Regional Cities Office Snapshot Q3 2020

The Regional Cities Office Snapshot provides a general market overview on the regional office hubs in Romania and the opportunities they can offer to office tenants, real estate developers and investors. Regional markets can provide attractive alternatives, and also room for expansion and further growth in Romania.

Following a natural trend, major international office occupiers have gravitated towards the capital of Romania, Bucharest, by far the largest city in the country, with roughly 2 million inhabitants, without counting its metropolitan area. Both international developers and real estate investors usually start their investments in Romania with Bucharest. However, as the Romanian economy is maturing and expanding, and as average wages increase and unemployment levels get lower and lower, both real estate investors and office occupiers are looking to expand beyond Bucharest, to tap into Romania’s full development potential.

Investment

Q3 2020 property investment volume for Romania is estimated at €408 million, a value approximately 68% higher than the one registered in the same period in 2019. For the first nine months of 2020, transactions volume reached €816 million. Even though expectations for Q3 were not very high, considering the emergence of the second wave of the COVID-19 pandemic, the investment volume was boosted by the closing of one of the largest deals ever signed in Romania, the acquisition of the NEPI Rockcastle’s office portfolio by AFI Europe, a deal worth approximately €307 million, which includes several properties in Bucharest and one in Timisoara, with a total GLA of almost 120,000 m².

The second largest deal closed during Q3 was the sale of the 37,500 m² GLA office complex Floreasca Park in Bucharest. The project was sold by GLL to Resolution Property Investment Management and Zeus Capital for an estimated €101 million. Although the road ahead is marked by uncertainty, considering the persistence of the COVID-19 pandemic and the restrictions associated with it, there is a consistent pipeline of deals which could be closed soon and throughout 2021.

Office leasing

The leasing market has continued to be active in the regional cities. During the first nine months of 2020, total take-up experienced a roughly 8% increase in comparison with the same period of 2019.

In Cluj-Napoca, total office leasing volume for Q1-Q3 2020 reached 32,600 m². In Brasov, it stood at 10.900 m² and 9,400 m² in Timisoara.

Around 4,200 m² were leased in Iasi during Q1-Q3 2020.

The demand for office space in regional cities was dominated by deals between 500 and 1,000 sqm and by grade A office spaces (73%).

Prime rents and incentives in Q3 remained stable throughout the regional cities.