Land Market

Demand

Land market sales in Romania closed 2023 with a decrease of less than 10% compared to 2022’s EUR450 million level, while remaining comfortably above pre-pandemic levels, according to Colliers estimates. While Q2 and Q3 were not all that great, the start of the year and a final push in the closing months helped round out a solid year. The final quarter was especially robust and probably the result of many investors wanting to close deals for either tax purposes (sellers) or maybe for cash flow optimization (buyers). It is worth pointing out that we include in such figures only land purchased for commercial real estate projects (residential, retail, offices etc.), mostly in or around urban areas and that we do not include industrial or agricultural land transactions.

It is also worth mentioning from the start that this result was mostly generated by deals started in previous years, some of them quite a way back, while new interest, meaning deals actually starting in 2023, was much lower. The latter aspect points to a softer outlook for 2024, but more on that later. Nevertheless, other aspects indicate a reasonably strong market, like the fact that we have not noticed investors pulling out of deals, at most delaying them when such decisions needed to be made. That said, many deals remained postponed, mainly on account of permitting issues.

Approximately 70% of land plots traded came from Bucharest and its surrounding areas. Further dissecting Bucharest’s volume, we see that half of the deals came from land sales for residential projects, a quarter from retail and the rest from various types of investors (like offices, medical) or purely speculative buyers. The most active submarkets for residential were in the larger metropolitan area, outside of Bucharest (Pipera, Balotesti, Corbeanca), mostly due to easier permitting and authorization. Other areas with improved infrastructure access due to the upcoming A0 ring road highway also drew interest. Meanwhile, buyers also focused on small, but ultra-central and strategic locations, where projects could be easily absorbed by the market.

In the rest of the country, residential also accounted for around half of the volumes with retail largely for the rest, but it is somewhat of a drop in retail deals compared to previous years.

The most active buyers were One United, Speedwell and Kaufland, but interestingly, in a change from previous years, another quite active market player was the Romanian state via different entities, which exercised their buying option for certain strategic platforms in some cities (Brasov, Sibiu, Iasi).

Another type of demand was that of buyers who sought consolidating their position in a certain area, buying up neighboring land plots to further improve the scale of their upcoming mixed use projects.

Supply & prices

Supply remained adequate, with some owners who questioned the shorter- to medium-term outlook of certain real estate sectors, like offices and residential, seeking exits. Consequently, the offer side increased quite a bit compared to previous years. There were also cases where owners decided that for strategic reasons (shareholder decisions to exit Romania, shifting to other more „core” segments of the market), they should sell and accept the best offer on the table, though these were isolated instances.

Amid the slightly higher offer, prices dipped a bit on a more generalized basis, though if we were to point to the average decline of the market, it would still be in the single digit teritory. The decrease in demand and the increased flexibility of owners gave rise to this, but in most cases, the very good land plots have not moved at all as owners remain confident in the longer term appeal. Neither these sellers, nor buyers want to rush in as both sides think that time favours them, hence, leading to more of a price stability for the upper end of the price segment/for the very best plots.

Outlook

Turning to the outlook, we feel that the appetite looks set to remain a bit more subdued compared to 2021-2023, but the shift is not at all a dramatic one. Furthermore, some sizeable deals are in various stages of the due diligence process and may close in 2024, leading to another very solid year when we draw the line in 12 months. A lot of investors are waiting on the sidelines, thinking that new opportunities may arise, though owners who are not pressured may not feel the need to sell at lower prices or to offer any opportunities. However, in our opinion, as long as no material negative scenario materializes – like an expansion of the war or an economic crisis in some big countries, for instance, Romania’s future after the elections looks quite bullish. Hence, 2024 might actually be a very good year to conclude purchases if one believes in the longer-term prospects.