by Ákos Budai | Report

Romania has significantly strengthened its position as a favourable investment destination within Central & Eastern Europe and unlike other countries in the region, the Romanian property market is not entirely dominated by its capital city. Although investors and developers are most active in Bucharest, secondary and even tertiary cities have a lot of potential as well, and several companies have decided to explore what these regional hubs have to offer. 


Retail on the rise
 
The total investment volume on the Romanian property market for H1 2016 was over €359 million, the highest level in five years. According to a report by CBRE Romania, the top five investment transactions recorded during H1 2016 account for over 80% of the total investment volume. Although a large number of the assets transacted are located in Bucharest, one of the largest single asset transactions of the last few years was recorded outside of the capital. This June, Shopping City Sibiu, a retail park worth €100 million, was acquired by New Europe Property Investments (NEPI) from Argo Capital Property. 
 
Not only investors, but developers also see Sibiu’s potential. Primavera Development, a Bucharest-based company has recently announced the restart of the €70 million Festival Shopping Center project, the city’s first centrally located shopping mall, with 44,000 sqm of rentable area. Inauguration is scheduled for H2 2018.  
 
Only one large retail project was completed in Q2 2016 in Romania. The refurbishment of an old department store, Mercur Craiova was executed by SIF Oltenia in the centre of Craiova, the fifth largest city in Romania. Developers announced close to 191,000 sqm of further retail space to be delivered in 2016, supported by the strong growth of retail sales and consumer confidence. This trend, which is likely to continue in the future, has encouraged retailers to expand. Nevertheless, they remain highly selective when it comes to the locations of their new openings, focusing mainly on well-performing shopping centres. 
 
Over 50 new international brands have opened units in Romania since 2014. Food retailers, which expanded aggressively over the last two years, encouraged by the surge in retail sales of food products, are present in all major cities and are now targeting tertiary cities of under 100,000 inhabitants. One example is Element Development’s project in Bistrita, Transylvania. The city of 70,000 inhabitants will have a shopping mall of 15,000 sqm. Shopping City Piatra Neamt, developed by NEPI in the country’s Moldova region, will be opened at the end of 2016 and will have a leasable area of 28,000 sqm. 
 
In Timisoara, Israeli real estate developer Plaza Centers has signed an agreement with Auchan for 10,426 sqm of its future mall with 38,000 sqm of retail space, Timisoara Plaza. Alpha Group Investments, an investment arm of Alpha Bank, together with TBE Business Solutions has also decided to invest around €90 million in the “western capital” of Romania. Timisoara Centrum, offering retail, leisure and office space, is expected to be delivered in 2017. 
 
Looking east, Immochan is already extending Coresi Shopping Resort in Brasov, which was opened in March 2015 with 13,500 sqm in three buildings. A €10 million additional investment will be added to the initial €60 million. AFI Europe Romania has completed the acquisition of a 40,000 sqm plot in the centre of the city, where it will develop a mixed–use project that includes AFI Palace Brasov Shopping Mall and AFI Park Brasov, a Class A office project. The shopping mall will have a total GLA of more than 40,000 sqm. 
 
AFI Palace Brasov Shopping Mall and AFI Park Brasov 

The Mudura family, developer of Lotus Center Oradea, has also announced a new mixed-use project. At first a new shopping centre will be delivered, but Oradea’s Lotus Center 2 will have residential and office components as well.

 
Office boom in regional cities
 
By the end of 2015 the total office stock in regional cities was 20% higher than in 2014, and in the first six months of this year another 47,500 sqm became available on the market. Estimations are that in the next 18 months an additional 165,000 sqm will be delivered outside Bucharest and that by the end of 2017 the total regional stock will reach 800,000 sqm. Demand was 25% higher in 2015 than the year before. Developers such as Iulius Group, Ascenta Management, NEPI, Vlerick Group, Werk Property Group, AFI Europe, TBE Solutions, Tester Group, Multinvest and Transilvania Constructii are investing in extensions or new projects in regional cities like Timisoara, Cluj-Napoca, Brasov or Iasi. 
 
Last year Iulius Group started construction on its mixed-use project, Openville in Timisoara. Over €220 million will be invested in the urban ensemble located in the immediate vicinity of Iulius Mall Timisoara, making it the largest infusion of private capital in the real estate industry in western Romania. Openville will bring together office, retail, park and entertainment functions. This is the second mixed-use project in the company portfolio alongside Palas Iasi. The first Class A office building, United Business Center 2 (UBC 2), offering 18,000 sqm on 11 floors, will be completed by the end of 2016. By the same time, the company will also open a total of 33,000 sqm of office spaces. The first development stage of the Openville ensemble will be completed during the last quarter of 2017 and will comprise 80,000 sqm Class A office spaces, retail spaces and the park. The second development stage includes the development of office spaces up to a total of 131,000 sqm. 
 
The latest announced project for Timisoara is Werk Property Group’s Vox Technology Park, a Class A office building featuring 26,000 sqm of rentable office space. The building will provide the largest floor surface available in a commercial building in the Timisoara region upon its completion in December 2017. Ovidiu Șandor has also announced a new office project for Timisoara, scheduled to be delivered in 2018.
 
Vox Techonolgy Park Timisoara

In Brasov, Ascenta Management and BuildGreen have joined forces for the BREEAM certification of the second phase of Coresi Business Park, comprising three low-rise office buildings. The first building is already built, while the other two are currently under development. Coresi Business Park is developed on the former Tractorul industrial platform in Brasov. The scheme is one of the major urban regeneration projects in Romania, transforming 12 hectares of the old manufacturing plant into a contemporary business environment. The initial phase of Coresi Business Park consists of approximately 25,000 sqm. The master plan of Coresi Business Park features a mix of industrial halls, office conversions and newly built offices, envisioning 100,000 sqm of GLA within 10 years. 

NEPI and entrepreneur Ovidiu Șandor have begun the construction of the third and last phase of the largest office complex in Cluj-Napoca, called The Office. 18,500 sqm are scheduled for completion in Q2 2017. The entire complex will include a total rentable area of 59,185 sqm upon its completion. Also in Cluj-Napoca, Liberty Technology Park, a Fribourg Capital initiative under the patronage of businessman Ion Sturza, has recently reached a 90% occupancy rate. Although the second phase of extensions have been finalised in 2015, the developers have further extension plans. 
 
Iasi, the largest city in Eastern Romania, is also gaining more and more interest from investors and developers, partly thanks to the large number of employees in the IT/outsourcing sector. Two large projects have been completed in the past years. Palas Iasi was developed by Iulius Group and Iulian Dascalu. Tester Group and entrepreneur Bogdan Pitigoi have developed Ideo Business Center and Tester Technology Park. New projects will be launched soon.  
 
Breaking new ground
 
Several developers have announced new projects in Romania, driven by the strong demand for industrial space. Regional markets are attracting more investments and an increasing number of developers add speculative components on top of space secured through large pre-leases. 
 
This year marked the entry of one of the biggest investment funds in the world, Blackstone, into Romania. Three Romanian assets have been purchased from Immofinanz as part of a portfolio deal and now they are a part of Logicor, Blackstone’s European logistics platform. Another major player, Panattoni Europe also decided to enter the Romanian market last year, initially focusing on BTS developments. 
 
One of the biggest players on the market, CTP has increased its strategic investments in Romania. The company is currently constructing two facilities in Bucharest and is also active in regional cities. CTP is currently preparing groundworks for a facility for an expanding client in CTPark Sibiu. In Cluj-Napoca, CTP is constructing a 19,000 sqm¬ facility for Romanian retailer, Profi. 
 
Last year, developer Zacaria Group doubled its portfolio of industrial warehouses in Romania,  surpassing 140,000 sqm of rentable area. The company is now developing an additional 107,000 sqm of industrial space in Sibiu, Craiova and Cisnadie. The Group’s investors, Alf Mizzi & Sons from Malta, now own and operate 10 industrial projects located in 7 major cities across the country. 
 
Timis County, having an unemployment rate of only 1.4%, is a popular choice among developers. One of them is Bardeau Imobiliare, the developer of Banat International Business Park. Artemis Real Estate, the Romanian subsidiary of Swiss group Artemis Holding AG, is also active in the county, owning over 125 ha of development land. They have recently made a move from investor to developer and have now finished infrastructural preparations in Sanandrei. Having negotiated a contract for 10 years, construction is now underway with delivery scheduled for the beginning of 2018. The company is accelerating projects in Giarmata and near Timisoara Airport as well. 
 
Cluj-Napoca, in the centre of Romania, is also an area that attracts a lot of interest for new developments and demand is very high for industrial space. Transilvania Constructii, a developer with Transilvania Logistic Parc in its portfolio, is currently building a speculative 17,000 sqm warehouse in Jucu near Cluj-Napoca, on 16 hectars of land, as part of the TRC Park project. 
 
TRC Park Cluj

Helios Phoenix, developer of the Olympian Parks network, has also announced a new 43,000 sqm project in Jucu, Cluj county. The first phase of 13,000 sqm is to be finalised this year. The company also has plans to acquire land in Bacau or Iasi for new Class A warehouses and to extend its existing facilities in Brasov and Timisoara by 20,000 sqm this year. 

The author of this article, Ionut Oprea, is the Publisher of 2016 /2017 Yearbook: Office, Logistic and Industrial Parks in Romania.