Colliers: 2021 is expected to be a year of recovery, but the pandemic will still have a great influence
2021 is expected to be a year of recovery, but many uncertainties remain, like those related to the vaccines’ ability to return everyday life back to normal or to potential jitters about the monetary policy at the major central banks’, which would have deep ramifications globally, Colliers International consultants predict. Working from home will become a common practice within many companies even after the Covid-19 pandemic, a more significant return to offices of employees being expected around the middle of 2021 if the inoculation with vaccines is successful.
Romania should recover most of last year’s losses in economic activity by end-2021, but the recovery will be quite uneven, with significant differences between industries. Some economic sectors, like e-commerce, construction, certain IT&C subsectors, have not blinked at all during the crisis, others should recover by end-2021, like overall retail trade and professional services in general, and some may take years (oif ever) to crawl back to a decent activity level, like aviation, automotive or tourism, says Colliers International consultants.
After a decade and a half as an EU member state, 2021 could lay the groundwork for future economic breakthroughs that could greatly accelerate economic development over the medium-term, considering the new pandemic package from the European Commission, Romania could attract as much as 80 billion euro in extra capital in the next years, one third of the country’s GDP, which should have a much greater impact than in neighbouring countries if utilized for reforms needed in the country.
Tourism will become more local and more frequent as things return to normal, Colliers International consultants predict. The vaccine gives hope in this direction, but reaching a reasonable threshold of immunity will be challenging in Romania and other countries that face a bigger percentage of popular skepticism towards vaccination compared to Western Europe.
Remote work will become a permanent fixture, but Colliers International consultants believe that companies will also want to bring their employees at least 3 days a week in the office in order to foster teamwork and corporate culture. A more significant return to offices of employees is expected around the middle of 2021, with buildings located in residential areas at the forefront, benefiting from a reduced commuting time.
Office tenants reign supreme in 2021, with a rapidly rising secondary market of sublease alternatives (low range estimates place it at over 2% of current stock at present) and a vacancy rate in excess of 10%. Colliers International consultants talk about a robust office delivery calendar, with around 260,000 square meters of modern offices due to be finalized in Bucharest and they expect that office market conditions should return to neutral in the first half of this decade.
The industrial and logistics market ended its strongest year in history for Romania, and 2021 should be very different as recent trends supportive for the development of warehouses remain in place: the rise of e-commerce in a competitive landscape, the need to cater to a rapid expansion of modern retail schemes nationwide, the need to replace the old and uncompetitive stock (including from a safety standpoint). There is also some potential for business amid Brexit and the overhauling of relations between the EU/US and China.
Retail continues to be under pressure, but Colliers International consultants are seeing silver linings. The growth in e-sales greatly outperformed that of traditional brick-and-mortar stores through 2020 and this trend should hold in the new year. Rents and vacancy should remain under pressure through 2021 and may not recover until 2022 or even 2023. That said, Romania’s higher profitability for retailers and the low stock of leasable modern retail spaces per capita should insulate the market from any persistent negative effects and lead to a good subsequent recovery of losses.
Investment deals are expected to dip, after a very good year for the investment area. The 2021 investment market may see a dip in activity from around 900 million euro to around 500-600 million euro. Some buyers may remain on the sidelines amid a lack of clarity about future revenues (particularly regarding better positioned assets in sectors like offices and hotels); on the flipside, the activity could become more dynamic in terms of distressed assets or properties with a value add angle, which may offer a more attractive proposition for buyers.
2021 brings various opportunities in the land market, Colliers International consultants say. Given the considerable number of deals initiated in the recent period (including in 2020), the land market looks set for a good year. Retail developers, including big box operators, and residential developers will remain the driving force. Demand for land plots for offices and hotels will remain soft and Colliers International consultants are not expecting things to change too much given elevated uncertainties with regards to the leasing/revenue side.
Despite the adverse economic reality, the residential market still saw strong demand and modest price gains (on average) in 2020. But things look a bit different now – wage growth has ground to a halt in the private sector and it may take some time to start rising again, while civil servant wages are frozen amid fiscal consolidation – and 2021 is expected to be a breather year for residential. Otherwise, the dynamic cities from an economic standpoint and their outskirts remain attractive in the longer run given Romania’s overcrowding problem.