Warehouses in Romania are booming due to friend-shoring trend
Article by Gijs Klomp, Business Development Manager WDP Romania
Romania is currently one of the most promising countries in Central and Eastern Europe for the industrial real estate sector, including warehouses for logistics and light industry. In addition to the country's considerable availability of development land, infrastructure development and cheap labour costs, the recently emerging trend of friend-shoring rather than offshoring makes it a very attractive destination for new warehouses and production facilities.
Availability of land
The Romanian logistics real estate market has huge growth potential partly due to the availability of development land. In addition to being the sixth largest country in the EU, Romania benefits from a rather mild zoning policy. Companies looking to build industrial real estate in Romania struggle with a lot less red tape compared to other EU countries.
Moreover, neighbouring country Hungary has greatly invested in the development of highways over the years, which today extend all the way to the Romanian border. Romania itself has been increasingly bolstering its infrastructure as well, putting its share of the COVID-19 Recovery Fund and other supportive financing to good use, resulting in a record length of highways currently under construction.
While most goods are still transported by road, railways are being upgraded as well. The railway line from the Black Sea port of Constanta to Bucharest is undergoing refurbishment and its renewal will extend to Western Europe. More and more pieces of track on that important axis are being upgraded, so rail transport can be expected to receive a further boost in the coming years.
In short, Romania’s long overdue infrastructure boom will also make it easier to develop new regional cities. A plus point for companies looking to set up production facilities in locations where labour is still cheap compared to more established cities such as Bucharest, or those in the western part of Romania close to the Hungarian border.
Cheap labour costs
Romania – its regional cities in particular – is arguably the second cheapest location in the EU (after Bulgaria) when it comes to labour costs, closely followed by Serbia and Ukraine as its economic rivals. However, recent events in Ukraine have been causing businesses to pull away and set up shop in Romania instead. Because it is not yet clear whether Serbia will opt for closer ties with the EU, numerous companies are now preferring Romania instead.
Following COVID, the war in Ukraine, and the further deterioration of China’s already troubled relationship with Taiwan, more and more companies opt to produce closer to their target markets, reducing the risk of supply chain disruption and possible sanctions. Friend-shoring, instead of offshoring, is becoming the new norm. A NATO member since 2004 and an EU member since 2007, Romania is very much a politically stable country that values its relationship with the European Union. Its political leaders are actively seeking to align with the West, enabling the ongoing deglobalisation trend to work strongly in Romania’s favour.
The future of warehouses in Romania
In conclusion, regional cities in Romania are well-positioned to capture the once-in-a-generation opportunity offered by the (temporary) demise of its recent economic rivals Ukraine and Serbia and the visible friend-shoring trend. We can therefore expect the boom in industrial real estate in Romania to continue in the following years.