The year 2023 ended with one of the best results since 2011 in terms of deliveries of new retail projects, adding approximately 220,000 square meters to the total retail area, more than double compared to the last two years, according to the annual market report published by Colliers.

Both for retailers and shopping center owners, 2023 was also another good year for sales, and the level of profitability in Romania continues to be one of the highest in the European Union.

In parallel, Colliers consultants note an increasing interest from developers in large-scale mall or mixed-use projects in the coming years.

The largest openings in 2023 were the Promenada Craiova mall by NEPI Rockcastle (63,700 square meters), which is also the largest retail project delivered in Romania since ParkLake in Bucharest in 2016, followed by the AFI Europe retail park in AFI Arad (29,400 square meters) and the Carolina Mall in Alba Iulia owned by Prime Kapital/MAS REI (28,900 square meters).

Overall, the distribution appears much more balanced than in the recent past, with new projects targeting both large cities, including Bucharest, and smaller cities, which continue to be at the forefront of retailer expansion. Colliers consultants mention that they only considered commercial schemes exceeding a total leasable area of 5,000 square meters.

Currently, Romania has a total stock of modern retail space of over 4.3 million square meters, of which over 2.7 million square meters are malls, and the rest primarily retail parks. Over 60% of the total modern retail space is concentrated in the top 10 largest cities, with over 200,000 inhabitants.

However, Colliers consultants note that although the general sentiment is positive among market participants, from customers and retailers to property owners, consumers have become more cautious, as usually happens in periods of heightened uncertainty, with many shifting towards more affordable products.

After years of strong price increases, discounters continued to perform well in 2023, and it is expected that they will maintain this favorable dynamic in the future.

Moreover, the yields offered by the local market to retailers, together with the rapid recovery of the retail sector after the pandemic, one of the fastest in the EU, have put Romania back on the radar of international retailers.

Last year saw the entry of new brands into Romania, such as Lefties, Jimmy Kay, Wittchen, or Stefanel (a re-entry after the brand completely exited the market in 2021). Although most target the fashion segment, this is not the only beneficiary of the new entries, as the market is attractive to a multitude of segments, meaning that new brands should continue to find their place in Romania, from clothing to food, footwear, accessories, or decorations.

Regarding occupancy rates, dominant shopping centers and well-positioned retail parks maintain their high leasing levels, and newly delivered projects are generally well received by the market. Regarding rents, although sales have slowed down, Colliers consultants emphasize that sales remain considerably above pre-pandemic levels.

With less than 90,000 square meters of new modern retail projects announced this year, more than half of this volume coming from a single project - Arges Mall in Pitesti, there is a decline compared to last year, a figure comparable to the weaker years since the beginning of the pandemic.

However, the prospects remain encouraging, considering that between 2025-2028, several large and dominant shopping centers are expected to add several hundred thousand square meters of leasable space to the modern retail stock.

Iulius Group initially announced that the mall in Cluj-Napoca will have a total leasable area of over 100,000 square meters, and a new project in the same city, carried out by the Prime Kapital/MAS REI association, will deliver a leasable area of over 70,000 square meters in the coming years.

In Iasi, Prime Kapital/MAS REI will also deliver an extension of almost 60,000 square meters to Moldova Mall by the end of 2025. There are also quite a few other large projects under construction or whose works are expected to start soon, with a total leasable area between 30,000 and 50,000 square meters each.

However, Romania remains a market with insufficient supply not only compared to Western European countries but also compared to Central and Eastern European countries. For a similar consumption per capita level as in the Czech Republic and Poland (in terms of volume of purchased products and services), Romania's modern retail stock per capita is twice as low as that in the Czech Republic and over 40% lower than that in Poland.

However, while Romania's real estate segments remain relatively deficient compared to other European countries (including those in the region), data indicate that the gap is smaller for the retail market than for office or industrial markets, in relative terms (per capita).

Colliers consultants anticipate a favorable medium-term evolution for consumers as well. On the one hand, inflation is expected to continue to decline after ending 2023 at 6.6% and should return to the central bank's target range of 1.5-3.5% by the end of next year (if fiscal policy allows it).