We recall the fact that, as per Eurostat’s readings, Romania tend to offer some of the highest (in many cases, the highest) gross margins in the EU for a variety of types of goods, from clothing to footwear to toys to pharmaceutical. While the cost of risk is more significant than in other countries, and this can impact the bottom line when taking out a loan for example, we view this as a sign of a still undersupplied market in terms of retail schemes and a market which can accommodate new players. Indeed, last year saw new brands making their way to Romania, such as Lefties, Jimmy Kay, Wittchen or Stefanel (the latter is a re-entry, as the brand exit the market completely back in 2021). That said, after years of hefty price increases, the discounter segment of the market has continued to do well through 2023 and should see favourable dynamics.

Rents & Vacancy

In general, occupancy remains solid for most shopping centers, with the newly delivered schemes generally well received by the market. Meanwhile, dominant malls still have virtually non-existent available spaces. On the rental side, despite the slowdown in sales, it is important to note that sales remain comfortably above pre-pandemic levels.

Outlook

With around 80,000 sqm of new modern retail schemes due to be delivered this year (and more than half coming from a single scheme – Arges Mall in Pitesti), it is quite the downgrade versus last year and rather comparable to the softer years right after the pandemic start. There is a bit of a difference, however, as we can see around the corner, during 2025-2028, quite a few large dominant shopping centers which would add several hundreds of thousands of GLA to the local retail stock. Iulius Group’s new Cluj-Napoca mall has, based on initial promises, a GLA of over 100,000 sqm, with a fresh scheme in the same town from the Prime Kapital/MAS REI joint venture to deliver in excess of 70,000 sqm of leasable retail areas. Elsewhere, in Iasi, the latter JV will also deliver an expansion of nearly 60,000 sqm to Mall Moldova by the end of 2025; there are also quite a lot of other large projects underway (or where works should commence soon) with a GLA of somewhere between 30,000 to 50,000 sqm. While Romania’s real estate segments remain quite undersupplied relative to other European countries (including those in the region), evidence suggests that the gap is smaller for retail than for office or industrial markets on a relative (per capita) basis.

Further available stock for general retailers could come over the medium term from large FMCG operators aiming to optimize their occupied surface as more and more people order food online or simply shop at proximity supermarkets rather than go to larger hypermarkets. Some hypermarkets with over 12,000-15,000 sqm of occupied surface may want to scale it down with up to half of this, leading to a quite significant extra stock that could be leased to a wide array of retail tenants, mostly those found in retail parks.