In Central and Eastern Europe (CEE), the real estate markets performed well last year with a dynamic industrial space market, a return of the retail sector to pre-pandemic values in terms of in-store traffic, and the increasing importance of ESG criteria in the office area, according to the “Highlights 2022 CEE-6 Real Estates Market” report, recently published by Colliers.
“2022 was a year of challenges, but also of successes in the area of real estate investments and certain sectors, like the industrial one. Romania’s economy and local real estate market gained a lot of maturity in the last decade, with 2022 confirming that the country has the potential to be a much bigger regional player,” says Laurențiu Lazăr, Managing Partner at Colliers.
So, in the area of favorable results, the Colliers report mentions the volume recorded by the real estate investment market, with transactions of over 1.2 billion euros, the best value since 2007 and a significant increase compared to the usual average volume of about 900 million euros that Romania has had from 2014 to date. Compared to the 2005-2009 period, a notable difference comes from the divergence of commercial property prices from the region and from the economy in general. As a result, Romania lagged the region in terms of yield dynamics, which should give the market a higher degree of resistance to the impending correction.
Another major topic highlighted in the Colliers report, with significant implications for the local economy, is the dynamism of the industrial and logistics space market, particularly with the increasing number of announcements of major factories being built in Romania. Colliers consultants believe that this marks the beginning of the relocation of production units from Asia and Russia in the context of the new geopolitical realities, but it is also the result of major investments in the area of infrastructure, another major focus of 2022.
The residential market is also ending a record year in terms of deliveries, with a total volume of units delivered at least 40% higher than the average of the previous decade, with the construction sector remaining lively at the end of the year. However, the challenges of falling living standards and rising interest rates also began to be felt during the year, but not strongly enough to diminish the very good results.
“As far as the office building segment is concerned, the year that just ended was a relatively dynamic one, marked both by growing demand and new entrants to the local market, such as Ford’s and Booking’s new service centres. And these generally good results came in spite of growing interest in hybrid working. But a more important trend for the office sector, and beyond, is the increased focus on environmental, social and governance commitments, the so-called ESG criteria, and in particular those related to the environment. Rising costs have made both developers and tenants much more aware of the importance of energy-efficient buildings, which has permanent effects from now on” says Laurențiu Lazăr.
Another positive trend of 2022 that the Colliers report mentions is the rapid recovery of the retail market, as sales, shopping center traffic and rents have recovered and even exceeded their pre-pandemic levels. However, with the autumn months, enthusiasm has slowed a bit in the retail area as consumer incomes come under pressure.
Rising construction costs and inflation are a recurring topic in all real estate markets in the region in 2022, given pressures on both development costs and rents. Under these circumstances, most of the developers of commercial real estate projects that had no adequate pre-leasing, both office buildings and warehouses, entered into a stand-by with further investments.
