Romania’s real estate market has enough resources to continue development in 2023 thanks to the possibility for the local economy of achieving a 3-4% expansion rate as the conflict in Ukraine and the full effects of monetary policy tightening in the Eurozone and the US have not yet been fully felt in the country – Colliers consultant shares with The Diplomat Bucharest.
Amidst political noise, the Romanian economy should remain competitive
Romania’s economy looks decently positioned at the beginning of 2023 and no recession is in sight. With the high number of employees and companies still expanding, consumer spending should remain decent as a tight labour market fuels wage growth, alongside a rise in the minimum wage.
As The Diplomat writes, an exceptional 2022 is likely to be followed by a rebalancing year, the logistics and industrial market remains one of the most dynamic real estate sectors. However, 2023 could also be dominated by a lot of political noise, given the presidential, general, local and EU Parliament elections in 2024, which could stop or at least slow down the significant reform that the Romanian economy needs to remain competitive in the long run – Colliers consultant points out.
The value of green is on the rise
While the 2020 European Green Deal has accelerated the adoption of ESG criteria, the sharp increase in energy prices seen in 2022 brought further momentum. Consequently, experts anticipate seeing an even greater differentiation in the rent and value of a building based on how green or efficient it is. This should apply to all real estate sectors, but particularly offices and industrial.
Office delivery: 2023 looks limited, 2024 is still empty
At this point, demand for office space is predicted to remain good in Bucharest. But, while around 100,000 sqm of new office space is expected in the city this year, no new project is slated for delivery in 2024 which would move the city into a landlord’s office market – Property Forum writes referring to Colliers.
In terms of rents, it is expected that landlords transmit most of the inflation indexation into rents. For instance, a pre-lease for a built-to-suit project would likely attract a rent that is some 5-10% higher than it would have normally been a year ago.
Rebalancing is the watchword
Investment rebalancing is the watchword for the real estate market in Romania. The limited office delivery is of relevance to the investment scene, which relied on such projects, so in 2023 we could see overall turnover halving from 2022’s 1.2 billion euros. The short-term outlook seems challenging also when considering the period of price discovery which has also started – The Diplomat cites Colliers.
After some very strong years, with a limited pipeline of construction projects amid higher construction costs and given the significant uncertainties, developers will likely turn increasingly prudent about the future. As a result, purchases of land plots will become much more opportunistic, focusing more on deals of exceptional land plots or at an attractive price.