Plenty of room for growth in Romania’s industrial sector

With a current industrial stock of around 7.1 million sqm, Romania still has significant potential to grow, being the third biggest market in the region, behind Poland and the Czech Republic. Close to half a million sqm of new industrial and logistics spaces are under development at the moment, while the volume of speculative projects remains on a downward trend.

By Ovidiu Posirca

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The local industrial market is supported by strong demand, particularly from manufacturing, coupled with limited supply. The vacancy rate for industrial projects stood at 5 percent at the end of Q1 2024, according to a Cushman & Wakefield Echinox report.

“Looking ahead, I anticipate continued demand for modern industrial spaces driven by light manufacturing and retail. Additionally, the return of domestic and international manufacturing strengthens the need for quality industrial real estate. Furthermore, market dynamics emphasise sustainability and technology. Tenants increasingly seek green buildings with energy-efficient features alongside advanced technological infrastructure to support operations,” says Sorin Preda , Founder and CEO of local industrial developer Global Vision.

With its current industrial stock, Romania is trailing behind Poland, which has 31 million sqm, and the Czech Republic, with over 11 million, according to Colliers data. On the rent component, prime properties in dynamic cities have average rents ranging between EUR 4.5 and 5 per sqm, though some properties have exceeded this range.

“Romania is an attractive option for companies looking to relocate or consolidate their operations, due to low labour costs and a less strained labour market compared to other countries in the region. In addition, infrastructure connectivity is expected to improve significantly by the end of this decade, with around 800 kilometres of high-speed roads under construction,” says Victor Cosconel , Head of the Office & Industrial Agencies at Colliers . On this backdrop, new players are entering the local market. Indotek acquired land for future warehouse developments, while a division of AG Capital announced intentions for future projects and completed the acquisition of land in Popesti-Leordeni, near Bucharest.

On the leasing market, transactions totalled around 150,000 sqm in Q1 2024, down by 44 percent compared to the same period of last year, although consultants say the market will pick up pace in the coming quarters.

Meanwhile, Global Vision is looking to expand its city logistics projects in major and secondary cities. The company is also exploring the build-to-own market, where it will act as a general contractor.

“A key aspect of our expansion strategy involves the development of integrated commercial ecosystems that prioritise both efficient warehousing and well-planned residential communities. We are currently exploring potential locations for these projects, aiming to create self-contained environments that promote efficiency and convenience for tenants and residents,” says Preda.

Strong demand for warehouses from manufacturers

While manufacturing is the main driver of demand for industrial spaces, logistics and FMCG players are also looking for high-quality warehouses. The demand landscape is expanding to include the pharmaceutical industry, online retail giants, and even the automotive sector. This diversification signifies a thriving and multifaceted industrial ecosystem, according to Global Vision’s CEO.

“The need for space extends beyond traditional warehousing. Companies are seeking facilities tailored to specific needs, such as assembly lines, temperature-controlled environments, and even light production capabilities. This trend underscores the importance of modern, adaptable industrial real estate that can accommodate a broader spectrum of uses,” concludes Preda.

On the investment transaction market, industrial players held a share of 15 percent of dealmaking, which reached EUR 202 million across the commercial sector in Q1 2024. In the next quarter, the industrial sector will have a bigger role in the investment market, considering CTP’s purchase of six industrial projects and a land bank from Globalworth in Romania. The transaction is valued at around EUR 170 million, according to Colliers estimates.

The acquired portfolio comprises industrial projects in Bucharest, Arad, Pitesti, Oradea, and Timisoara. As part of the deal, CTP has also purchased 30 hectares of land for further potential developments in Western Romania. With the newly acquired projects, CTP’s network in Romania has climbed to 2.91 million sqm of industrial spaces. This deal underscored the need for good transport infrastructure for cities that attract industrial investments. Consultants say that infrastructure development remains the main issue related to the uneven economic growth across Romania.

The last few years have brought significant infrastructure projects, which have the potential to unlock some areas in the country that were previously isolated and bypassed by investors, including Eastern Romania, where new industrial projects are taking shape.