The first half of the “pandemic year” was most difficult for retail players, considering the lockdown during the emergency state, but the recovery up until July has been better than most market participants were initially expecting, according to Colliers International’s market report for the first semester of 2020. In the industrial & logistics area, it has been business as usual during the pandemic, with some seeing big spikes in activity, but a significant pipeline of speculative developments and a competitive market are tilting the balance in favour or tenants.
“Ahead of March, the retail scene in Romania was performing very well, with new brands constantly entering the market, some in the first couple of months of the year actually, like Armani Beauty, Breitling or Movenpick. With limited clarity about both the short and medium-term, some interest has dimmed, but we continue to see solid demand from food operators, including discounters, DIY/home deco as well as mass market clothing/footwear brands. Just to gauge the strength of the retail scene, it is important to note that the big and performant dominant retail schemes in major cities still have virtually no spaces available and feature waiting lists for brands wanting to set up shops”, says Simina Niculiță, Partner & Head of Retail Agency at Colliers International.
Furthermore, the V-shaped recovery of consumption continued strongly in June, with retail sales having recovered three quarters of the decline seen in March and April and overall sales turning positive for the year in the January-June period. While the future path of the recovery will depend on how the pandemic situation evolves, as well as the dynamic of the labour market, it is clear that things are moving much faster than with the previous recession: retail sales do not return, in real terms, to levels seen in 2008's summer until mid-2015. Statistical data suggest that the recovery is quite uneven, with clothing sales lagging quite a lot as spending shifted in the last couple of months towards items like DIY or sportswear (including camping).
Modern industrial and logistic stock reached 4.7 million square meters at the end of June
Around 120,000 square meters in new modern industrial & logistics spaces are estimated to have come online in the first semester of 2020 throughout Romania, with 100,000 square meters in the vicinity of Bucharest, which is less than half the level seen a year ago. The second half of the year is seen to be much more active, with nearly 300,000 square meters in new deliveries expected, two thirds in Bucharest, as quite a few big contracts were signed fairly recently, and the tenants are expecting to move in. This took overall modern industrial & logistics stock to 4.7 million square meters at the end of June, with Bucharest amounting to 2.4 million square meters.
“Total demand reached 249,000 square meters in the first half of the year, roughly unchanged compared to the first semester of 2019. The good result was achieved largely thanks to two large deals involving Profi, a chain of supermarkets, which accounted for nearly half of the total GLA leased in 2020. The retail/FMCG sector in total generated nearly 50.2% of all deals, followed at a great distance by production activities (19.4% of total) and 3PL/logistics (14%)”, says Laurențiu Duică, Partner & Head of Industrial Agency at Colliers International.
Colliers International consultants note that amid the pandemic, incentives are higher, with landlords offering more rent-free months than before; this means that, in some instances, the net-effective rent can reach some 20% below the headline (versus around 13% before). Otherwise, vacancy is still comfortably in single digit territory. It is hovering around 7-8% and has not seen any material changes amid the coronavirus situation. Such levels are consistent with a neutral market, but with the significant pipeline of speculative developments (including such deliveries in recent years) plus a competitive market tilting the balance in favour or tenants.
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You can download the Colliers Mid-Year Romanian Real Estate Market Report here.
