The land market in Romania remained very active in the first half of 2023, reaching an estimated turnover of around EUR 250 million, according to a report by Colliers. The figure includes only transactions involving land for commercial real estate projects in residential, office, and retail sectors, without segments like industrial or energy.

However, since the summer period has been fairly quiet, Colliers consultants expect modest volumes in the subsequent quarters.

The demand was almost evenly split between retail and residential, the same source said. However, the two sectors experienced quite significant differences. While retail developers remained quite active, focusing primarily on land plots for retail parks/big boxes in areas/towns with limited coverage of modern retail schemes, in the residential sector, higher interest rates and increased construction costs have led to a pretty significant decline in activity.

“For retail, a special note should be made about Bucharest, which is still very much in an uncertain situation with regard to urbanism and legislation. We have quite a lot of transactions that could close, provided that certain conditionalities are met regarding construction/zoning permits. On the residential side, many developers still have a significant land bank for potential projects they could start now, though many want to wait a bit longer to see where the market is going over the short term,” said Sinziana Oprea, Director Land Agency at Colliers Romania.

On the supply side, activity “remained decent” both in terms of large industrial platforms/land plots and medium-sized plots that can accommodate different types of real estate projects. Meanwhile, Colliers says, some investors are looking to purchase strategic land that would likely see long-term demand irrespective of what happens with the economy in the short term and also acts as a good hedge against inflation.

“Prices also remained more or less unchanged compared to the end of 2022, with owners under no particular pressure to offer discounts and decreasing interest for new deals impacting any potential moves to the upside. Very good land plots, particularly those with urbanistic documentation in place, continue to have high prices,” Colliers said.

Sinziana Oprea explained: “While noting the slowdown, we do not expect the market to shift into a pessimistic mood, which would entail a generalized drop in prices unless the overall economic conditions worsen dramatically. Still, the subsequent quarters should be weaker in terms of land sales activity.”

She added: “We need also to acknowledge how relevant and important major infrastructure works can be for the real estate market. The southern half of the new ring-road highway around Bucharest is set to finish next year, and we are already seeing increased interest in that area, which will benefit from improved connectivity. Otherwise, investors continue to maintain a close eye on both Bucharest and the bigger towns.”

According to the Colliers director, fewer deals have been started this year and it usually takes at least one or two quarters to close a deal even when things are already planned. In other words, the land market is now experiencing a return to more normal levels after an unusually active period amid the pandemic, with 2021 being the best year in the last 15 for the Romanian land market, with transactions exceeding EUR 800 million.

irina.marica@romania-insider.com

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