Cushman & Wakefield Echinox: "New projects delivered on the industrial and logistics space market, halved in 2023"

The stock of industrial and logistics spaces exceeded the 7 million square meter mark, almost 80% of the surface being concentrated in three development regions: Bucharest - Ilfov, West and South - Muntenia, according to data from the real estate consulting company Cushman & Wakefield Echinox.

This also indicates that new projects totaling 450,000 square meters were delivered in 2023, down 46% compared to 2022, a contraction that is based on slowed activity in terms of speculative built spaces.

For this year, the developers announced the delivery of over 500,000 square meters representing new logistics and industrial parks, the largest area being announced in Bucharest - Ilfov (180,000 square meters), in the West area (144,000 square meters) and in the Center ( 105,000 square meters).

In 2023, the volume of transacted spaces also crossed the threshold of one million square meters, level in line with the average of the last three years, with almost 300,000 square meters rented in the last quarter of 2023. Compared to 2022, the volume transacted decreased by 23%, on the background of the challenges related to the increase in financing costs, yields and difficulties in securing capital for development, according to the cited source.

Andrei Brînzea, partner Land and Industrial Agency Cushman & Wakefield Echinox, declares: "Companies are still cautious in terms of business expansion, implicitly determining a reduction in the need for new premises. Moreover, even when they want to expand their logistics operations, the decision-making time is long, thus prolonging the process of finalizing transactions. On the other hand, the current climate creates new opportunities, so we will see consolidation of operations in fewer but larger buildings to increase efficiency, reduce costs and improve delivery processes. The expansion of online commerce and the need to respond to consumers as quickly and efficiently as possible will generate demands for new spaces. Even though this increase in the volume of online sales was relatively modest in 2023, forecasts indicate a return to growth in the coming years. In addition, traditional retail networks will continue to be active on the rental market, in order to adapt strategies regarding online orders".

Consequently, it is anticipated that the demand for logistics spaces in order to streamline the supply chains of retail companies will persist in 2024, according to Cushman & Wakefield Echinox.

Also, the demand for spaces from production companies will continue to gain ground against the backdrop of the "nearshoring" phenomenon, whereby companies relocate their production closer to consumer markets.

A significant structural change that affects all categories of real estate assets, including logistics, is the sustainability component, which has become a priority for tenants. This change will cause an increase in demand for sustainable projects.

New demand continued to be the main driver of the rental market, accounting for 66% (672,000 square meters) of the total leased. It should be noted, however, that last year marked a decrease in the share of net demand, excluding the renegotiations of existing contracts compared to 2022, when it represented 85% of the total volume, according to the mentioned source.

• Bucharest - the preferred target for tenants

Bucharest was the preferred target for tenants, with 48% of the leased area in 2023, which together with Timisoara (121,600 sqm), the second largest logistics hub in the country, are the only cities where the demand exceeded 100,000 square meters, according to Cushman & Wakefield Equinox. Braşov, Cluj, Ploiesti, Sibiu and Pitesti are other locations where companies have rented spaces. Logistics and distribution operators were the most active on the rental market, with 300,000 sqm contracted, followed by automotive companies - 106,000 sqm, retail, e-commerce and FMCG companies with 93,000 sqm, and pharma - 41,000 sqm.

Reference rents in Bucharest and in the main industrial and logistics destinations in the country increased slightly to levels between 4.30 and 4.70 euros/sqm/month in the last quarter of 2023, an upward trend that is expected to continue.

The development of projects on a speculative basis will continue to be reduced, partly as a result of the cautious approach of the developers, who want to prevent an oversupply on the market against the background of the decrease in net demand, concludes the cited source.