The Real Estate and Construction sector has attracted around EUR 12 billion of Foreign Direct Investments

Mihai-Alexandru Cristea 26/10/2022 | 14:02

The real estate and construction sector has attracted around 12 billion euros of foreign direct investments (FDI) in the last ten years, as the share of this economic activity in the overall FDI stock increased to a level of 17.4% at the end of 2021, compared with 9.2% in 2012, according to data from the National Bank of Romania analyzed by the Cushman & Wakefield Echinox real estate consultancy company.

 

Under these circumstances, the real estate and construction market became the second largest recipient of foreign capital in Romania, after the manufacturing industry (30% of the FDI stock), surpassing trade (17.2%).

At the end of 2021, the total FDI stock pertaining to the real estate and construction sector reached 17.4 billion euros, while recording the highest growth rate among all economic sectors (219%) in the 2012-2021 period.

Foreign direct investment includes the paid-up capital and the reserves related to a non-resident investor holding at least 10% of the voting power or of the subscribed share capital of a resident enterprise, debt instruments between the investor or the group to which the investor belongs and the resident direct investment enterprise, as well as the reinvestment of earnings.

The consistent increase of the FDI flows in real estate and construction during the last ten years also reflects the evolution of the total stock of modern commercial properties, foreign investors having a dominant presence in all market segments.

Therefore, the real estate developers completed office, retail and industrial projects with a cumulative area of around 7 million square meters in the analyzed period, a major increase compared with a stock of only 5.5 million square meters in 2012. Moreover, foreign investors have also increased their presence on the residential market (especially during the last five years), as tens of thousands of residential units directed to these players have either been completed or are under various stages of development in the main cities of the country.

Moreover, foreign investors are the largest owners of modern commercial properties in Romania in all market segments, owning more than 70% of the total stock of such spaces.

Cristi Moga, Head of Capital Markets Cushman & Wakefield Echinox: „With an annual average investment of around 1.2 billion euros, foreign capital has played a decisive role in the evolution of the local real estate market during the last decade, while also heavily contributing to Romania’s consolidation as a major IT and logistics hub in Eastern Europe. Romania is a country where there is still a great development potential in all market segments and thus the presence of foreign investors is more than beneficial, alongside the domestic capital, which has also become increasingly visible. Therefore, the authorities have a great responsibility towards creating transparent and predictable legal and fiscal frameworks for real estate developments and investments, considering that Romania is facing a strong competition in terms of attracting this capital. Unfortunately, the ongoing situation in Bucharest, which has already lasted for 2 years, has made many developers reevaluate their investment options”.

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Mihai-Alexandru Cristea | 26/10/2022 | 17:53

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