Following a long period of financial and political crisis and subsequent stagnation, Romania is now making strides to secure its economic upturn from the historic lows recorded in its investment market rates over the last five years, inevitably affecting the real estate market in all its aspects.
The Romanian real estate market experienced a powerful comeback last year and has not ceased to track an upstream record thereafter. Anticipation of “at least 5% increases at national level” until the end of 2016 expressed by major real estate groups such as Colliers and RE/MAX Romania reflect the local market’s positive evolution.
So far, Romania’s real estate seems to be growing strongly particularly in the retail and industrial sectors. Official data indicate an increase of 10-20% in retail market over 2015, accompanied by a similar increase in retailers’ sale performances and in the delivery of new retail projects, mainly including large shopping centers and non-food retail chains in some of Romania’s biggest city centers. Meanwhile, the industrial market has managed to multiply its existing stock over the last year. A wide range of industries is driving demand for industrial space, with an emphasis on manufacturing production and with the automotive industry retaining its dominant position.
Other segments of the real estate market, including office, housing, and the investment market, as well as logistics, have recorded satisfying levels of sound transactions and moderate-to-buoyant investment volumes. As regards the office market, although supply and demand curves seem to be dragged downwards, the strong ongoing pre-leasing activity that commenced in 2014 is temporarily restoring the market’s equilibrium. The investment market, for its part, has mostly relied on the favorable fiscal regulatory framework that provides for a drop of 4% in the VAT rate, encouraging existing investors to expand their portfolios, targeting top quality assets and new players to attempt a series of income-producing transactions, even if they remain cautious at this stage and slightly reluctant to fully integrate in the region. Significantly increased activity is also reported in the residential market area, where both supply and demand are building up steam, with sophisticated investors opting for premium residential units, taking advantage of beneficial recent fiscal regulations. Logistics seems to be the only sector that has remained stable compared to the last couple of years with no significant activity going on and a forecast of moderate growth, limited essentially to cities.
When it comes to new entries in the investment market, an interesting development worth mentioning seems to be coming from the Middle East, aided by the current oil crisis: over the last quarter, our firm has been working on a couple of large-scale deals involving prime real estate in Bucharest, representing investors from that region who wish to reduce their risk exposure in the oil and gas sector by diversifying their non-energy investment portfolios into new destinations.
Overall, Romania’s ability to rapidly build up efficient mechanisms to combat crises and its talent for immediately catching investors’ eyes even before ensuring 100% market safety have allowed it to evolve into a regional business hub for South East Europe. As a result, we fully expect that Romania will continue enjoying increasing and sound internal demand, while the anticipation of much more favorable financial conditions over the next few years will support continuing improvement and growth for the real estate sector.