Record value of construction works started in Romania in 2023
Written by Dr. Sebastian Sipos-Gug - Ebuild Srl
Activity-Start, that is, the total value of started construction works, greatly increased (+64%) in 2023 across Romania compared to the previous year. It reached the highest level seen in the past decade, both as gross value and growth rate – according to the EBI Construction Activity Report. Even more impressive is the serendipity that as Activity-Start of building construction began to decline, civil engineering sprang up to cover the difference and more.
What is EBI Construction Activity Report?
There was no construction start indicator in Romania, so we have created an estimation for it. It helps you understand what could happen on the market in the coming months. The indicators are based on project information from iBuild project database and are published monthly in the EBI data visualization (for all the 18 segments of the construction market). On top of this the EBI Construction Activity Report Romania is published quarterly with data and explanations. This research is a fruit of the cooperation among Eltinga, Buildecon and iBuild. And this is where the name EBI comes from.
Civil engineering in the spotlight
Residential multi-unit buildings seem to have peaked in 2021 in terms of the Activity-Start indicator. With construction costs rising in 2019, followed by high inflation and interest rates, it seems developers were less optimistic about the market's short-term outlook and consequently, they started fewer projects.
When it comes to non-residential construction, 2023 saw a slight downturn after a very good performance in the previous year. The main factor was Bucharest where the current issues regarding urban planning, compounded with wavering demand, slowed down the development of new buildings across all non-residential segments, but mainly in the office sector.
With the spending deadline for funding from the EU 2013-2020 programs at the end of 2023, a surge in activity in civil engineering was to be expected, and this also explains why Q4 was milder than previous quarters in terms of the Activity-Start. The projects that had a reasonable chance to reach an advanced stage or to be phased into the new programs were prioritized and started in previous quarters.
Of all the projects that started construction in 2023, one stands out: the 37.4 km section (Cornetu - Tigveni) of the A1 motorway will be one of the most complex and expensive road segments build so far in Romania since it crosses the Carpathian Mountains and will require 12 km of bridges, tunnels and viaducts. It will also have the longest motorway tunnel built so far in the country (1.7 km), nearly five times larger than the current record holder.
Several renewable energy projects were also started in Q4 2023: a 102 MW wind energy park in Braila County and a 60 MW solar plant in Alba County, signaling a renewed interest in green sources of electricity after the recent volatility in the prices of fossil fuels.
The third spot on the list of the largest projects that began in the last quarter of 2023 is taken by the 12.000-seat Sports Arena in Targoviste. The local football team there (FC Chindia – named after a tower built in the city by Vlad the Impaler) had to play its games on other cities’ stadiums in the four years it was in Romania’s First League as its local arena was considered inadequate.
Less glamorous, but equally important, work was also started in Q4 2023 on the water and sewer networks in Dambovita, Iasi and Brasov counties, part of the ongoing efforts at national level to improve the existing infrastructure and provide increased access to public utilities.
When it comes to building construction, all top projects started in the last quarter of 2023 were residential parks, three of which were in Bucharest (Theodor Pallady residential area, Nusco City Phase 2 and Cortina Elysium, totaling more than 1.600 flats) and two more in Sibiu County (Magnolia Residence Phase 2 and a residential complex in Selimbar, adding nearly 1.000 more flats).
Bucharest loses the first place in Activity-Start
2023 was an unusually even year regarding the regional distribution of the Activity-Start indicator. Previously, Bucharest-Ilfov took the largest piece of the pie and accounted for around one quarter of the value of construction works started in each year. In 2023, however, it lost its lead because other regions saw major increases in Activity-Start, while it and the Center underperformed compared to the previous couple of years and fell behind. The slowdown in Bucharest was visible across the board with drops in new projects, both in civil engineering and buildings. Infrastructure starts had previously peaked in 2022, and the focus switched to completion, while urban planning issues limit new developments for all segments.
The North East region had a boost moving from the third least active right to the top of the podium in terms of Activity-Start. Likewise, West shot up to the top half from the very last position that it held for four consecutive years.
North West region: steady as it goes
While other regions, as mentioned previously, saw major upward and downward changes in their share of the national started construction works, North West maintained the second place that it usually holds.
Behind this veneer of stability, however, lies an uneven evolution of different construction types, the EBI Construction Activity Report suggests. Activity-Start indicator (deep orange on the chart) of the building construction submarket began strong, growing fast in Q1 and Q2, and then it plateaued, while civil engineering had a very different path, having a boom in activity in Q3.
Much of the growth can be attributed to the Cluj Napoca – Episcopia railway electrification (166 km), that in itself accounted for almost 1/3 of the value of all started construction works in North West in 2023. The fastest passenger train on this railway averaged 60 km/h, with added delays at the Hungarian border and in Cluj-Napoca caused by switching locomotives from electric to diesel and vice versa. The new electric line will remove this impediment and allow speeds up to 160 km/h for passenger trains and the doubling of the lines will facilitate cargo transit as well.
Other major construction works started in 2023 in the North West include several sections of the much-delayed A3 motorway as well as airport terminals in Cluj-Napoca, Satu Mare, Bihor and Maramures counties.
The region attracted several manufacturing investments with the largest project in the building submarket being the Nokian Tyers factory that started construction in Q2 2023 in Oradea.
Healthcare and education buildings are a rising concern due to the aging stock and limited access to services. Thus, extensions of the emergency clinics in Oradea (5.500 sqm) and Bistrita (9.750 sqm) also started in 2023. In the same year, work began on a new private school in Oradea (29 classrooms) and on renovating a university building in Cluj County (10.000 sqm).
Cluj Napoca gained notoriety for its tight residential market. Limited deliveries and high demand have pushed the prices here higher every year, and it’s now the most expensive city in the country for home buyers. Supply is slowly expanding with phases of larger projects like Elite City (279 flats) and The Nest (102 flats) starting construction in 2023. Several multi-unit projects were also completed here in 2023, including Liberty Residential (268 flats) and Seasons by Studium Green (150 flats).
Completions (light orange) in the North West were on an upward trend for the past couple of years with building construction overshadowing civil engineering. This is poised to change starting with 2024 as the expected completion of infrastructure projects started by 2023 could even out the field. However, road and railroad projects in Romania have had a long history of delays, cancelled contracts and legal woes, thus, some caution is in order when looking forward.
During 2023 nearly 30 km of motorway on A3 were completed on two sections. However, one of them (Nusfalau – Suplacu de Baracu) is quite isolated, so its usage will be limited until it’s connected to the remainder of the network, in 2025 at earliest.
With good Activity-Start and completions, Output (blue) also had a favorable evolution in 2023 for both buildings and civil engineering. Enforcing the idea of steadiness of the North West, Output showed steady growth in each quarter of the last couple of years, at least at current prices.
The major challenges for the North West region in the upcoming years will be to find new avenues of growth, especially in the building segment, and to secure funding and manage ongoing works for infrastructure construction. To quote Lewis Carroll “[...] here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.”
EBI Construction Activity Report Q4 2023 has been published and can be purchased at ebi@ibuild.info.
