News Article Bogdan Sergeant Cushman & Wakefield Echinox ESG industrial inflation office retail Romania
by Property Forum | Office

The most exposed sectors to the inflationary pressures in Romania are the residential, industrial and retail ones, with a lot more resilience found in the office segment, suggest representatives of real estate consultancy Cushman & Wakefield Echinox. 

At the same time, the volatility of energy prices could accelerate the companies’ process of relocating to green, energy-efficient buildings where ESG standards have been implemented. 

“The inflation and the rising interest rates will certainly impact the residential real estate market, a sector strongly linked to loan practices and policies. The decreasing purchasing power can also affect retailers' sales and could also lead to a decline in demand for warehouse spaces. We believe that the office sector will be more resilient, as current events can only affect the market if they persist in the medium and long term,” says Bogdan Sergentu, Head of Valuation & Consulting at Cushman & Wakefield Echinox. 

Office space occupiers are directly impacted by the inflation of 14.5% which will lead to increasing occupancy costs, which now account for up to 10% of a company's operating expenses. 

It should be noted, however, that the office rental levels are largely determined by the market conditions which means that a rental increase is a phenomenon more related to the local market fundamentals and to the vacancy rates and less related to the inflationary trends, say the agency’s consultants. 

In the retail market, sales have gone up due to bigger prices, but the increasing operating expenses will significantly reduce the operators’ profitability in this inflationary environment. 

The inflationary pressure will manifest itself differently on the industrial and logistics market, given that around 3 million sqm of such spaces are owner-occupied in Romania, in addition to the around 5.6 million sqm available for lease. This means that a higher share of occupiers of industrial and logistics are vulnerable to market instability compared with other real estate sectors.