“The Romanian industrial and logistics market has probably been one of the most dynamic in Europe, despite growing from a fairly small level. Over a longer term, the relative under-supply of industrial and logistics space in Romania per capita supports strong growth in the subsequent decade. Regarding the second half of this year, demand, vacancy level and rental rates are expected to remain stable. An increase in vacancy could be seen on the Bucharest market, offering more options for tenants active on this market, in terms of both rental fees and locations”, says Laurențiu Duica, Partner & Head of Industrial Agency at Colliers International.
Romania’s stock of modern industrial and logistics spaces has grown threefold since 2015, but there is still a significant gap between Romania and other CEE markets. In the Czech Republic, the modern industrial and logistics spaces reach roughly 9 million square meters, while in Poland they reach around 19,6 million square meters. This means that Romania’s stock of modern warehouses per capita is four times below that in the Czech Republic and twice below that in Poland, per Colliers data.
Some 120,000 square meters in new modern industrial and logistics spaces were delivered in Romania in the first half of 2020, compared with 300,000 square meters delivered in the same period in 2019. However, the second half of 2020 is expected to be much more active, with nearly 300,000 square meters in new deliveries envisaged, of which over 60% located in the outskirts of Bucharest.
The total volume of warehouses leased in Romania reached 250,000 square meters at the end of June 2020, with new contracts accounting for 81%. Bucharest accounted for 35% of the total volume of spaces leased, respectively 87,500 square meters, with new contracts and renegotiations making up for 55% and 37% of total deals.
Colliers data also show the tenant structure in terms of sectors on the Romanian market was dominated by retail/FMCG sector, which generated 50% of all deals, while in Bucharest, the demand was led by 3PL/logistics (35%) and light production/manufacturing (33%). Profi’s new logistic facilities in Timișoara and Craiova were the most important developments, covering 115,500 square meters.
Rents for Class A (prime) warehouse spaces remained broadly stable this year, between EUR3.8-EUR3.9 per square meter for industrial & logistics spaces around Bucharest and nearly EUR3.7-EUR3.9 per sqm in other hubs across Romania. By comparison, in the area of Warsaw, Sofia or Budapest, rents amount to EUR5 per square meter.
Colliers International consultants note that incentives are higher, against the backdrop of COVID-19 pandemic, with developers offering tenants more rent-free months per year of lease than before. Tenants may also get 1 to 2 months early access to the property. Otherwise, vacancy is still comfortably in single digit territory, hovering around 7-8%, and has not seen any significant changes amid the coronavirus situation.
The report also shows that in the CEE, some of the key challenges in this sector include the availability of land and property in locations that meet the expectations of both developers and end-users, along with the availability and reliability of utilities, connectivity to transport infrastructure, the availability and skills of the workforce, and the access to investment incentives.
Industrial and logistics real estate markets across the CEE-17 region are all at different stages of maturity, in terms of both size and the pace of development. The total supply of modern industrial and logistics stock across the CEE-17 is well over 50 million square meters in total. Of this total volume, the current availability can be categorized as low, with the majority of markets recording vacancy rates of below 5%.