Another correlated aspect to the aforementioned shift to activities outside of Bucharest has a lot to do with an increase in manufacturing activities. Roughly one third of the leased surfaces were signed by tenants aiming for production activities, a dramatic shift as before the pandemic, this share was usually below 10-15% unless a major contract was signed. This are just the initial signs of the re-shoring wave that we expect to become ever more visible in the forthcoming years. ​

When looking at the sectors of companies, it is also important to note the rising importance of automotive; while this was a staple in the past, it rarely surpassed other sectors. Last year, automotive tenants generated the biggest share of deals (around 30% of total take-up), surpassing logisticians (3PL operators, c.23%). Another longstanding trend, namely the shift inward in cities, particularly in Bucharest, by tenants amid a competitive e-commerce scene, remains valid.

The year’s biggest leasing deals were all in the 50,000 sqm region; the biggest was the contract renewal from FM Logistics with CTP in Timisoara (part of a sale and lease-back agreement that involved 100,000 sqm of warehouses throughout Romania), the expansion of Pirelli’s factory in Slatina with WDP and Inter Cars’ new lease in VGP Park in Brasov.

Rents & Vacancy

The rental side saw a dramatic change over the last couple of years. In the prior decade, warehouse rents were largely flat from one year to the next, with the prevailing trend being that of a very slow decline when looking at a longer period of time. The significant shift in construction prices coupled with a fairly low availability of vacant spaces in certain parts of the country and, most importantly, a significant shift in demand, finally inflated rents in Romania. Consequently, rents jumped from less than 4 EUR/sqm at the end of 2021 to asking rents that are heading towards 5 EUR/sqm for an average surface/BTS warehouse; this c.30% increase in rents over the span of two years is not that significant on a regional scale, where markets saw similar dynamics, but it is nevertheless significant for Romania when keeping in mind the stale dynamic in the past decade.

With regards to vacancy, we note that most regions of the country face a low vacancy rate (Bucharest is also around 5%), meaning that it can be challenging for tenants above a certain size to find a suitable warehouse in a short time span. We also need to emphasize that Romania, in comparison to other CEE markets like Czechia for example, is not facing a widespread phenomenon when it comes to “shadow vacancy”, meaning warehouses partly built where construction was halted and hence, are not considered delivered.

Outlook

In general, Romania is moving into a more and more favourable context for industrial and logistics operations and there is a lot more room to grow over the medium term. With its c.7 million sqm of modern warehouses, Romania’s stock is much smaller on a per capita basis when compared to Poland’s over 30 million sqm or Czechia’s over 11 million sqm. Consequently, we think that if things accelerate ever so slightly for the economy, our longstanding call of reaching a 10 million sqm stock by end-2030 would look quite conservative. We also need to note that we do not include in the stock the owner-occupied facilities, which tend to be significant in the manufacturing side or for some companies, like certain players in the FMCG space.

Overall, there are many reasons to be optimistic about the local industrial scene. Firstly, Romania is nicely positioned to take advantage of the re-shoring trend that is taking place amid the reshuffling of geopolitical relations globally. The country’s much lower costs and better availability of workforce compared to European peers make it a good alternative. So does the fact that when looking at the gap between labour costs and productivity, the Romanian manufacturing sector displays the biggest gap in the European Union (which is largely comparable to China’s, for instance).