Colliers: 2024 likely to be better than 2023 for the Romanian real estate market

Romania’s real estate market remains a sector with high growth potential, and this year is likely to be better than 2023 for many subsectors, Colliers consultants predict in the “Top 10 Predictions Romania 2024” report. They see favorable underlying trends in industrial operations and improvements in terms of infrastructure.

Still, 2024 is also expected to remain challenging for the local investment market with the prospect of better days ahead due to lower interest rates, a growing shift in focus from retail parks to large retail projects, and an increase in both demand and affordability in the residential market.

“2024 looks quite optimistic for Romania’s economy and, by extension, the real estate market. Some of the most encouraging signs are the ongoing major infrastructure developments, the substantial capital inflows expected through European funds, or the fact that Romania becomes a more prominent regional distribution hub, especially for South-Eastern Europe,” Colliers said. 

Other positive signs for this year include a better external context for Romania’s main trading partners and an expected pullback in inflation. 

On the other hand, there are also concerns both internally, such as the country’s substantial fiscal imbalance, and externally, where some major uncertainties, particularly regarding geopolitics, persist.

With 80 km of highways and express roads put into service in 2023, well above the annual average of the last 33 years (26.6 km), Colliers consultants expect the major infrastructure transformation to continue in 2024. Plus, the prospect of an improved business environment, coupled with a potential entry into the Schengen area for terrestrial borders, also attracts investors’ attention.

“Romania’s geographical position, as well as its specific economic advantages - in particular the elevated gap between labor costs and labor productivity, comparable to China, for example - supports the idea that Romania will become a hotspot for logistics and manufacturing activities in the context of the ‘friend-shoring’ trend,” Colliers further explained.

“While companies cannot ignore Asia or parts of South America for production, they can diversify their operations better to mitigate risks and the CEE, including Romania, is well placed to see much more investments in the coming years - a trend that Colliers consultants have started to notice as of the last couple of years, even in Romania.”

According to the same report, the office market is expected to see the lowest deliveries in around two decades. Only one major project of around 16,000 sqm could be delivered this year in Bucharest, for example, making this the weakest year since 2004-2005, when the office market was in its incipient phase, Colliers consultants note. And things don’t look brighter in regional cities either.

On the other hand, despite “the unprecedented increase in rents” in 2022 and 2023, the industrial and logistics sector remains active, especially compared to pre-pandemic levels. “The outlook remains promising, as Romania ended 2023 with less than 7 million square meters of modern warehousing, a rather limited supply on a European standard, particularly given the ongoing infrastructure improvements and the expected increased demand amid re-shoring,” the same source said.

After a few years when retail parks were the star of the retail market, Colliers’ consultants are seeing a growing interest in large projects, both stand-alone and integrated into major mixed-use developments, and expect a multitude of such schemes to continue or start development this year.

When it comes to the residential market, Colliers consultants anticipate an increase in both demand and affordability. “Lots of Romania’s dynamic cities and economic areas are facing overcrowding, sustaining in the long run the demand for affordable residential units in many parts of the country. In addition, the anticipated easing of the central bank’s monetary policy, expected to begin by mid-2024, together with robust wage growth, should support buying interest.”

As for the land market, Colliers consultants noted a slight decline in investor appetite in 2023, as measured by new inquiries, and expect this trend to continue in 2024, as many developers already have land for future development. “However, a number of large deals that have been in the pipeline for some time could be completed in 2024, resulting in a solid year. Good land plots continue to command a premium over the rest, and if longer-term uncertainties dissipate reasonably, land prices may start increasing again more substantially,” they explained.

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