The “pandemic year” turned out to be a bumper year for industrial and logistics, with total demand increasing by a staggering 72% over 2019, to nearly 784,000 square meters of leasing deals. A large part of the record demand came from various retailers, including FMCGs, expanding their presence nationwide, and various companies, not just pure e-commerce players, looking to branch out in the online sales segment, shows the annual report released by Colliers.
The overall stock of modern industrial and logistic facilities in Romania reached 5.7 million square meters, up by over 0.5 million square meters compared to the previous year, and there is still significant room for growth compared to other CEE countries.
Romania remains one of the more undersupplied markets among the major CEE countries, having roughly half of the warehouse stock on a per capita basis compared to Poland and a quarter of Czechia’s. In excess of 0.5 million square meters of new modern I&L spaces were delivered in 2020, according to Colliers estimates. Bucharest accounted for around half of the total square meters of all deliveries and the rest scattered throughout the country – mostly in cities from Transylvania, but also in some southern parts of the country.
“Bucharest remains the heart of the local logistics market, but there have been some slight changes from one year to another in the sense that more and more new warehouses are being developed outside Bucharest and 2020 was no exception. While some speculative developments were initially put on hold, the rosy economic results in the second part of 2020, coupled with the swift recovery in consumption, brought these back on the map in the second part of the year. CTP and WDP remain the major players, but VGP has also recently started to develop new projects. We have also some new names on the market that have the potential to make major investments in the next period, like Globalworth/Global Vision and Element Industrial”, says Vlad Mustață, Associate Industrial Agency at Colliers.
Bucharest remains at the forefront of activity in terms of demand also and generated over 70% of the total leasing deals, with Timisoara and Craiova following at a great distance. FMCGs accounted for one third of total demand, with just Carrefour and Profi’s 3 leasing deals, which were among the biggest of the “pandemic year”, totaling 200,000 square meters. Second and third places – logistics and retailers – were not too far apart from each other (over 20% market share each) though in a lot of instances, the 3PL tends to serve the retail sector to a significant extent. As such, it would be safe to say that consumer-oriented industries generated at least two thirds of demand in 2020. For comparison, în 2019 automotive generated one third of demand.
Rents for prime warehouse spaces remained broadly stable in 2020, between 3.8 – 3.9 euro per square meter in the Bucharest area and just a bit below these levels in other parts of the country. Colliers consultants consider that we may see rents trekking upwards a bit in the next few years as Warsaw and Budapest can close in on 5 euro per square meter for prime assets.
Meanwhile, vacancy has been climbing a bit the last couple of years (5% in 2019) towards 8% for Bucharest, based on Colliers estimates and a similar level is also seen in Timisoara, with a bit lower levels in other parts of the country.
“Such levels of vacancy suggest a fairly balanced market, not a tenant’s one. I&L has been, arguably, one of the most interesting asset classes – and this is valid not just for Romania, but also for large parts of the global economy, as warehouses proved to be a source of steady income even during such difficult times. Consequently, one of the first trends which we consider worth mentioning is that post-pandemic, a lot of investors that have not been exposed to this sector will want a slice of this pie. We expect to see more and more non-traditional developers either developing themselves or in partnerships or purchasing income producing assets; we have quite a few companies active in the office and residential sectors in Romania that serve as examples”, explains Vlad Mustață.
With regards to demand, we continue to see major upside from consumer-related sectors and in particular e-commerce. As a relevant side-note, quite a few of these companies are planning to use Romania as a base of operations for other smaller economies in the region, like Bulgaria, Serbia and Greece, turning Romania into a smaller regional hub.
Regarding the supply, developers are promising in excess of 0.6 million square meters of new developments in 2021, as new supply is needed both to account for the robust demand and to replace a significant stock of older warehouses which are not up to par with current technical and safety requirements. Colliers consultants point out that speculative developments, which were halted during 2020 amid elevated uncertainties, should come back to life and matter much more – possibly as much as 20%, double the share we registered in 2019.
The next 10 years are likely to bring a continued acceleration of growth as the modern I&L stock is underwhelming compared to the fast pace of the economic development in the past decade, let alone future growth. Consequently, even nearing Poland’s per capita level of modern warehouses would mean surpassing the 10 million sqm threshold, which is certainly attainable.The next decade will also bring some major trends which will have a deep impact on the industry, from enforcing stricter environmental rules to a continuous push for automation.