Real estate market registered a spectacular evolution in 2017, with record volumes of activity on the industrial and office sectors, record demand in most of the sectors and growing occupancy rates. Rental levels were generally stable, with some increases reported for retail and industrial spaces, while residential prices increased by an average of 10%.
Industrial / logistics sector saw record-high volumes of completions and demand at national level, 2017 being the best year so far for the segment. A new speculative stock of 500,000 sq m was completed, a 42% annual growth, with the international developers (CTP Invest, WDP, P3, Logicor, Zacaria Group, Globalworth) having a rapid response for the high growth in demand. Take-up volume, including major leases, jumped by 70%, up to 730,000 sq m at national level, with 73% of demand being represented by logistics/warehousing uses.
The occupancy rate of competitive stock continues to exceed 95%, with most of the dominant parks being fully let, while the level of A-class industrial / logistics rents followed a slight upward trend, to average values of 3.5-4.0 Euro/sq m/month at national level.
Office market reported also a growing activity last year. The new stock completed in Bucharest, accounting for 147,800 sq m GLA, maintained at a 8-year average volume, but new deliveries outside Bucharest reached 93,000 sq m GLA on the back of record activity found in Timisoara (42,000 sq m GLA). Major lease transactions totaling 460,000 sq m were signed at national level, with over 367,000 sq m in Bucharest (2nd highest volume in the last 10 years) and a record of 90,000 sq m outside Bucharest. New demand represented almost 50% of take-up, the highest share in recent years. IT&C sector continued its accelerated growth, being responsible for 42% of Bucharest’s take-up, respectively 50% outside Bucharest.
Vacancy rate decreased below 10% in the main markets, with availability in Bucharest dropping from 11.5% in 2016 to 9.1% at the end of last year. Rents maintained stable, having prime levels for central locations varying from 17-19 Euro/sq m/month in Bucharest, 12-14 Euro/sq m/month (Cluj-Napoca, Timisoara), 10-12 Euro/sq m/month (Iasi, Brasov) and 8-10 Euro/sq m/month in secondary markets.
On the other hand, the retail market registered a relatively contradictory evolution, accounting for a significant volume of potential demand affected by insufficient offer as new completions were limited. A new shopping centre stock of 66,700 sq m GLA was opened in 2017 (-70% year/year), respectively 23,885 sq m GLA of retail park schemes, being the first year during when the shopping centre stock under operation registered a slight decrease, as closures exceeded new openings.
The occupancy rate increased national wide, both for dominant and secondary schemes, but also for the main high streets. Rental levels witnessed a slight upward tendency, with a higher rate for the shopping centre segment that concentrates most of demand.
Investment volumes increased by 56% in 2017, to over 925 million Euro, following a growing number of international investors, a strong growth in retail transactions volume (+65% year/year) and the sign of the largest hotel transaction to date (Radisson Blu/Park Inn complex). Bucharest concentrated 43% of total investments, maintaining as the main destination for international buyers, responsible for 97% of all major acquisitions in Romania last year. The main new entrances were South-African based funds Atterbury Europe and Prime Kapital / MAS REI, respectively China Investment Corporation and Czech fund CPI Property Group. Others, such as international companies CTP Invest, Globalworth, GTC, Immochan, Immofinanz and WDP, respectively Smartown Investment and One United Properties from Romania, continued to buy new properties.
Prime yields hardened by an average of 0.25%, reaching shopping centres / office levels of 7.0-7.5% in Bucharest and 8.0-8.25% in other major cities.
In regard to the residential market, official statistics show a number of 53,301 units were completed nationally, a 2% annual growth. Growing volumes of completions were reported in central, north-western and western Romania, while Bucharest-Ilfov area recorded a surprising 4.9% annual decrease. The acceleration in demand and sales brought an average 10% increase in residential prices, having average levels of 700-950 Euro/usable sq m in county capitals above 100,000 inhabitants, 1,100-1,350 Euro/usable sq m in Bucharest and 1,300-1,400 Euro/usable sq m in Cluj-Napoca.
Real estate forecast is positive for 2018, being expected increases in development pipeline, active levels of demand in all sectors, together with a stable/up evolution of rents and further reduction of prime yields. Retail completions are announced to include 93,200 sq m GLA of shopping centre space and to jump to a maximum potential of 135,000 sq m GLA of retail parks in 2018, however not all projects are likely to be opened in term. Office stock under construction to be delivered in 2018 exceeds 200,000 sq m GLA in Bucharest and a record volume of 155,000 sq m GLA outside Bucharest. Industrial stock under construction accounts for more than 315,000 sq m GLA, out of which 75% is concentrated in Bucharest area.