The improving economic situation and EU accession will drive the Romanian construction sector into record figures in the next 2-3 years. Good performance will be achieved in all construction sectors, civil engineering, non-residential and residential construction, but several limitations still threaten these prospects.
Romanian construction sector growth is much stronger than in the previous year, reaching €15bn in 2007. It has shot up by 33.6% and is expected to maintain a high growth rate in the coming years, announced market research company PMR in one of its most recent reports “The Construction sector in Romania 2008. Development forecasts for 2008-2010.” As shown in the report, the triggers for growth in the construction sector are the positive economic performance and access to EU funds – to be spent on infrastructure currently in poor condition.
Commercial property preparing to expand beyond the capital
After many years of being dominated by the capital of Romania, Bucharest, developers and investors have started to consider other locations for commercial property. The relative saturation of the market in Bucharest and rising land prices are making investment less effective than in other locations. This is mostly applicable to commercial buildings (shopping centres or other large format outlets like hypermarkets and DIY stores) and warehousing facilities or logistic centres. For the moment, locations like Cluj-Napoca, Timisoara or Constanta are being considered due to much lower land prices and superior purchasing power in the case of commercial space or their location advantages for modern industrial space (located closest to Western Europe or on the Black Sea shore).
At the moment, Bucharest is still the undisputed leader in office space, both in terms of existing stock and announced projects. A relatively limited number of announced projects are holding demand much higher than the supply; however, it is expected to reach a balance in 3-4 years. Meanwhile, developing cities are being sized up for office space buildings, of which Cluj-Napoca is considered noteworthy.
Residential construction driven by improving living standards
There is a housing shortage in Romania, estimated at around one million, according to PMR analysts. By 2010 around 50,000 dwellings will be completed each year. In 2007 the number of completions increased by over 20%.
Housing shortage holds the demand at a very high level. Due to the improving standard of living among the population, the housing loans market is expanding. More and more Romanians can afford to apply for mortgage loans. This situation has kept the developers busy but has also raised house prices greatly. Up to now most residential projects have been announced and carried out in Bucharest but they are becoming more and more visible in other cities.
There is still however, a series of factors that can negatively influence the construction market in Romania, most notably the lack of construction workers due to work emigration and the capacity of Romanian construction companies to take up large construction projects.