We know cities - Office market overview in regional cities

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market overview in regional

Overview

New forms of creating, consuming, learning, working and living are evolving in regional cities in Romania. Thriving cities and territories benefit from local innovative communities and citizens, who manage to reorganize the existing state-of-things while not expecting to trigger general changes in the system (economy, institutions, large infrastructure projects).

As businesses move away from having one headquarter and explore regional, hub-and-spoke premises for their business, the future looks bright for the office market outside of Bucharest.

Moreover, the work-from-anywhere concept and the decoupling of work and place, naturally created growing teams in regional cities. Some have been seen as refuge from the busy capital, while others as real opportunities to access a more diversified talent pool.

For some secondary cities and smaller towns, these movements present an opportunity to bring in resources, financial, know-how and human capital, into the city coffers.

Each region comes with its own peculiarities and individual behaviors, with good and bad, specifics that we highlight further down for six of the most developed office markets outside Bucharest.

For you to better ground your decision, we would be happy to get into details.

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Cluj Napoca

The capital of Transylvania and home to the largest university in Romania, Cluj-Napoca is a hub for creative industries, hosting some of Europe’s best music and film festivals.

Cluj county is the best performing region in Romania, a real growth engine for the country, registering the highest GDP per capita outside Bucharest, with 30% higher than the national average. Its capital city is an important business destination whose development relies on IT, engineering, financial services and other innovative industries.

Furthermore, Cluj-Napoca is home to a record number of tech companies, following investments of large companies or efforts of start-ups, software production being one of the most fruitful local industries.

Cluj-Napoca is the star performer on the secondary office markets, both in terms of supply and demand of quality space. The city is offering the largest and most varied stock of modern office buildings, outside Bucharest. From business centres with visibility to campus-like projects, with large floor plates, boutique office buildings or mixed-use compounds, Cluj-Napoca has it all.

Although vacancy rate is low, settling below the 10% threshold, occupancy levels are different lately, and one-time opportunities might show up on the radar.

Particular to Cluj-Napoca is the great interest for high quality offices and individual, representative headquarters. Thus, the city hosts the largest share of built-to-suit projects or owner-occupied buildings, home to some of the major players in the city.

Although the first half of 2022 registered a modest take-up of space (of approximately 3,000 sqm), the take-away is that new players are setting foot in the city. Organizations such as Brillio, EBRD or HTEC leased their first office space in the city, or even first office in the country.

We are witnessing a dynamic market with real interest for quality office space, and we expect to see several movements by the end of the year.

Timisoara

Timisoara is one of the most important regional cities in Romania, both in terms of population and office markets.

Low unemployment rate (below 1%) and salaries above the national average are attracting young people to Timisoara with the promise of a better future.

Located next to the Hungarian border, the city is at the epicenter of a cluster of eastern European branches of global car manufacturers. Therefore, automotive players have taken up a strategic position on the map when choosing Timisoara for their operations, either for manufacturing purposes or innovative software solutions. The future European Capital of Culture in 2023, Timisoara is the tech hotspot of the country with one of the largest university center in the country, numerous start-ups and several renowned tech companies like Nokia, IBM, Continental, only to name a few, which have settled down in the city.

Timisoara is a good example of the snowball effect, as big players setting foot in the city or nearby, attracted similar and complementary services and products, building communities and the creative buzz around them.

In the last years, over 65% of the activity on the office market was driven by the tech sector.

And where better for these communities to be created than in mixed-use projects and high-tech buildings.

Timisoara will continue to strengthen its talent base with high level of technical skills, and we expect both existing players and newcomers to secure their footprint and market share, the automotive sector remaining the main driver.

Iasi

lasi is the largest regional city in Romania, home to the oldest higher education institution in the country.

With a large talent pool with background in technical and analytical fields (first engineering school in Romania was in Iasi), the city is an emerging hub for software development and R&D centers and has already been recognized as one of the fastest-growing IT hubs in Europe. With over 55,000 students, Iasi steadily becomes a regional magnet for young and smart talent from the entire area, with many coming to study or work in the city.

In 2005, Amazon opened in Iasi its first R&D facility in Eastern Europe, offering a vote of confidence to the city’s tech industry high potential. Since then, the market has deeply evolved into a strong business hub.

In recent years, demand for class A office space was driven by large players such as Amazon, Microsoft, Cognizant, Accenture, leasing large surfaces and leaving their mark on the business environment of Iasi. The average transaction size was above 2,000 sqm.

2023 will be a milestone for the office market in Iasi, as two landmark projects will be delivered, increasing the modern stock by a significant 40%.

Located in the heart of Romania,

Brasov is preparing for growth.

One of the oldest cities in the country, Brasov has been characterized by multiculturalism, craftsmanship and trade, more recently becoming one of Romania’s biggest industrial and touristic hotspots.

As former industrial sites have been relocated to the outskirts of the city, new development opportunities have been created and first modern real estate compounds emerged, leveraging on the industrial heritage of the city. Automotive and aeronautics continue to be the main drivers of growth for the business environment of Brasov, developing communities and innovation clusters. Tech related business are expanding, either start-ups or global companies setting foot in the city.

As the development of the new airport approaches completion, by mid-2023, the city attracts more and more investments, both private and public. Hotel room offering is significantly expanding with internationally well-known operators entering the market. Radisson Blu is opening this year, followed by Accor group with two of their brands and a Marriott. Sports facilities are developing, including the largest multipurpose hall in Romania to be built by 2025, thus completing the range of benefits for both residents and guests.

Although not as developed as in other regional cities, office space offering is diverse and ready to accommodate future request, 20,000 sqm of new office space being in various stages of development and another 17,000 sqm are planned.

In terms of office demand, existing players in Brasov are optimising and upgrading their premises while new entrants are looking for flexible solutions to support their growth process. Coworking facilities are being created, granting a vote of confidence to the city’s office market.

Sibiu

First European capital of culture in Romania, Sibiu became an important cultural and touristic hub, ideally located in the heart of Transilvania and Romania.

With an important German culture legacy, Sibiu has attracted companies with ties to Western Europe or IT and business services related players looking to capitalize on the availability of German speaking people.

In terms of office supply and demand, Sibiu is an emergent market. Office buildings have been typically developed by local businesspeople, looking to diversify their assets. As large players are entering the city, they trigger the need for class A office spaces and landlords need to adapt.

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Craiova

At first sight,

Craiova doesn’t seem to be much in the spotlight in the scene of regional cities. Look deeper, and you will find a buzzy and vivid city. Craiova is the home of several cultural events and even pioneering music festivals – IntenCity – a premiere in our country, chose Craiova to host it. International artists performed for the first time in Romania on IntenCity stage, and the festival gained people from all over the country. Summer Spell and Craiova Street Delivery are just another 2 festivals hosted in Craiova this summer

A top-notch educational system is the ground of every emerging city. Craiova University is gaining more and more popularity amongst students – and if we add the employment array to this, we’ll realize how Craiova managed to rise like a Phoenix. From a dull city now is becoming a pearl of regional cities.

As for the prospering industries in the region, Craiova is a well-known, established automotive center. In 2008, the former Automobile Craiova factory was acquired by Ford, thus becoming one of the key players in the automotive industry in Romania. The long history of car manufacturing and industrial activities in the city together with the qualified work force and competitive prices, generated additional investments and spin-offs, setting the ground for Craiova to become the hot spot in the South West region.

There is little doubt that regional markets are on the rise, taking into account employment from all cities. As a result, as demand begins to rise in one place, so does the rent. This is the situation in Craiova, where the office rent is higher than in more developed cities such as Timisoara or Cluj-Napoca, anging from 13 Eur/sqm to 20 Eur/sqm.

By the end of the year, 8,000 sqm of office spaces will be finalized and ready to welcome its tenants.

More and more companies are planning to create branches in Craiova as the city’s connectivity improves and the Express Road nears completion. When deciding where to create a branch, universities provide a significant benefit.