Analysis: Foreign investors pour EUR 12 bln into Romania's real estate sector in nine years
The real estate and construction sector attracted the biggest foreign direct investments (FDI) to Romania between 2012 and 2021, about EUR 12 billion in total, reveals an analysis by Cushman & Wakefield Echinox based on FDI data from Romania’s National Bank (BNR).
As a result, the share of this economic sector in the overall FDI stock increased to 17.4% at the end of 2021, compared with 9.2% in 2012. At the same time, real estate and construction surpassed retail to become the second-biggest sector in terms of FDI stock at the end of 2021, after the manufacturing industry.
At the end of 2021, the total FDI stock pertaining to the real estate and construction sector reached EUR 17.4 billion, more than triple the value recorded at the end of 2012, when the current economic growth cycle started. The overall FDI stock climbed by 70% to EUR 100.3 bln in the same period.
The consistent increase of the FDI flows in real estate and construction during the last ten years also reflects the evolution of the total stock of modern commercial properties. The real estate developers completed office, retail and industrial projects with a cumulative area of around 7 million square meters in the analyzed period, a major increase compared with a stock of only 5.5 million sqm at the end of 2012. Foreign investors are dominant in all market segments and own more than 70% of the total inventory of modern commercial properties in Romania, according to Cushman & Wakefield Echinox estimates.
Moreover, foreign investors have also increased their presence in the residential market, especially in the last five years, as tens of thousands of residential units directed to these players have either been completed or are under various stages of development in the country’s biggest cities.
“With an average annual investment of around EUR 1.2 billion, foreign capital has played a decisive role in the evolution of the local real estate market in the last decade, while also heavily contributing to Romania’s consolidation as a major IT and logistics hub in Eastern Europe,” said Cristi Moga, Head of Capital Markets Cushman & Wakefield Echinox.
He added: “Romania is a country where there is still great development potential in all market segments and thus the presence of foreign investors is more than beneficial, alongside the domestic capital, which has also become increasingly visible. Therefore, the authorities have a great responsibility towards creating transparent and predictable legal and fiscal frameworks for real estate developments and investments, considering that Romania is facing strong competition in terms of attracting this capital. Unfortunately, the ongoing situation in Bucharest, which has already lasted for two years, has made many developers reevaluate their investment options.”