The first three quarters of 2023 look promising for the industrial and logistics (I&L) real estate sector. The total leasing demand of 550,000 square meters during this period was largely comparable to the previous year, according to Colliers data. It's worth noting that this result includes only public leasing transactions, i.e., those reported in the local real estate forum or publicly communicated by companies in financial reports or press releases.

Colliers consultants estimate that direct transactions between owners and tenants, which are not reported, are considerable and likely contribute at least 30% to the total leasing volume.

The recent solid performance of the market is attributed to Romania being increasingly seen as a regional distribution center by companies targeting the southeastern part of Europe, extending beyond this region.

Bucharest (36%), Timișoara (26%), Brașov (12%), and Slatina (10%) concentrate the majority of industrial and logistics (I&L) leasing transactions in Romania in the first three quarters of 2023. This consolidates a trend anticipated by Colliers, namely that transactions outside the capital will surpass those in Bucharest, considering that in the past, over 50% of transactions came from here.

In other Eastern European countries with a developed regional economy and larger geographical distances, the share of the capital is already smaller for many years. For example, Warsaw holds less than a quarter of the total stock of modern warehouses in Poland, while Prague represents one-third of the stock in the Czech Republic.

Both percentages are approaching the relative share of capitals in the country's GDP, while Bucharest represents about a quarter of the country's GDP, with over half of the I&L stock.

The total supply is expected to reach around 7 million square meters this year, up from 6.2 million square meters at the end of last year. With an additional half a million square meters expected to be added in the coming quarters in various regions of the country, it is evident that the focus is shifting from the capital to other cities.

In terms of sectors, one-third of this year's total leasing contracts were signed by logistics companies, accounting for approximately 160,000 square meters, followed by the automotive sector with around 120,000 square meters leased.

As in the past, considering most transactions by 3PL operators and companies related to the retail sector, in broad terms, it is likely that the fast-moving consumer goods sector is responsible for the largest part of the demand.

The top warehouse vacancy rate has remained in the single digits, mostly below 5%, in most submarkets in Romania, including Bucharest. This indicates that for tenants exceeding a certain size, it might be challenging to find the desired space in terms of cost and location.

Therefore, Colliers consultants believe that the current market favors landlords in many parts of the country. In other words, the rent increases recorded in the last year and a half are higher than what simple inflation rate indexing would suggest.

The prospects remain optimistic for the local industrial and logistics market, with significant room for growth compared to other countries in Central and Eastern Europe.

While Romania has similar private consumption levels (in volume indices) to Poland or the Czech Republic, the per capita stock of warehouses is 2-3 times smaller than in these countries.

This means that both the demand for logistic spaces and expansion are expected to remain robust in the future, even considering that both Poland and the Czech Republic act as regional distribution centers to a much greater extent than Romania.

In conclusion, Romania can accommodate a much larger stock of I&L spaces, exceeding 10 million square meters by the end of this decade. Another positive change in Romania is the prospect of significantly improved infrastructure. Some of the new roads will open up new markets for I&L operations.

For example, the new beltway around Bucharest is already generating increased interest in the southern part of the capital, while the highway to Moldova will create a bridge to this part of the country, likely leading to more logistics and production operations in the area.