In line with the slowing economy, the real estate market in Romania is showing some signs of slowdown in several segments, but overall the results remain quite solid, according to experts from Colliers Romania in an analysis for the first half of the year.

The logistics and industrial property market is showing the most promising results, with leasing activity increasing by approximately a quarter compared to the same period last year. In the office segment, the first half of the year saw a rental volume increase of over 20% in Bucharest compared to the same period last year, reaching approximately 160,000 square meters.

Due to rising interest rates, less favorable results were recorded in the investment transaction area, where volumes halved, as well as in the residential sector, where sales have declined rapidly.

According to publicly available data, in the first half of the year, approximately 500,000 square meters of modern logistics spaces were leased, nearly double compared to the same period last year, without considering non-public direct transactions (including lease extensions).

An important change compared to previous years is that Bucharest now represents only one-third of total leasing transactions, a trend that Colliers experts have been expecting for some time. Infrastructure developments, workforce availability, and regional development are pushing more companies to seek logistics spaces in areas other than the capital. In the past, Bucharest accounted for over half of the total leasing transactions.

For the office market, the first quarter of the year was weak, but it was followed by a second quarter that is among the strongest not only in recent years but also considered one of the best before the pandemic.

Approximately 160,000 square meters of modern office spaces were leased in Bucharest in the first six months of the year, compared to around 130,000 square meters in the same period in 2022. However, new demand amounted to only 45,000 square meters, a 40% decrease from 2022.

The retail sector is going through a more challenging period for tenants. Although sales have increased, firms are experiencing margin pressures due to rising rents (including administrative costs).

However, developers remain solid in their appetite, with plans for this year exceeding 200,000 square meters of new retail spaces (although some may be postponed to 2024 due to delays), making it the busiest calendar in over a decade.

For land transactions, the first half of the year was quite solid, with a total volume of commercial real estate project lands of approximately 250 million euros, almost half of what was recorded for the entire year 2022.

Colliers includes in this figure only lands for offices, commercial spaces, residential projects, excluding industrial spaces. However, interest in new acquisitions seems to be noticeably lower in the second half of the year, with many potential buyers waiting for new opportunities.

On the other hand, most property owners do not feel any pressure to lower prices, so a slowdown in activity is estimated. The volume recorded in the first half of the year is generated almost equally from the residential and retail sectors.

In the real estate transaction area, there is a substantial slowdown in activity compared to the last two years, but Colliers representatives say it is more of a return to normal.

In the residential area, Colliers consultants note an increasing focus on the build-to-rent (PRS) sector - apartments for rent in dedicated buildings - both from clients and developers.

This comes both due to higher interest rates, which have made monthly rates for purchasing an apartment higher than equivalent rent, and due to other trends, such as generational change - as young people seek more flexibility - or the fact that some companies are trying to offer employees more favorable benefits packages, and subsidized rental apartments can be an option.