supply of incentive packages, narrowing the gap between reference and net rents.
Despite the small increase of rents in the last year, months of free rent are still granted, depending on the duration of the contract, points out Daniel Cautis, as well as early access months for setting up the space, with relocation costs being covered sometimes by the owners (thus reducing the total rental costs).
In the first part of 2023, the total industrial leasing activity (TLA) in Romania amounted to 560,400 sq.m, 16% more than the total area leased in the same period last year. There were 14 transactions with areas between 50,000 and 10,000 sq.m, the average being approximately 6,200 sq.m, 12% higher compared to the average of the first six months of 2022.
Even though the leasing transactions were concluded in all industrial regions of the country, the first three most desirable regions are Bucharest (with 36% of TLA), West/North West (34%) and Central Region, with 17% of the total leased area. The demand in Bucharest is concentrated towards the West and North areas, more precisely 97%, while the East and South areas jointly claimed the remaining 3%.
In terms of the main purpose of leasing industrial premises, more than half are for logistics operations, while the remaining 45% were leased for storage, production and other purposes. Depending on the tenants’ field of activity, those in logistics and the automotive industry generated the highest demand.
„The vacancy rate below 5.0%, the total leasing activity amounting to more than half a million sq.m and the generous supply of new premises, both delivered and forecasted, indicate that the industrial and logistics market is under favorable auspices this year. Moreover, we are witnessing changes in the profile of tenants in the share of demand, and production companies are making their way to modern, quality spaces”, said Victor Răchită, Head of Industrial and Logistics, CBRE Romania.
More and more developers are installing systems to make energy consumption more efficient, which translates into lower utility costs for tenants. Of course, this is always an advantage, from which more and more tenants benefit. For now, there are few people who have specific requirement, but of course it makes their decision to rent easier where these systems are already located. One of the efficiency measures is the installation of photovoltaic panels, both to reduce waste and to supplement the energy requirements.
The growing stock of modern premises confirms the positive development of the market
In mid-2023, the stock of retail spaces in Romania amounts to approximately 4.15 million sq.m available for rent in modern shopping centers and commercial parks throughout the country. This is 15 million sq.m put into use in the first six months of the year, after 2022 closed with a stock of 4.00 million sq.m, following steady deliveries in previous years.
In fact, an analysis of the last ten years shows that the most prolific years for the retail market were 2016 (when no less than 226,400 sq.m were delivered, including the last malls in Bucharest, Park Lake and Veranda Mall), and 2019 (with 183,900 sq.m, including a large expansion of Iulius Mall, in Timișoara, and the inauguration of the Promenada shopping center in Sibiu).
Since 2020, deliveries of new commercial space have been on a downward slope in the context of the pandemic and the economic crisis generated by it. It should be noted that the new additions to the modern stock of retail spaces available nationally in the first half of 2023 are represented by small and medium-sized projects with a combined area of 69,300 sq.m.
According to CBRE’s latest study, the dynamics of the stock of modern spaces intended for retail activity is a mirror of the industry’s rapid evolution over the last year and a half. The study was carried out on the basis of the financial results recorded by 449 retail companies in Romania, structured by fields and sub-fields of activity, plus another 92 retail schemes, covering a total of 63% of retail operations carried out at national level.
Bucharest owns 30% of the stock of modern retail spaces at national level
The composition of the modern stock of retail space is unevenly divided between the traditional format (i.e. shopping centers) and the specialized format (i.e. retail parks). If the total leasable area of shopping centers dominated the stock composition in the past, with shares of up to 66% (in 2016), starting from 2021 the balance began to lean more towards the specialized format.
This moment of change in time can be attributed to the development of e-commerce in the post-pandemic era, which has shown massive resilience and adaptation to new requirements from suppliers to stay in the market and, further, to remain relevant to customers. Thus, at the country level, the share of retail parks in the modern retail stock is constantly increasing, at the end of the first semester of 2023 reaching 39%.
The territorial spread indicates Bucharest as the country’s largest retail hub, as no less than 30% of the total is found here, i.e. 1.25 million sq.m. The rest, 70%, are in regional cities.
Thus, at a considerable distance from the capital, Timiș county holds the second position at the national level in terms of the share of modern spaces in the total, namely 5%, which translates into 210,300 rentable sq.m. Constanța, Brașov, Iași, Cluj, Sibiu and Bihor counties follow in descending order, with a stock of retail spaces between 183,600 and 152,300 sq.m. At the opposite pole, the counties with the fewest modern retail spaces are Olt, Caraș Severin, Giurgiu, Teleorman, Calarași and Tulcea (between 8,700 and 5,000 sq.m).
The retail schemes analyzed in the CBRE report ended 2022 with positive annual growth in aggregate business volumes, exceeding one billion euros, up 5% on the total amount recorded for 2019 – a benchmark year for the retail market in terms of looks at sales, traffic, new supply and the last year before the pandemic.
With growing financial results since 2020, both shopping centers and retail parks across the country have shown resilience to the restrictions imposed by the pandemic and continued their upward trend over the past two years. Thus, comparing the turnover figures recorded in 2022 and 2021, at the national level, shopping centers registered an increase of 18%, and retail parks by 2%. However, by referring to the results of 2019, only shopping centers are on the plus side, with 16%, while retail parks recorded a decrease of 5%.
Retail market tops: ”Fashion”, ”Food” and ”Leisure”
The analysis of the evolution of the turnover figures of the main retailers, according to the fields of activity, showed that the ”Fashion”, ”Food&Beverage” and ”Leisure” sectors recorded the highest annual increases, of 33%, 26% and 23% respectively %, while ”Home&Interior Design” and ”Specialty Retail” had year-over-year increases at a slower rate of 10% and 6%.
The same analysis, but compared to 2019, shows that industries such as Fashion, Food, Specialty Retail, Food&Beverage and Services ended 2022 with turnover increases ranging from 28 to 50%.
Selected main retailers from different sectors of activity ended 2022 with higher turnovers compared to the values recorded for 2021, the total amount approaching 31 billion euros (18% higher than the value recorded by the same companies in 2021). More than half of the total turnover, respectively 65%, was generated by retailers active in the food industry, followed at considerable distances by companies that are part of the household plus furniture and fashion sectors, with shares of 10% and 8% respectively.
Important annual changes were recorded by the Optical and Pharmaceutical subsectors, in 2022 achieving 31% more than in 2021 and more than twice (108%) than in 2019.
Selected retailers from the Accessories subsectors closed last year with a total turnover of 582 million euros, 11% more than in 2021.
60% of the volume is claimed by the Shoes/Shoes subsector, followed by Accessories with 23%, Jewelry and Watches with 17% of the total, and the Accessories/Handbags subsector with 1%.
The average increase compared to the previous year recorded by the four subsectors is approximately 19% and 20%, respectively, by reference to 2019.
The Handbags sub-sector saw the highest annual growth in 2022 at 36%, but compared to 2019, the Jewelry & Watches sub-sector has a 34% increase in total turnover.
The companies in the Electronics subsector recorded higher turnovers from one year to the next, in the period 2020-2022, for last year the companies included in CBRE’s analysis totaled around 331 million euros, 13% more than in 2021 and 8 % compared to 2019.