Investment Market

Otherwise, banks remained largely on-board and seem comfortable with current pricing levels; hence, funding was readily available and the last year saw some notable rollovers and funding take place for locally active developers.

Transactions

The year’s biggest two deals involved the divestment of Globalworth’s industrial portfolio. The biggest chunk, consisting of 270,000 sqm of leasable warehouses in multiple cities and land for additional expansions, was purchased by CTP for an estimated €168 million. Additionally, a 136,000 sqm portfolio owned by Globalworth and GlobalVision was purchased by WDP for around €110 million. Separately, WDP also closed a deal involving Expo Market Doraly, a retail park and cash & carry destination just north of Bucharest, for an estimated €90 million.

An interesting deal involved The Landmark, a prime CBD office project, sold by Revetas Capital/Cerberus to a new name on the local market, African Industries Group, a company backed by Indian capital and arguably the first major deal involving capital from this country with a major commercial real estate asset. The deal is also quite significant as it more or less helped cement prime office yields around currently reported levels after a period of uncertainty due to a lack of deals.

Another aspect we want to emphasize is that the average ticket size stood at around €25 million, which is one of the lowest levels we have seen in recent years, despite a handful of sizeable deals actually closing (it is worth pointing out that we only track investments involving commercial real estate assets worth at least €5 million). This is a testament to the rise of local money, which is increasingly more active; the new wave of entrepreneurs who generated excess capital thanks to their businesses over the past couple of decades are increasingly looking at destinations to park their funds. And while they cannot compete with the Dedeman owners when it comes to financial force, they do generate a growing part of investment activity. The last years have seen a record level of input from these smaller investors: between 2022 and 2024, tickets smaller than €20 million made up, on average, 26% of the yearly volume, which is more than double the usual level we saw in the pre-pandemic period.

Other notable deals include two retail parks purchased by BT Property, a real estate oriented fund owned by the largest bank in Romania, which cements what is a somewhat new type of capital on this market. Another interesting transaction involved Mures Mall, a shopping center in Targu Mures, purchased by the local medical university with the aim to transform it into an educational asset; this is part of a growing list of fairly recent transactions closed by local authorities involving sizeable investment tickets.

Prices and funding conditions

Yields have been more or less stable through 2024 and given the growing trend of deals, we have a bit more clarity and hence, we are reverting back to a single figure rather than an interval like in 2024. Consequently, we see prime retail shopping centers at 7.25%, prime offices at 7.50% and prime industrial assets at 7.75%. The latter has been bumped a bit during 2024 by 0.25 percentage points to reflect market activity; this does not highlight a correction, rather an adjustment following actual dealmaking which provided proof towards where current levels actually are. We also want to point out that recent trades involving good performing and recently opened retail parks in regional cities have been closing at around 8%, sometimes skirting below this level.

Meanwhile, banks are fairly comfortable with current levels of pricing, hence funding is available for good performing products; that said, banks still display a preference and would rather fund a well performing product and maybe one geared at certain sectors, like industrial or retail. That said, we see sentiment turning around towards prime offices, which had fallen a bit out of favour amid the whole remote work story.

Outlook

Starting 2025 with almost €100 million in signed (but not closed deals) – the sale of part Iride Park, owned by Immofinanz and the sale of a retail park portfolio owned by MAS REI and additional tickets in various stages totaling around €500 million, the new year is looking quite solid. Since our broad analysis includes only quite sizeable assets and, as we have seen in recent years, small deals matter a lot, 2025 is looking like it could hit well over €800 million in commercial real estate investment deals, but this is contingent on some favourable developments.

The main challenges going forward have a lot to do with the current internal backdrop in Romania. Firstly, we note the uncertain political backdrop following the cancellation of the presidential elections in late 2024 and the surprise rise of a candidate with a strong Eurosceptic discourse. This is bound to give some investors second thoughts about Romania until they have more clarity. Secondly, the country has a sizeable cost of risk amid a bloated fiscal gap and wide current account gap; this, in turn, weighs on the deals, denting Romania’s appeal in spite of its relatively attractive investment yields. Enacting reforms aimed at correcting the twin deficits would go a long way in improving the cost of risk and may help dealmaking activity in the longer run.

Then there’s the external climate. We cannot expect our baseline scenario of a robust investment market in 2025 if a negative scenario unfolds with regards to global markets. And there are a lot of things that can go wrong unfortunately, but since we cannot predict them, we would rather flag this as a risk going forward and keep a close eye on developments with regards to geopolitics, the Eurozone’s economic weakness, the US president’s trade policies and so on.

Ultimately, between 2015-2019, Romania reached a transactional volume of commercial real estate assets of over €900 million/year on average and yet, the GDP has almost doubled in size compared to 2015 in nominal terms. Consequently, we remain firmly optimistic about the longer-term path of the local market and would look past any negative scenario as rather a temporary setback.