The start of the year and the final months of 2023 contributed significantly to a solid year in the land market, with the middle quarters seeing a slowdown in activity. The performance is great, given the challenges in some areas of the commercial real estate market with higher construction costs than a few years ago, concludes Sinziana Oprea, Director Land Agency at Colliers Romania, who also expects a good 2024, given both investor interest and the current pipeline of deals.

“It is quite thrilling to see the investors’ enthusiasm regarding Romania’s long-term potential. Currently, the country and its real estate sector face a lot of challenges. From the much higher construction costs than a few years ago to uncertainties about the economy or about the global geopolitical scene to the high interest rates to the usual doubts that accompany an election year. In spite of this backdrop, last year saw a bit over 400 million euro in land sales for commercial real estate projects, a comfortable level compared to the 300-400 million euro per year recorded before the pandemic”, explains Sinziana Oprea, Director Land Agency at Colliers Romania.

Colliers estimates only include deals for commercial real estate projects excluding industrial and energy projects. 2023 started on a softer note and largely marked the closing of some long-pending deals, but investors continued well into the final months of the year as some wanted to close deals by end of 2023 for tax purposes while others looked for cash flow efficiency. Overall demand for new deals was lower than in previous years, but last year’s results were supported by some transactions that were in the pipeline for a long time and eventually closed.

About 70% of the land traded comes from Bucharest and its surroundings. Looking specifically at the volume in Bucharest, Colliers consultants noted that half of the transactions came from residential developments, a quarter from retail, and the rest from various types of investors (office, educational, medical) or simply speculative buyers. In the rest of the country, residential also accounted for about half of the volumes, with retail representing most of the difference. Thus, retail transactions were down compared to previous years.

The most active buyers were One United, Speedwell and Kaufland, and it is noteworthy that, unlike in previous years, another quite active buyer was the Romanian state, via different entities, which exercised its option to acquire certain strategic platforms in big cities such as Brasov, Sibiu, Iasi.

“Due to the general context, with some landlords feeling some pressure to sell or fearing for future prospects, the market saw a solid offer. This, alongside the general context with high interest rates and a slowing economy, prompted a slight drop in the average land price versus previous years, though if we were to estimate it on a like-for-like basis, it would be in the single digit territory. However, not all sellers felt the pinch and price cuts were not at all handed out for very good land plots which are likely to see robust interest from a variety of buyers. Meanwhile, some investors are also not rushing to purchase new plots as they feel there is no rush to start development and furthermore, they feel that time may be running in their favor”, says Sinziana Oprea.

Further, the Colliers director considers that appetite remains rather softer compared to 2021-2023, but the change is far from dramatic. In fact, some major deals are in various stages of due diligence and might close in 2024, leading to another strong year once the line is drawn at the end of the year.

“A lot of investors are waiting on the sidelines, thinking that new opportunities may arise. However, in our opinion, as long as no material negative scenario materializes – like an expansion of the war or an economic crisis in some big countries, for instance, Romania’s future after the elections looks quite bullish. Hence, 2024 might actually be a good year to conclude land purchases if one believes in the longer-term prospects”, concludes Sinziana Oprea.