The year 2023 ended with a consistent level of activity for the industrial and logistics sector, with lease contracts for approximately 770,000 square meters, slightly down from the record level of 830,000 square meters in 2022, according to the annual report published by Colliers.

The result probably does not accurately reflect the true extent of the local market, considering that only public information is taken into account (either transactions reported by local research offices, press releases, or reports for investors in the case of publicly listed companies).

Colliers consultants point out that unofficial data and fluctuating vacancy rates suggest a real demand of at least 25% higher, meaning that the one million square meter threshold was likely surpassed (again) in 2023.

Although still an impressive figure overall, when analyzing the actual leased area, only about 38% of the leasing demand came from Bucharest, down from 48% in the previous year and 63% in 2021.

Another aspect correlated with the aforementioned orientation towards activities outside Bucharest continues, says the director of Colliers, "has much to do with the increase in the number of production operations.

About a third of the leased spaces were signed by tenants targeting production activities, a significant change, considering that, before the pandemic, the percentage was usually around 10-15% if a large contract was not signed. These are just the first signs of the reshoring wave that we expect to become increasingly visible in the coming years."

The total modern stock exceeded 7 million square meters in 2023, up from 6.2 million square meters at the end of 2022. While CTP and WDP remain by far the largest owners in the market, cumulating over half of the leasable space, other developers remain quite active, and Colliers consultants note that there is interest from new developers analyzing certain regions.

In terms of sectors, Colliers consultants emphasize the growing importance of the automotive sector, which has always been a key driver but rarely outperformed other sectors. Last year, tenants from the automotive sector made the largest share of transactions, approximately 30% of the total contracts, surpassing logistics operators (3PL operators, approximately 23%).

Long-term, another trend remains valid, namely the reorientation of tenants towards city centers, especially towards Bucharest, in the context of a competitive e-commerce market.

Last year's largest transactions were all in the 50,000 square meter area, including Inter Cars' new lease contract at VGP Park in Brasov, intermediated by Colliers, the expansion of Pirelli's factory in Slatina by WDP, and the renewal of the contract with CTP in Timisoara by FM Logistics (part of a sale and leaseback agreement covering 100,000 square meters of warehouses in Romania).

The top storage vacancy rate remained in the single digits, mostly below 5%, in most submarkets in Romania, including Bucharest, indicating that for tenants surpassing a certain size, it might be difficult to find the desired space in terms of costs and location.

Colliers consultants also point out that unlike other markets in Central and Eastern Europe, such as the Czech Republic, Romania does not face widespread "shadow vacancy," meaning warehouses that have been partially completed but where construction works have been halted awaiting a tenant and, therefore, are not considered delivered.

Regarding rents, Colliers consultants emphasize that there has been a major change in recent years. In the previous decade, warehouse rents were largely stable from year to year, with the predominant trend being a very slow decline over an extended period.

The considerable change in construction prices, coupled with a relatively low availability of vacant spaces in certain parts of the country, and most importantly, a significant evolution of demand, have ultimately pushed rents up in Romania.

As a result, rents have increased from a significantly lower level of 4 euros per square meter at the end of 2021 to 5 euros per square meter for a medium/build-to-suit (BTS) warehouse space in a good location.

This increase of about 30% (sometimes even higher) in rents in two years is not as impressive on a regional scale, where markets have experienced a similar dynamic, but it is still considerable for Romania, given the challenging evolution of the last decade.

The outlook remains optimistic for the local industrial and logistics market, and there is still significant room for growth compared to other countries in Central and Eastern Europe.

With just over 7 million square meters of modern warehouses, Romania's stock per capita is much smaller than that of Poland, with over 30 million square meters, or the Czech Republic, with over 11 million square meters.

In other words, while Romania has similar private consumption levels (in volume indices) as Poland or the Czech Republic, the warehouse stock per capita is 2-3 times smaller than in these countries.

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