In 2018, given the limited room for fresh fiscal stimulus and expected monetary policy tightening, GDP growth is set to slow down to a more sustainable level (around 5 percent), still keeping Romania among the top performing European economies, the latest Colliers International report shows.
Consequently, the outlook for office, retail and industrial spaces remains quite rosy, especially for the latter.
“Our opinion does not take into account <black swan> -type risks like a sharp deterioration of the internal political climate or severe deepening of Western-Eastern EU divide,” Silviu Pop, Head of Research Colliers Romania, notes.
After 2017’s investment volumes of just over EUR 0.9 billion, the potential pipeline for the office segment alone could be larger than this level. Though some deals could be delayed for next year (as seen in 2017 as well), Colliers consultants expect to see overall market turnover move well north of EUR 1 billion, with both currently active players and new entrants to drive up demand. Among the arguments supporting the real estate investment scene are: attractive yield spreads versus neighbouring CEE peers, good macro performance and strong appetite from banks to back deals (other funding alternatives also available).
At the same time, the industrial segment will continue delivering very strong results. ”We view the strong tenant demand as fundamentally sound given the boost in e-commerce and room to catch up CEE peers,” the report also reads. Meanwhile, big landbanks ensure that deliveries could continue to be elevated in 2018, similar to 2017’s pace, if not higher.
As regards infrastructure, Colliers representatives do not expect to see a material acceleration, given the limited fiscal room in the state budget and poor track record of EU funds absorption.
However, the deliveries look set to accelerate quite a bit in 2018 after disappointing in 2017. The new hotspots (Center West, Piata Presei/Expozitiei) can likely be digested organically to a large extent, though developers are becoming much more cautious, with the pipeline for 2018 already one third lower than we would have thought 2-3 quarters ago.
No new large projects have been announced for Bucharest in the upcoming years. However, the investments will continue to focus on improving the nationwide coverage of modern retail, including via medium to smaller schemes in the less populated cities (below 100,000-150,000 inhabitants).
Given the higher wages and elevated intentions to purchase homes, residential projects are still likely to remain the key drivers for land. New office projects will likely draw demand for residential projects in neighbouring areas.