With a declining inflation rate, at 14.5% in March, 2023 seems to be, so far, the beginning of a slow and tedious journey towards economic stability. Yet, looming around the corner are new obstacles: the wave of tech sector layoffs which begun in late 2022 in the US is starting to reach Europe, but the scale of its ramifications is yet unknown; crashes in the US banking system, seemingly isolated incidents so far, have triggered fears that the shock wave created by the collapse of US banks could affect Europe. Furthermore, the recent problems experienced by some European banks have put further pressure on investors.


Against all expectations, 2022 was a record-breaking year for the real estate investment market. The total investment volume amounted to 1.26 billion EUR, a 39% yoy advance. The market saw steady growth throughout the first nine months, which was further boosted in the fourth quarter by the largest transaction of the year: Paval Holdings’ acquisition of CA Immo’s office portfolio for 377 million EUR. This did not only take the share of domestic investments to almost half in total activity for 2022, but it has also positioned the Romanian company as one of the major office owners in the country.

The office sector maintained its position as the top recipient of investments, with transactions involving office assets reaching a value of 812.7 million EUR in 2022. Despite the challenges posed by the hybridization of traditional office work, investors in Romania still favor office buildings before other asset classes: retail transactions made up for less than a quarter of total investments, at nearly 285 million EUR, while industrial investments only held a 7% share in total, at approximately 90 million EUR. Similarly to 2021, the public sector was present on the investment market with three small-sized acquisitions in Cluj-Napoca and Bucharest.


For the first quarter of 2023, investor activity has maintained momentum, with a total investment volume of 149.6 million EUR, a 73% advance compared to Q1 2022. In a somewhat uncharacteristic manner, the industrial segment displaced office products in terms of share in total activity, at 43.4% (65 m EUR) versus 30.6% (45.8 m EUR), followed by hotels (18.3 m EUR), public sector acquisitions (12 m EUR) and retail (8.5 m EUR).

Both in 2022 and Q1 2023, Bucharest recorded over half of investments (888 m EUR and 74.8 m EUR respectively).


“Apart from market stability and product variety, another reason why investor interest has shifted away from regional cities in the past years is the fact that pandemic-related blockages in development led to a limited number of quality properties available for sale. A series of new developments announced on the regional markets are set to pick up pace in 2023 and create additional investment opportunities in the following years”, says Ilinca Timofte, Head of Research, Crosspoint Real Estate.

At the end of March 2023, Bucharest’s office stock stood at 3.75 million sqm, with 123,000 sqm in seven office buildings delivered in 2022 and another 42,000 sqm in two buildings added in Q1 2023. With a little over 67,000 sqm due for delivery for the remainder of 2023, the limited pipeline for the next 24 months is, on one hand, an adaptation of the market to the decrease in demand and, on the other, a consequence of the blockages in urban zoning plans. Supply continues to be strongly correlated with demand, with most new projects located in the Central-West area and city centre.


Following a significant rise in demand in 2021, which pointed towards a quick return to pre-pandemic volumes, the leasing activity in 2022 flatlined, with a total take-up nearly identical to the one recorded a year prior, at a little over 309,000 sqm. Nevertheless, demand remained strong, with new occupations holding a 62% share in total leases. Although there is a significant inventory of office spaces available for subleasing in Bucharest, only a small number of companies have opted for this alternative, resulting in a total of 3,400 sqm of sublet office space throughout the year. Relocations, which made up for 24% in total demand, continued to converge towards high-quality buildings located in easily accessible areas.

The total leasing activity on the Bucharest office market in Q1 2023 has recorded a 30% yoy drop, to 45,419 sqm, with a net take-up of approximately 25,000 sqm, out of which 74% represent relocations. Furthermore, no pre-leases were recorded in the first three months on 2023, even with a limited pipeline for the upcoming period.

“The adoption of hybrid work in 2020 and 2021 was mainly driven by pandemic-related restrictions. However, the fact that occupiers continued to choose alternative work arrangements even after the restrictions were lifted in 2022 suggests that this approach is likely to be a long-term or even permanent solution. As a result, a few major occupiers, primarily in the technology and financial industries, opted to reduce the size of their offices towards the end of 2022 and the beginning of 2023. Additionally, mid-sized companies are sub-letting part of the office space they occupy. These factors may contribute to a further increase in vacancy rates, which are already on an upward trend”, says Ilinca Timofte, Head of Research, Crosspoint Real Estate. Currently, the vacancy rate in Bucharest remains high, at over 11%.

Even though tech companies were the first to adopt work from home and hybrid work, they maintained their top position among the most active industries on the office leasing market, with a 36% share in total leasing activity in 2022 and a 34% share in Q1 2023, followed at a distance by the Energy & Industrial sector, with a 14% share in 2022 and 19% in Q1 2023.

For the Bucharest residential market, the strong inflationary pressure from 2022 was the most obvious. The inflation rose constantly throughout the year, reaching a peak of 16.8% at the end of November, leading to an increase in interest rates of 7.57% for 3M ROBOR and 5.6% for IRCC. Despite the long-awaited extension of the 5% VAT rate for dwellings of up to 700,000 RON (approximately 140,000 EUR) finally being passed into law, the increase in prices could not be fully offset by this positive change alone. Unfortunately, the measure was short-lived, with changes brought to the law which lowered the maximum amount for which the 5% VAT rate applies to 600,000 RON, starting with January 1st, 2023.  Additionally, the escalating costs of construction materials persisted, and the Russia-Ukraine conflict further impacted supply chains. Consumer behavior was also affected by the conflict, causing a wait-and-see approach similar to the initial months of the COVID-19 pandemic. Furthermore, the postponement of urban zoning plans in Bucharest created uncertainty among developers and will result in delivery delays in the upcoming years. For 2023, as the inflation rate is expected to drop (BNR projections putting it at 7% in Q4 2023), lower interest rates are set to revive buyers’ interest towards the end of the year.

2022 was an unsuccessful year for the “New Home” program. The budget of 1.5 B RON was not fully spent for the first time since the program was put in place, as the absorption rate of the fund was 90%. Moreover, the National Bank of Romania recommends a pause in the program for the medium term because of the substantial credit risk to the state budget. Currently, the program is scheduled to proceed in 2023 under the same conditions and with the same budget as those of 2022.

The effects of the many challenges on Bucharest’s residential sector will start to be more clear in the next 24 months. The total number of building permits issued in 2022 was 22% smaller than a year prior. In January-February 2023, only 459 building permits were issued in the Bucharest-Ilfov area, 42% fewer than in the first two months of 2022. Currently, the number of new units expected to be delivered in 2023 will constitute approximately half of the deliveries made in 2022. According to the National Institute of Statistics, 73,332 new dwellings were delivered nationwide in 2022, with 21,328 new units delivered in Bucharest and Ilfov, a 3% yoy decrease.

Fortunately, the uncertainty regarding the geopolitical situation faded rather quickly and demand kept a healthy level throughout 2022. An increase in demand compared to the previous year was however noticed mainly on the Bucharest market, where sales recorded a 10.7% yoy advance. On a national level, annual sales dropped by 4.18%, with all large regional markets recording decreases, from a small 3.42% drop in Brasov, to -8.76% in Timis and down to -17.55% in Cluj. In Q1 2023, the demand seems to have however caught up with the challenges set for the Bucharest residential market throughout 2022: in January-March of this year, only 10,146 units were transacted in the capital city, a 21.6% decrease compared to Q1 2022. For that matter, the drop was also recorded throughout the rest of Romania, where sales went down by over 24%. Moreover, only 6 counties recorded small rises in apartment transactions in Q1 2023, with 11 counties registering drops of over 30% yoy, including Cluj (-35.9%), Timis (-34.8%) and Ilfov (-34%).

In 2022, the average price of new residential units in Bucharest increased by only 7% annually, to 1,858 EUR/net sqm, while old unit prices advanced by only 1%, to 1,579 EUR/net sqm. The first quarter of 2023 recorded a relative price stagnation for new units, of 1,866 EUR/net sqm at the end of March, while old unit prices dropped to around 1,500 EUR/net sqm, partly as a result of the pressure added by the aftermath of the earthquake in Turkey and Syria, which reignited concerns about the safety of old buildings in the capital city.

The increase in the cost of living and the high interest rates in 2022 have led to a higher demand for residential rental units than in previous years. Consequently, rents have increased by 15% yoy on average in 2022.  Given the current economic circumstances, an increasing number of developers are taking into consideration the shift towards built-to-rent residential projects and are willing to explore this opportunity in the upcoming years. While apartment sales in Bucharest seemed to be unaffected by the spikes in inflation and interest rates throughout 2022, buyers’ interest faded towards the end of the year and developers have started to consider PRS (Private Rented Sector) as a “plan B” or safety net in case demand for acquisition will fall in the future.

In terms of the industrial segment, growth continued to be strong in 2022. At the end of March 2023, the total industrial stock reached 6.52 million sqm, with new deliveries of 560,000 sqm in 2022 and 162,000 sqm in Q1 2023, out of which nearly 60% were recorded in Bucharest. The pandemic-driven expansion of the market is set to persist in 2023, with a pipeline of over 500,000 sqm. Most importantly, in anticipation of the delivery of the A7 highway in 2024-2025, developers are prospecting the expansion in the North-East, the most underdeveloped industrial area of the country, which expects deliveries of approximately 100,000 sqm in 2023.

The total leasing activity (excluding short-term leases) on the industrial market reached a record 939,560 sqm in 2022, a 48% yoy increase, out of which only 17% were contract renewals and renegociations. Half of the demand concentrated in Bucharest, while 30% of the leased space was located in the South/South-East area and 13% in West/North-West.

For Q1 2023, 147,600 sqm of industrial space were leased, a 15% yoy drop in demand. Tenants have so far favored regional markets to Bucharest, which only recorded 43% of the demand in the first three months of 2023. The spike in energy and construction materials led to an increase in headline rents. In Bucharest, rent levels rose to 4 EUR/sqm, while in the rest of the country rents average 3.9 EUR/sqm. Given the non-speculative nature of the development of industrial space in Romania, vacancy rates remain low, at 4.5%-5%, in Bucharest and on a national level.

The Bucharest land market has seen a resurgence of appetite from most market players, despite the strong headwinds coming from the uncertainty regarding the annulment/suspension of urban zoning plans and the Ukraine war, apart from the initial shock received immediately after the conflagration, the land market in Bucharest witnessed a resumption of the appetite from the majority of players on the market. However, on a national level, the land market recorded a drop in demand in 2022, much like the residential market. Overall, the number of land transactions grew by 27.5% in Bucharest but was down by over 15% in the rest of the country compared to 2021.

Contrary to the initial concerns, investors did not move to neighboring areas in Ilfov to avoid the uncertain permit situation in Bucharest. Instead, they either chose to wait for the situation to become clearer or proceeded with their property acquisitions when prices were favorable. For this reason, activity on the land market in Ilfov was relatively stagnant in 2022, with a slight drop of almost 2% yoy. However, the cancellation of zoning plans had some repercussions, with Spanish developer Gran Via announcing their exit from the Romanian market and citing the current planning status in Bucharest as the cause for their departure. These repercussions seem to have been more obvious in the first three months of 2023, when land transactions recorded a 30% yoy decrease in Bucharest and a 44.6% decrease in Ilfov.

The largest land transactions in Bucharest & Ilfov in 2022 totaled over 200 m EUR. Similar to 2020 and 2021, land prices continued to record a growth rate higher than all other real estate sectors and above the inflation rate. For 2023, the evolution of the land market in Bucharest is highly dependent on the resolution of planning issues. Given the fast growth of the industrial market in the past years, the main players on the industrial market will continue their expansion plans through land acquisitions, both in Bucharest/Ilfov and nationwide.