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Office sector, on the road to recovery: How's the 2015 stop?

The real estate market is still mending its wounds after the economic turmoil and more and more activity is seen in the office sector. While demand and supply are on an upward trend, The Diplomat's Alexandra Lopotaru talks to Romania's front office to discuss whether the current growth pictured in the market is too optimistic or not

2015-06-13 19:34:25 - From the Print Edition

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Although the real estate market seems to be on a positive trend, office developers take a deep breath and try to look behind the scenes. Some of them are optimistic and see 2015 as the beginning of a new stage for developments, while others are conservative and raise their eyebrows at the so-called "market resurrection". Nevertheless, during the financial crisis, the office sector has continued to perform, even if it was mainly driven by renewals and renegotiations, while now the market is driven by pre-leases, expansions and new entries.

Bucharest's modern office stock increased by two per cent q-o-q and stands at 2.2 million sqm, according to a DTZ Echinox study. In Q1 2015, two office buildings were delivered, having a total rentable area of 37,000 sqm: City Offices - 27,000 sqm and Auchan Tricodava - 10,000 sqm. For the rest of the year, new supply is projected to be of 130,000 sqm. Among the office buildings due to be delivered in 2015 are Bucharest One and Green Court - B in the Central North submarket, George Enescu Office Building in the Central area, PC Business Centre in the North and Sema Office 3 and AFI Park 4&5 in the West.

In terms of demand, last year's total leasing activity was of 298,000 sqm, according to DTZ research. Take-up was of 221,000 sqm, being 38 per cent higher compared to 2013, representing the highest take-up figure recorded since 2008 according to the same study. The new demand's share in total take-up was more than 50 per cent. Represented by expansions, relocations from old stock to class A & B office space, existing tenants opening new operations or new companies entering the market, new demand has increased by 60 per cent compared to 2013.

However, in Q1 2015, leasing activity came to 56,000 sqm and compared with the same period last year is lower by eight per cent. Nevertheless, take-up represents 71 per cent, with 40,000 sqm transacted and is divided between expansions/new operations - 58 per cent, relocations within A & B class office space - 31 per cent and relocations from old stock to modern office space - 11 per cent. In total, new demand's share in take-up was around 70 per cent.

For Oana Iliescu, managing director of DTZ Echinox, 2014 has proved that Romania is again becoming a desired destination for real estate investments. "Compared to previous years, general perspective has definitely changed," Iliescu tells The Diplomat - Bucharest. "Institutional funds that in the past were not considering Romania to be a viable investment destination are now active and looking to acquire income-generating products. Demand for office space has increased considerably, both in Bucharest and in the main regional cities such as Cluj, Iasi or Timisoara and this is forecast to follow the same trend going forward," she adds.

The heavy demand generated mainly by IT&C companies which expanded aggressively in the last two to three years, caused the overall office vacancy in Bucharest to decrease at the end of 2014 to the lowest level in the last six years, 13.3 per cent. In Q1 2015, however, Bucharest's general vacancy rate for class A & B office space increased slightly to 14 per cent. In total there are 309,000 sqm of vacant office space, with Pipera North accounting for 25 per cent. The lowest vacancy rate is registered in CBD (Victoriei - Aviatorilor) - five per cent, followed by the West submarket, with six per cent. Central North has a general vacancy rate of ten per cent, being the only submarket experiencing a major drop in vacancy q-o-q, as described in the DTZ report. Barbu Vacarescu - Floreasca (Central North submarket), with an office stock of approximately 280,000 sqm, has at the end of Q1 2015 a vacancy rate of 7.5 per cent.

"The occupancy rate in Bucharest has strengthened during 2014, with the average office net absorption last year being 50,000 sqm," says Iliescu. "Pre-lease activity proved to be consistent, outlining that office occupiers have started to be more confident in signing a pre-lease agreement. Finding Bucharest's office market conditions interesting, developers are announcing new projects. Most of them are investors with a proven track record in delivering office projects in Bucharest, and are familiar with the needs of the office occupiers and thus have the experience and the knowledge necessary in order to attract tenants' interest towards new office projects."

Romania, back on the map of international investors

2014 was the best year for the Romania's post-recession real estate market, according to Silviana Badea, head of capital markets at JLL Romania. The property investment volume recorded in 2014 is estimated at close to 1.3 billion Euro, higher than any of the annual figures registered since 2007, and take-up has also increased and new projects have been announced. This is a clear sign that Romania is back on the map of international investors, she says.

"We expect that the real estate market will continue its positive trend in 2015, both in terms of transactional activity, occupier interest and new development," Badea tells The Diplomat - Bucharest. "The strong economy (+2.9 per cent GDP growth in 2014 and a +3.0 per cent forecast in 2015) and take-up reaching record levels for the last two consecutive years (2013 and 2014) spawned a new wave of confidence, with developers announcing an impressive number of new projects which will be delivered by the end of 2016. After the strongest Q1 since 2010 in terms of take-up, we have strong reasons to believe that 2015 will set a new milestone."

The office market in Romania and especially in Bucharest became more mature in the past few years, with several institutional developers focused on delivering class A green office buildings, ready to accept a higher flexibility in occupancy of the space. Rental levels are becoming more stable (in Bucharest they are at the same level since 2012 at 18.5 Euro/sqm/month), tenants have an improved awareness about the real estate market and new dedicated office areas are being created in Bucharest: Barbu Vacarescu - Calea Floreasca corridor, Dimitrie Pompeiu and Central West area.
However, along with the increased demand, competitiveness in terms of office supply emerges and developers need to be more flexible in order to attract clients. Marius Scuta, head of Office Department & Tenant Representation at JLL Romania thinks that new or experienced developers are using strategies to appeal both to decision makers and normal employees. If a decision maker emphasises on accessibility and efficiency in terms of space occupancy, employers look for the proximity to public transportation.

"For a decision maker, the new space needs to be easily accessible, very efficient in terms of space occupancy, with the latest technical finishes and technology installed, a green certificate and in a location with great potential to attract new employees," Scuta tells The Diplomat - Bucharest. "For normal employees, the office needs to be located next to a metro station, next to a shopping mall or other amenities, easily accessible from the local universities and with the office space being developed/arranged similarly to other offices outside Romania. Google, Microsoft, EA Games, Intel are just few examples of new and modern office facilities, which include recreational and informal meeting areas, showers, bicycle racks and so on."

Attracting customers is a process also done even before the construction of the office building starts. Laura Berezitchei, associate - office & commercial at Crosspoint Real Estate, notices that, as a mechanism, developers generally start a new project when they already identify tenants for 50-60 per cent of the building area. Thus, she says, those are buildings provided from the start with specifications for satisfying customer needs. "From our experience, other ways through which developers can attract tenants are creating additional facilities to those existing on the market, a flexible and efficient space layout, opting for a distinct architecture, with personality - perhaps the best example is Ethos House building - or build-to-suit options (buildings built to tenants' specifications)."

Business services industry, the main growth driver

With demand for office space on the upswing, development has also revived. Main investments that have been recently started include Metroffice developed by Immofinanz in Pipera South and Oregon Park developed by Portland Trust, both planned for 2016. Moreover, Vastint, part of the Swedish group Ikea is developing an office project with a GLA of 30,000 sqm (Central area - Timpuri Noi), Globalworth Real Estate Investments is constructing on Dimitrie Pompeiu Boulevard the first phase of Globalworth Campus, while NEPI is planning the extension of Promenada Mall, including offices. In the West area (Grozavesti) a series of office projects were announced after Hercesa sold 13,000 sqm of land to a local investor and even Hercesa plans to build an office building in the Centre of Bucharest if the company manages to sign two pre-lease deals. Among the office buildings due to be delivered in 2015 are Bucharest One (developed also by Globalworth) and Green Court - B in the Central North submarket, George Enescu Office Building in Central area, PC Business Centre in North and Sema Office 3 and AFI Park 4&5 in West.

In Q1 this year, the most active office occupiers continue to be Technology & Telecom companies, with 42 per cent share in take-up, followed by companies active in Retail, with 26 per cent and Professional Services, with 15 per cent, according to DTZ report. The largest transactions by area this year were Oracle leasing around 10,000 sqm in Sky Tower and Carrefour pre-leasing about 7,000 sqm in Green Court - B, both office projects being located in Barbu Vacarescu - Floreasca (Central North submarket). Excluding the above, average deal size was of 600 sqm, only six transactions exceeding 1,000 sqm being finalised.

However, a particular field, hidden under the IT&C umbrella, caught the attention of the office developers in the past few years: business services industry, including companies working in segments such as IT outsourcing, business process outsourcing (BPO), shared service centres (SSCs) and R&D. Either more and more companies close their offices from Western Europe and reopen them in Romania, or they expand their local operations. If in 2004 up to 200 employees were working in this field, now the industry counts more than 60,000. As growth perspectives are targeting a triple number in next five years, office developers count on their support.

"On the office market, we see higher interest from companies active in IT, BPO and SSC sectors," Ilinca Paun, managing director at Colliers International, tells The Diplomat - Bucharest. "However, they will close transactions only towards the second part of the year. To give just an example, once at two weeks we see a new company researching the market, we present case studies for Romania about the workforce structure and talent pool. Besides the demand coming from expansion (companies active in Romania that will increase their occupied area), we estimate that more than 20,000 sqm will come from transactions with new companies entering the market both in Bucharest and the countryside," she adds.

Laura Berezitchei, associate - office & commercial at Crosspoint Real Estate shares the same view as Ilinca Paun, noticing that big companies in sectors such as IT, telecom and outsourcing have been market leaders in the area of office space, greatly expanding and supporting the market in previous years. In addition, in terms of demand, Berezitchei notices an interesting niche: start-ups and IT companies which need smaller office spaces. "There are very dynamic companies in the IT sector which are looking for smaller office spaces and have an extraordinary potential for development in the coming period," says Berezitchei. "From this point of view, we can say that there is room in market for office buildings that could offer smaller spaces available for rent, 100-150 sqm, currently very difficult to identify in existing buildings on the market."

Analyzing the overall market, Colliersā€² Ilinca Paun confesses that 2014 created positive momentum for most of the real estate segments, office, investments and residential, each segment registering significant increases in demand compared to previous year. This year, however, it will be difficult to register comparable results. "Last year, in Bucharest, the office market registered a 30 per cent increase in net take-up and, at the national level, the investment market recorded a fourfold increase in volume," she says. "2015 started on a positive note and we already see the signs of an active market. However, taking into account the significant increases registered in 2014, it will be rather challenging to register comparable surges."

Nevertheless, there are positive signs for the investment market this year. The growing interest in prime properties noticed in 2014 is expected to accelerate in 2015, being aided by the number of core products that are expected to enter the market. "The latest developments in the European markets also reinforce the optimistic outlook for real estate investment," adds Paun. "Apart from the US and Asian funds, that continue to flood the European market, the Quantitative easing measures announced by the European Central bank will bring another layer of liquidity to the market, which can directly or indirectly be channelled to the real estate segment."

In this context, The Diplomat - Bucharest talks next to major office developers to see how they really perceive the market, to stress their latest projects and to emphasize the challenges they still have to face.


Genesis Developmentā€²s Liviu Tudor: "Romania has not exited the economic crisis yet"

The current image of the real estate market that seems to have been resurrected is driven only by a psychological impulse, says Liviu Tudor, president of Genesis Development, one of the most important office buildings developers on the market. The sector is most likely to restart itself after several economic elements line up, especially when the restructuring process of financial institutions will be complete. This could happen in eight years from now, says Tudor.

"In my opinion, Romania has not exited the financial crisis yet," Tudor tells The Diplomat - Bucharest. "Actually, Europe has not exited the economic crisis, because it still needs to solve the issue of the national budget deficits. In terms of the real estate sector in Romania, however, the image that has been created so far is a little bit exaggerated. I have noticed the desire to invest in office buildings, yes, but the market will not be able to sustain it. We will end up in a few years with more empty office spaces. The market will restart itself especially when banks finish their restructuring process. From my point of view, we need to wait eight more years."

Tudor goes on to add that the office segment has seen an increased demand coming from business services companies that decided to relocate their business on the local market. Even so, the real demand is much smaller than speculated, he says. "There are many companies active in the outsourcing industry that closed their offices in Western Europe and reopened them in Romania," says the president of Genesis Development. "Moreover, there are foreign investors that are still opening R&D centres here and this is extraordinary. However, compared to the optimistic frenzy in the market, the real demand is much smaller. There is a psychological pressure on investment funds and developers who already have purchased land which compels them to give the image that we have a fabulous restart of the market."

Liviu Tudor is one of the largest office buildings owner in Romania, counting in its portfolio Novo Park, built between 2005 and 2011 with seven buildings and 75,000 sqm of office space, and West Gate Business District, built between 2007 and 2013, having five buildings and 75,000 sqm GLA. Both business parks are fully leased, Novo Park - 99 per cent occupancy rate with clients such as HP, Luxoft, Ringier and UniCredit, while West Gate registers 98 per cent occupancy rate with tenants such as Accenture, Ericsson and Dacia Renault. The investment value in both parks adds up to 240 million Euro. Since 2013, however, Genesis Development invested 4.3 million Euro in landscaping, infrastructure and fit-out works for both its office parks.

Both Novo Park and West Gate Business District contain enough additional land to double the current capacity of office space. Asked about other development plans, Tudor confesses that the company would start the development of a new office building only when current or new tenants request it. "Real estate developments are twofold: speculative and conservative," says Tudor. "As we count ourselves in the second category, we will not start the construction of a new building without having pre-lease contracts. If our clients want to grow - and we do have some discussions in this regard - then we can help them to by developing a new building. We are willing to grow based on a sustainable demand, with tenants we know and whose strengths we know."

Besides Bucharest, Tudor owns lands in Timisoara, Constanta, Brasov, Iasi, Cluj-Napoca and Oradea. According to him, the company will start a new project "only when the time is right." "Multinationals are targeting more and more secondary cities, but only when the volume will grow, we will start a new project," concludes Tudor. In 2014, the turnover of Genesis Development, whose portfolio includes also West Gate Studios private campus, was approximately 33.7 million Euro, up two per cent over the previous year.

Portland Trust to deliver first phase of Oregon Park in July next year

Real estate developer Portland Trust, who invested around 400 million Euro in Romania so far, plans to invest 45-50 million Euro in the first two buildings of its latest office project located in Pipera, "Oregon Park", according to Florin Furdui, country manager of Portland Trust in Romania. The development is expected to be completed in July next year and to count 44,000 sqm of office space.
"Oregon Park is developed on a 3.4-hectare piece of land and will have three buildings with a GLA of 73,000 sqm in total," Furdui tells The Diplomat - Bucharest. "The first two buildings - A and B - that will count 44,000 sqm will be finished in July 2016. The project will have green standards in terms of energy efficiency, including a heating pump, efficient facades and lighting systems, as well as a charging station for electric cars. The third building is currently under evaluation to see if we need to start building it or not."

The land on which Oregon Park is being developed was bought from Nusco Group for around 20 million Euro last year. Asked about pre-lease contracts for the first two buildings, Furdui states that "we generally do not start building below 50 per cent pre-lease, this being the internal threshold to start working." However, due to confidentiality terms, he cannot disclose the names of the clients.

Portland Trust has built more than 110,000 sqm of office space on the local market: developing Opera Centre - delivered in two phases in 2001 and 2002 and sold to CA Immo; Bucharest Business Park - delivered in 2006 and sold to CA Immo; Floreasca 169A - finished in 2009 and sold to NEPI; and Floreasca Park - finished in 2013. The latter, still in Portland Trust's portfolio, generates around eight million Euro revenues from rent, says Furdui. "So far, we managed to sell all our investments in the proposed parameters," says the country manager. "Although visibly improved, Romania has not enough liquidity yet and we would like to see more investors. We launched Floreasca Park in December 2013 and it has already 99 per cent occupancy rate six months upon its delivery in December 2013."

Speaking about the real estate market in general, Furdui believes that its current status reveals a more mature sector, with a normal and steady growth. According to him, land prices have started to become more realistic and allow investors to make a long-term business plan. "From our experience, the most expensive land we bought was the one for Floreasca 169A, with 1,000 Euro/sqm, but I know of transactions during that time of 3,000 Euro/sqm," says Furdui. "Nowadays, the prices have decreased. As a comparison, the lands for Floreasca Park and Oregon Park cost around 500 Euro/sqm."

Moreover, as another positive indicator, Portland Trust's country manager stresses the increase of the value of real estate transactions last year, to 1.2 billion Euro up from 300 million Euro in 2013, of which 30 per cent represented office purchases. "In the following years, the buildings office sector in Bucharest will be more and more competitive," says Furdui. "However, it will depend on the economic environment and on the financial incentives given by the Government to foreign investors, especially in the IT and BPO sectors, that could help increase the real estate industry," he concludes. Portland Trust posted last year around 14 million Euro in turnover.

Skanska's Marcin Lapinski: "By the end of the year, building B will be fully leased"

Green Court Bucharest, the first office building developed by Skanska in Romania on a 1.5-hectare plot, will see the completion of building B in June this year, according to Marcin Lapinski, the president of Skanska Property Romania. The first building, counting 19,500 sqm, was delivered in October 2014 and sold to Globalworth Real Estate Investments for 44 million Euro, with an occupancy rate of 91 per cent. The second building, counting 18,000 sqm, already has a 61.2 per cent occupancy rate with four big clients such as Carrefour, Sanofi, Adecco and Colgate. By the end of the year, however, building B will be fully leased mainly due to increased interest of outsourcing companies.

"Currently, we are having interesting discussions with potential clients, so, by the end of the year, building B will be fully leased," Lapinski tells The Diplomat - Bucharest. "We see a lot of interest for this building and many clients will start operations in June. Some of the clients will come from the outsourcing industry, because this is the big power on the market today, creating a lot of demand. What is very interesting about BPOs is that when they win different clients, they need office space right away. We are also an ABSL [Association of Business Leaders in Romania] partner and we have a quite big experience working with such companies. In Poland, for instance, we are very close connected to this sector."

So far, Skanska invested 80 million Euro in the development of the first two buildings - A and B and obtained the LEED (Leadership in Energy & Environmental Design) certificate in April this year for the first one. However, Green Court Bucharest will be completed in Q2 next year after the developer will deliver the third and the last building of the project, adding another 14,500 sqm. "The construction works of building C have already started," says Skanska's president. "We are going full speed and one year from today [the interview was conducted in May] we will be delivering our third project which will complete our business park."

Speaking about the real estate market in general, Lapinski thinks 2015 is a continuation of a step by step recovery, the sector heading in the right direction. Although positive signs can be seen in terms of demand coming from companies active in the outsourcing industry, the real estate market still lacks high activity in terms of property investors. "I see positive signs, but I would like to see more action," says Lapinski. "For the last two or three years I've seen quite a big demand. The tenants are growing, a big part of the Bucharest market being BPOs and SSCs. However, what was missing in the past few years were the international investors ready to purchase the buildings and do transactions. Now, I see that they are discussing more and more about Romania."

In terms of future plans, Skanska is open for new investment opportunities on the local market, North, West and centre of Bucharest being on the developer's radar. Skanska is present in 11 countries in Europe, in Latin America and USA. The Group posted 15.8 billion Euro in revenues last year.

Immofinanz's Visoianu: "The real estate market is on a steady growth path"

Austrian-based Immofinanz Group, one of the leading real-estate developers and investors in Romania, posts a portfolio of 82 properties in mostly office and commercial space, estimated at 957 million Euro. The company counts large office buildings like S-Park, Bucharest Business Centre and Iride Business Park, which is the biggest business park in Romania with 93,000 sqm of office space.

The company announced at the end of 2014 the start for the long-term transformation and expansion of the existing Iride Business Park into a modern urban quarter under the name of Iride City. The new development, "Metroffice", has started with the construction of the first phase of the project, that will comprise around 20,000 sqm, half of the rentable space planned for the entire project. The construction should be completed in Q1 2016 with an investment volume for the first building of around 34 million Euro. The long-term master plan of Iride City involves the redesign of the entire area within Iride Business Park into a quarter with office, retail, leisure and residential space. So far, the project received positive feedback from current clients and the general market seems to have improved, according to Sorin Visoianu, country manager Office & Logistic Romania and Bulgaria at Immofinanz Group.

"The real estate market, in general, with the office sector we are closely handling, in particular, certainly places itself on a steady growth path," Visoianu tells The Diplomat - Bucharest. "The increasing number of interactions and advanced discussions we are having with our tenants for new leases or prolonging and extending the rented space confirm this trend. (...) In the past few months, after revealing plans to expand Iride Business into Iride City, we are very pleased to see long term partnerships continue. Our vision and long-term plans for Iride City sparked the interest and positive feedback partly from our current tenants so we have concluded new contracts with tenants coming from various sectors, such as tobacco, media or travelling."

As the leading office building owner in Bucharest, Immofinanz Group counts a total of 187,405 sqm rentable space, according to its representatives. The company's clients' portfolio includes market leading companies involved in IT, pharma, banking, FMCG and BPO sectors, as well as the agro segment. As of January 2015, when the company issued its latest report for all countries, its Romanian office portfolio registered an occupancy level of 77.3 per cent. "The main anchor in attracting more clients is to provide modern spaces, adapted to their business's needs," says Visoianu. "In this case, Metroffice will become one of the area's landmarks of quality and professionalism on completion."

Some of the latest strategic decisions with regard to the Romanian office and logistics segment of Immofinanz involve reconversion works for Armonia Mall (Arad) into a logistics centre, where the first tenants have already been attracted, says Visoianu. Additionally, the company is getting off the starting blocks for new logistics developments. Within "a short time", Immofinanz will start the first phase of its "LOG.IQ" Bucharest development with a rentable space of around 38,000 sqm. Nevertheless, speaking about the development of the real estate market, Visoianu adds that it is more likely for the local market to moderately yet constantly grow in the forthcoming period. "Taking into consideration the crisis we faced, I would say it wouldn't be healthy for the market to suddenly grow, and taking into account the evolution within the last 12 months, we can probably expect a temperate positive trend," he concludes.

Hercesa could start the construction of the first office building in Romania this year

Spanish-based Hercesa, present on the local market since 2004, has invested more than 150 million Euro in Romania so far in land purchases, the Cismigiu Hotel refurbishment, and in development of the Vivenda residential compound. This year, the company could develop its first building office in the centre of Bucharest if pre-lease contracts will be signed with two possible tenants that showed interest in the project, according to Mauricio Mesa Gomez, the general director of Hercesa Romania.
"In order to start construction, we need at least 30 per cent pre-lease contracts; this is our internal development strategy," Mesa tells The Diplomat - Bucharest. "Currently, we are in discussions with two IT companies: one is interested in renting half of our GLA, between 2,000 - 2,500 sqm, and another one is interested in taking over three levels of the building. If we sign pre-lease agreements, we would have around 80 per cent occupancy rate and the constructions would start afterwards. We will see how discussions go."

If the constructions will start, the company will need 18 months to complete the project, says Hercesa's GM. The office building, located at the intersection between Mircea Voda Boulevard and Cauzasi Street, is designed to have 5,500 sqm and will need an investment value of seven million Euro. The land was bought by Hercesa seven years ago with building licence for office, but the company renewed it for a hotel. However, they are considering changing it back to office because of the pre-lease discussions. Hercesa developed Vivenda residential project that started in 2007 and records 420 apartments in the first two phases, sold almost entirely. This year, the company plans to invest another five million Euro in the development of the third phase of Vivenda, comprising two blocks that count 66 apartments each. Hercesa posted last year up to eight million Euro in turnover.


While Bucharest's office market continues to be tenant-driven, in the main regional cities such as Cluj-Napoca, Timisoara, Iasi or Brasov the situation is slightly different. In these cities, the occupancy rate for A and B class office space has been strong, due to the lack of options. However, the situation has started to change. More and more companies working in IT&C tend to go to secondary cities, benefiting from both low labour cost and skilled professionals. As a result, the office stock outside Bucharest is expected to see growth in the following period and developers are waiting for the right time and for more stressed signals to penetrate secondary markets.

Brasov: Ascenta Management to invest up to ten million Euro in a new office building by 2016

In November last year, the office stock in Brasov stood at 80,000 sqm class A and B office space, with the majority of office space located in the Civic Centre and on Calea Bucuresti, according to the DTZ Research department, where the demand for office space is generated especially by Financial and Technology & Telecom sectors. One of the most important office projects in Brasov is Coresi Business Park, developed by Ascenta Management on the former Tractorul industrial facility, where companies like Raiffeisen Bank, IBM, Fresenius, Freudenberg, Computer Generated Solutions (CGS) and Waters operate.

Stretching over 13 hectares, the business park has the capacity to host over 100,000 sqm of office Gross Building Area (GBA). To date, Coresi Business Park comprises four A class office buildings, totalling around 27,000 sqm GBA, that have been converted from period office buildings or former warehouses. In April this year, the developer launched the second phase of the project totalling 18,000 sqm, with a first building of 8,000 sqm GBA, as two of its clients, CGS and Freudenberg, extended their lease contracts for additional ten-year terms. The investment value for 2015/16 is estimated at up to ten million Euro, with the first building to be completed by Q2 next year.

"This year, we have noticed a significant increase of activity in the office buildings sector due to the growth of the outsourcing industry, including BPOs and call centres," Silviu Savin, partner at Ascenta Management, tells The Diplomat - Bucharest. "I don't know for sure if they have actually started to lease office spaces, but they are planning to expand in the following period. In Coresi Business Park for instance, all our clients have a larger office space than they had at the beginning. The growth opportunity in the same location is a big advantage for clients and we can add another 70,000 sqm GBA, hopefully in the next ten years."

Savin confesses that the new building of Coresi Business Park will have two new important tenants in 2016, but, because of confidentiality terms, he cannot disclose their names. However, according to him, Ascenta has received expansion requests from almost all its clients. Currently, around 2,500 employees are working within the first four fully-leased buildings, CGS being the main employer with over 1,200 people. In 2014, Coresi Business Park posted a 9.5 million RON (2.13 million Euro) turnover and expects to see an up to 30 per cent increase by the end of 2015.

Not only Brasov is targeted by Ascenta Management. Bucharest and Cluj-Napoca are also on the radar. "We were really close to acquire a project in Cluj-Napoca, but someone else won the bid," says Savin. "However, we are really interested in Bucharest. We made an offer to buy the Swan Office project, but the sellers decided in the end to withdraw the project from the market, at least temporarily. It depends on the starting price of the next bid if we will participate again or not. Nevertheless we will continue to look for acquisitions. I expect the office market to evolve considerably in the next five years, as Romania still has a lot of potential, both in Bucharest and in secondary cities."

Cluj-Napoca: Liberty Technology Park could start the development of the third phase next year if demand dictates

The real estate market in Cluj-Napoca has witnessed an impressive growth in the past two years, doubling its office spaces delivered, and is expected to increase by 40 per cent in the following period, according to a study made by RE/MAX. Having an estimated office stock of 180,000 sqm, Cluj-Napoca registers an occupancy rate of 90 per cent, according to experts. The high number of IT&C and R&D companies that have chosen Cluj-Napoca, whether by relocating, expanding or simply changing their venue, are shaping the city more and more as a destination for business.

One of the most important class A office projects in Cluj-Napoca is Liberty Technology Park, developed by Fribourg Capital and hosting companies such as Siemens, Halcyon Mobile, Recall Information Services, Control Data Systems and KPMG. The office building inaugurated its first phase in late 2013, while the second phase of the project, offering 13,412 sqm, opened its doors in May this year. The total investment for both phases has exceeded 11 million Euro. Furthermore, the construction of the third and final phase of the project could start next year if demand will be registered, says Nina Moldovan, the CEO of Liberty Technology Park Cluj.

"Liberty Technology Park Cluj integrates all the necessary elements for an effervescent business environment," Moldovan tells The Diplomat - Bucharest. "Our major future investment is the third and last phase of our project which implies building new office pavilions, totally customizable with a total area of 18,000 sqm. The new buildings will be designed in conformity with our residents' business growth needs and will meet their every requirement. The developments are scheduled to begin in 2016 by demand and investments value is estimated at about 30 million Euro."

While the first phase of the project is fully occupied, Liberty Technology Park has signed lease and pre lease contracts for 40 per cent of the total space designated for phase two. Makronetz and Luminos Software are among the first clients and another tenant is expected to take its office in July.
Liberty Technology Park Cluj is also the initiator and one of the founding members and hosts to Spherik, a business accelerator and a platform designed for developing and implementing business both locally and internationally. "The accelerator offers the perfect habitat in which investors, mentors, specialists and young professionals passionate about technology and entrepreneurship are reunited," says Moldovan. "Their first program is currently underway, helping five teams to launch their projects. "Fotocolaj" is one of the first projects already launched that benefit from Spherik's help and the "Primul Doctor" app was launched this March, being the first start-up developed and grown with the help of Spherik's team."

Speaking about the Romanian real estate market in general, the CEO notices several indicators showing that Romania has an ascending path. First of all, Moldovan stresses the steadier economic environment that seems to be continuing its ascending trend in 2015. "In this line of thinking, one argument to begin with would be the growth of GDP - which is again expected to accelerate in 2015 to 3.3 per cent," she says. "Another indicator might be the encouragement of the credit market due to the decrease of the monetary policy rate from four per cent to 2.75 per cent in 2014, a trend which is expected to continue. Also the IT&C sector is gaining momentum now more than ever, registering a growth of 15 per cent y-o-y in the first nine months of 2014 and reaching a share of approximately five per cent of the GDP."

Nevertheless, in terms of Cluj-Napoca, the CEO of Liberty Technology Park sees the city as a tech-driven urban conglomerate in the near future. "If we take into consideration the great human resources potential that this city has to offer, we can easily see why Cluj-Napoca is becoming day by day a more sustainable ecosystem for both national and international companies, following Bucharest's lead," she says. "Moreover, the fast paced interest for new technologies amongst the young and talented graduates of the universities here, will for sure transform the city into a tech-driven urban conglomerate in the near future."

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