Romanian real estate investment market registers highest increase in transaction activity in CEE

The first quarter of 2024 ended with real estate investments in Romania totaling EUR 202 million, up 69% compared to the first three months of 2023, with transactions in the retail segment accounting for around two-thirds of the volume, according to Colliers’ ”CEE Investment Scene Q1 2024” report.

Compared to the other five major economies (Bulgaria, Czech Republic, Hungary, Poland and Slovakia) in Central and Eastern Europe (CEE), Romania was the best performer. Market activity in the region was soft and transaction volumes reached one of the lowest levels in a decade.

The Czech Republic became the region’s new leader, with investment volumes accounting for 46% of the total of the six largest CEE countries, overtaking Poland, which had a cumulative share of 30% of the volumes traded in the first quarter of the year. However, performance varied significantly across the region, from a 94% drop in activity in Slovakia to a 69% increase in Romania.

Colliers’ consultants believe that the outlook for the real estate market in the region remains quite strong, with environmental, social, and governance (ESG) criteria becoming increasingly relevant in the decision-making process of real estate investors, banks, and tenants.

Overall, total investment volume in the six CEE countries fell by 15% compared with the first quarter of 2023, to around EUR 1.2 billion, in line with the dynamics in other regions of Europe and many other parts of the world.

Romania’s performance is quite encouraging, especially compared to other more developed markets such as Poland or the Czech Republic, considering the pre-pandemic period. In the first quarter of this year, Romania accounted for 16% of the region’s total investment volume, compared to 5-7% in the pre-pandemic years.

“There remains a disparity between the price expectations of buyers and sellers. Various factors affect returns and liquidity, including interest rates, maturity, loan terms, and ESG compliance, among others. However, the primary challenge persists in the cost of financing, currently ranging between 5% and 5.75% for all-in loans, influenced by persistently high interest rates. Compared to Western European markets like Germany, the CEE region has not undergone significant price corrections in the past 12-18 months. This could contribute to slower transaction activity in 2024,” said Laurențiu Lazăr, Managing Partner &Head of Investment at Colliers Romania.

The retail sector dominated the Romanian real estate market in the first quarter of 2024, representing approximately 66% of the total commercial real estate investment volume. Following closely behind was the hotel sector, comprising around 21% of the total volume.

On a broader scale, at the CEE level, retail emerged as the primary leader, capturing 43% of transaction volumes in Q1 2024. Hotels followed with a share of 20%, while industrial and logistics accounted for 15% of the total volume.