Despite the increased year-on-year take-up volume registered at the end of 2011, the industrial market in Romania is still characterized by over-supply, with no significant change registered in terms of vacancy rate as at Q1 2012.
In 2011, approximately 70,000 m² of industrial and logistics space was completed nationally, out of which only 30,000 m² was developed speculatively 10,000 m² in Timisoara by VGP and 20,000 m² in Ploiesti by Alinso Group.
In Bucharest, no new developments or additional phases in the existing logistics parks have been delivered. Developers have been waiting to rent their current vacancy or seek prelease agreements for new buildings.
Consequently, at the end of 2011 the total stock of modern industrial space reached approximately 1.4 million m² across Romania of which 882,500 m² (accounting for 63% of the total national stock) was located around the capital city.
No completions were tracked in Q1 2012 and we do not expect any major projects to be started in 2012. Since 2009, the industrial market has been characterized by a more cautious developers' strategy. Considering the weak macro-economic situation, this prudent approach is still maintained and therefore the start of the construction for a new project is triggered by a build-to-suit contract or by securing a significant pre-lease.
With few projects planned to be delivered in 2012, the build-to-suit schemes will continue to be the main drivers of the construction activity.
In 2011, the take-up reached the highest level tracked since 2008, namely 200,000 m², out of which 110,000 m² has been concluded in Bucharest. According to last year's take-up, Timisoara, Ploiesti and Pitesti were among the most active industrial hubs in terms of demand.
Take-up per annum around Bucharest has gradually evolved from 70,000 m² in 2009 to 110,000 m² transacted in 2011. In the other active industrial poles of Romania such as Ploiesti, Timisoara, Pitesti and Brasov the total absorption has increased from 30,000 m² in 2009 to over 80,000 m² transacted in 2011.
The average size of requirements in Bucharest for logistics and industrial space reached 2,600-3,000 m² with only three transactions surpassing 8,000 m². For 2011 the trend at national level was fewer deals (10 transactions in total compared to over 30 in the capital city) but with a higher average size of approximately 6,000 m².
For the first three months of 2012, the take-up was considerably lower than the amount tracked during Q1 2011. Only 3,000 m² of take-up was reported in Bucharest made up of a few small deals. Considering the current unstable economic conditions and based on the reduced leasing activity recorded for Q1 2012, we estimate a slight decrease in transactions for 2012, similar to the level recorded in 2009 and 2010 respectively.
In 2011 the vacancy rate for class-A logistics and industrial space located in Bucharest ranged between 9-12%, showing a slight improvement compared to the previous two years. For the first quarter of 2012, no major change was registered from this level.
Despite the increased leasing activity in 2011, cities such as Timisoara, Arad & Ploiesti still register an increased vacancy rate to around 15%. Considering the reduced take-up expected for 2012 coupled with no announced of new supply, by the end of the year we forecast a slight reduction in the vacancy rate.
Rodica Tarcavu, Head of Industrial Department, DTZ Echinox , commented: "The rents for industrial and logistics space in Romania have dropped as well adjusting to the decreasing demand level, thus having in Q1 of 2012 an average of 3.53.7/m²/month for surfaces larger than 5,000 m² in class-A logistics space in Bucharest and Romania overall.
"The headline rents for modern industrial and logistics space in Romania are generally comparable to those quoted in other CEE capitals such as Prague, Budapest or Kiev, however these still remain lower than the levels applied in Warsaw."
For class-B warehouse space, asking rents vary between 2.5-3/m²/month, the respe