The logistics and industrial market in Romania has become increasingly strong recently, with a record level of leasing activity in the last two years fueling robust development activity, with average stock growth of around 15-20% per year, according to the recent "ExCEEding Borders I&L" report released by Colliers. 2022 has also started on a decent note in terms of leasing activity, with a solid pipeline of transactions to be completed. In the future, Colliers consultants are expecting a boom in the area of modern storage spaces designed for small and medium-sized enterprises and last-mile projects.
Romania’s modern industrial and logistics facilities stock reached 5.6 million square meters at the end of 2021, which represents the third largest I&L market among 15 of the biggest CEE economies, and developers have another 470,000 square meters of modern I&L under construction, reveals Colliers in its latest "ExCEEding Borders I&L"report. Together with deliveries in the first half of the year, this means that Romania will exceed 6 million square metres by the end of 2022. Bucharest accounts for roughly half of the Romanian I&L stock, but the rapid rise in regional cities over the past decade, with favorable labor market dynamics fueling consumption there, has given way to increased opportunities also in other parts of the country. Underscoring this aspect is the fact that in other markets with a developed regional economy and where geographical distances are higher, the capital’s share is much lower. For instance, Warsaw accounts for less than a quarter of Poland’s total modern warehousing stock, whereas Prague represents one third of Czechia’s.
Vacancy for prime warehouse spaces remained in single-digits, mostly around 6% on average, which is slightly above the average of CEE-15, and prime headline rents in Romania were also quite static in recent years on account of robust competition on the supply side, between 3.5 - 3.9 euro per square meter, which is one of the lowest levels in CEE-15. That said, given the increase in construction prices, we have started to see material upside pressures on rents in 2022 and actually see prime headline rents quoted rather in the region of 4.3 euro per square meter.
“Apart from the traditional demand for larger formats, Small Business Units (SBU) and Last Mile Logistics (LML) are becoming more attractive. The truly modern stock in Romania is limited and only in recent years has shown some signs of more robust growth down the line. When looking strictly at SBUs, there are only a handful of modern schemes worth looking at and these will serve as a testing ground to see if there is potential. Last-mile projects have also started developing faster only more recently. Given the high population density that a city like Bucharest has, the overall transport infrastructure has been more strained with each passing year. In other words, the need for last-mile projects and, even more relevant, in-city logistics makes sense in the long run. Demand for these formats has seen an increase in requests over the last 3 years”, explains Victor Coșconel, Head of Leasing | Office & Industrial Agencies la Colliers.
Colliers consultants note that the emergence of SME units in Romania is proof that the local market is maturing and is a great place to be as a real estate developer. Continued strong growth and the macroeconomic resilience of recent years has acted as a catalyst for the emergence of strong “middle class” companies, so it is no longer the case that only large tenants can afford or have the need for A-class warehousing. Additionally, a competitive workforce and the increased materialization of Romania’s latent infrastructural potential has kept on attracting large players needing I&L solutions.
During the pandemic, the I&L sector experienced greater interest from tenants from both the e-commerce sector and logistics operators offering their services to retailers and internet trading companies. Colliers consultants predict that the trend toward e-commerce will continue to grow, but this growth will be slower than at the beginning of the pandemic. The ongoing war in Ukraine has caused further disruptions to supply chains, rising fuel prices and lower availability of construction materials, and these factors all greatly influence not only the I&L markets in CEE-15 but also around the world.
On the surface, the conflict in Ukraine has had a minimal impact on the I&L market and, in a wider sense, the Romanian economy. The long-term effects are still early to estimate, but Colliers consultants believe that they will ultimately prove positive for the local economy, as companies will want to rely on the safety offered by a country like Romania (firmly anchored within NATO/EU) while also offering relatively low labor costs. The near-term impact could lead to some relocations of manufacturing/storage activities to Romania.
Overall, the total I&L stock for the CEE-15 region has grown to exceed 50 million square meters, with 20 million square meters situated in and around the 15 capital cities markets. Poland maintains the largest I&L market and is approaching the 25 million square meters mark. The recent "ExCEEding Borders I&L" report released by Colliers indicates that all CEE-15 countries have seen an increase in enquiries for SBU/LML space. This is connected, among others, with the significant development of the e-commerce sector and courier services. These factors mean that in the coming quarters we can expect further significant development of this market segment in CEE-15. The total stock of typical SBU / Last Mile Logistics space in the CEE-15 countries accounts for over 3 million square meters and another 500,000 square meters of SBU/LML space under construction.
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