In addition to infrastructure improvements and still insufficient supply compared to the rapid growth of the economy, Colliers consultants attribute the strong market growth to Romania's role as a regional distribution hub for companies targeting Southeast Europe. Although logistics activities remain dominant, the manufacturing sector is also seeing an increase in leasing.
"Romania's industrial property market has grown significantly since the pandemic, almost doubling pre-2020 rental levels. Economic growth, infrastructure improvements and reshoring are key factors in this dynamic. Considering the lower supply of modern spaces per capita compared to the Czech Republic or Poland, Romania has a strong potential for growth. Investments in green buildings and compliance with ESG standards are increasing, with one in three green certificates in 2023 being attributed to industrial projects, thus aligning with EU directives and tenants' expectations", explains Victor Cosconel, Head of Office & Industrial Agencies at Colliers.
Moreover, the ECE-6 region (Bulgaria, Czech Republic, Hungary, Poland, Romania and Slovakia) is a leader in the implementation of ESG standards, with almost 90% of modern industrial and logistics spaces having high-quality environmental certifications. The Czech Republic and Slovakia have had BREEAM-certified buildings at the "Outstanding" level for several years, and Hungary joined them in 2022. In 2023, Poland and Romania also achieved the highest level of certification in several industrial parks and logistics. It is expected that, in the coming years, more and more facilities in all ECE-13 countries will receive such certifications.
Asking rents in the region range from €3.4 per square meter per month in Poland to €7.7 per square meter per month in the Czech Republic. Romania is in the middle, with gross rents of around 4.5-5 euros per square meter for first-class warehouses. Recent developments have led to higher rents in Romania, with increases of around 25-30% in the last two years, although the pace of growth seems to be slowing down. Investment returns for top industrial and logistics projects vary between 5.25% in the Czech Republic (the lowest in the CEE region) and 8.5% in Bulgaria, and Romania is also in the middle, around 7.5 %. Occupancy varies significantly, from 1.75% in the Czech Republic to 7.7% in Hungary, with Romania hovering around 5%.
In the CEE-6 region, the average annual volume of investment exceeds EUR 10 billion, according to the latest available data, and investments in the industrial and logistics sector represent approximately 27%, i.e. EUR 14 billion, in the last five years. In 2023, the volume of investment in I&L was around €1.5 billion, significantly below the five-year average. This decline is mainly due to large developers such as CTP, GLP, Prologis and Segro holding long-term properties, thus limiting available volume, even as some developers engage in asset trading. Therefore, in Romania and much of the CEE region, the volume of I&L investments does not accurately reflect real demand.
“The industrial and logistics sector continues to be a key area of interest for CEE investment, despite economic and geopolitical challenges. The CEE-6 region has seen significant yield compression and notable increases in rental rates due to limited supply and high demand, maintaining an optimistic outlook despite economic pressures. Investment considerations now include financing costs, ESG compliance and economic factors affecting tenant markets. Current financing rates vary between 5% and 5.75%, being influenced by rising interest rates and compliance with ESG criteria. In recent years, the I&L sector has become central to economic growth in Central and Eastern Europe, including the Baltic countries and the Balkans. This growth is fueled by the growing demand for modern logistics facilities, strategic geographic positioning and solid economic fundamentals," notes Victor Cosconel.
In the CEE-13 region, there are significant variations in wages, with particularly important increases in CEE-6 due to nearshoring and automation trends, which are driving business expansion in Central Europe. Migration patterns from the Western Balkans have also been considerable, providing industries with the opportunity to recruit employees with diverse skills and backgrounds.
Driven by industries such as 3PL, retail and distribution, the total supply of modern industrial and logistics space in CEE-13 capital markets stands at nearly 25 million square meters, and over 67 million square meters at country level, despite the drop in demand in 2023 due to economic and geopolitical factors. The ECE-6 region, which is the leader in terms of industrial and logistics development within ECE-13, holds almost 90% of the total stock of more than 60 million square meters. By the end of 2023, nearly 4 million square meters were under construction across the region.
Looking ahead, the industrial and logistics (I&L) sector will react to inflation and economic changes, with the potential for disruption due to changes in tenant demand and the expansion of e-commerce. Nearshoring activities are expected to increase as supply chains diversify. Despite these challenges, the CEE I&L sector is well positioned to maintain its stability.
