Cushman & Wakefield Echinox surveyed the top management of local, regional and global investors and developers, with a combined Romanian real estate portfolio valued at more than €15 billion, thus having a share of approximately 50% of the local modern real estate market.
Bucharest and the secondary markets consolidated their positions as the preferred investment destinations. Almost 80% (compared with 66% in 2023 and 63% in 2022) of respondents indicate Bucharest as their main location for new investments, while 31% (24% in 2023 and 20% in 2022) are actively targeting tertiary locations (cities with less than 200,000 inhabitants). Secondary cities are also a very attractive investment destination for more than 65% of respondents.
This development underlines how the investment portfolios have been diversified across the country and the increased interest in emerging markets outside Bucharest. The attractiveness of these areas is supported by growth opportunities, lower costs and positive market dynamics.
Vlad Saftoiu, Head of Research Cushman & Wakefield Echinox: ”Investors are optimistic, while also showing a certain degree of caution in regards to the Romanian real estate market evolution. They are predicting a consolidation of the industrial & logistics and retail segments, a stabilization of office demand and selective portfolio growth. The overall real estate market performance illustrates a balance between opportunities and macroeconomic challenges, in a context of increased confidence towards economic stability and consumption growth, supported by the accessibility of bank financing, the focus on sustainability and the adoption of ESG requirements.”
A majority of respondents predict an upward movement of office rents. While there were a series of concerns about potential decreases in 2023, the sentiment shifted back to optimism in 2024, suggesting a belief in a long-term upward movement of office rents. However, the 2024 growth predictions were slightly tempered for industrial & logistics assets, with an increased share of respondents forecasting stability rather than continuous growth.
The results indicate a positive, but cautious outlook for retail rental rates. While many expect increases, a consistent number of investors anticipate stability, the outlook improving each year, with fewer respondents predicting declines. This trend suggests growing confidence in the retail market, possibly fueled by the recovery of demand and by the impressive retail sales growth.
Inflation remains the primary factor which could influence occupancy costs in the real estate market. Construction and financing costs are also highlighted as major risks for rents across all segments.
In terms of demand, investors and real estate developers forecast a stable level for offices, with the sector moving towards consolidation, as companies are adapting to current work models rather than pursuing aggressive expansion. However, investors are more optimistic concerning the demand for retail spaces compared with previous surveys, even though there is no clear anticipation for significant changes.
Respondents are optimistic about the logistics sector and, to a lesser extent, retail when it comes to the asset classes expected to see more investments in the coming 12 months. The sentiment towards office spaces remains cautious, while also showing slight improvement compared with the previous editions of the barometer.
In this context, a clear majority of investors intend to expand their portfolios over the next three years, while 21% plan to maintain their current activity level and only 9% foresee downsizing. The primary source of financing is represented by banks, with 49% of respondents highlighting the accessibility of credit conditions. Another important financing source is represented by shareholder loans (19%).
The main negative factors concerning the real estate market are related to inflation and interest rates, while geopolitics and financial stability were also highlighted as significant risks. However, the investors’ perceptions of macroeconomic stability, taxation and labor market have improved compared with previous years.
Sustainability is becoming a key element in investment decisions, which is perceived as a way to ensure long-term success. Investors are clearly focusing on certifying their buildings and on getting up-to-date with the EU ESG Taxonomy reporting requirements.
The optimal management of operating costs is the primary challenge for 39% of respondents, while 24% identify the complexity of legislative regulations as a major issue for the management of their real estate portfolios. Factors expected to significantly influence property management include tenant experience and behavior, as well as the adoption of innovative and data-driven solutions.
