|SOUTH-EAST EUROPEAN INDUSTRIAL ÌARKET » South-East European INDUSTRIAL Ìarket - issue 4/2018, November
Romania's Industrial Parks Infrastructure
Romania is a country which currently houses a total of 72 industrial parks spread across both private and public ownership. Most of these parks offer capabilities suited for industries like aerospace, IT&C and industry. All of them provide companies with the access to utilities and some particular benefit packages according to their focus of business. Investors are additionally exempted from land, building and urban planning taxes as well as for land destination changing.
Most of the industrial parks of Romania are located in South Region, where there are 21 parks, of which 14 parks in Prahova County, and North West Region with 15 parks, of which 9 in Cluj County. Another 17 industrial parks are located in the Center Region of Romania, where 11 are built in Brasov County, 6 operate in the South West Region, 5 parks are in the North East Region and 6 parks are in the West Region. There are also 2 parks are in the South East Region and 2 parks in Bucharest. So far, the only counties without any industrial parks are Mehedinti, Caras-Severin, Calarasi, Buzau, Vrancea, Vaslui, Braila and Tulcea.
Industrial parks according to Romanian legislation
For the purposes of Romania’s legislation, industrial parks are defined as confined areas where economic, R&D and industrial production activities, as well as services, are conducted under a regime of specific incentives, using human and material resources available in the proximity of the relevant area, explain expert law representatives from the country.
When setting up industrial parks four key factors are: economic and social development, technology transfer, efficient investment, and cooperation between central and local public authorities, undertakings and/or other parties involved. In theory and practice, founders of industrial parks can be individuals and/or legal entities (e.g. public authorities and/or private companies) which initiate the establishment of an industrial park by incorporating a certain company as administrator of the park with the specific purpose of building, operating and administering the same.
The industrial park title enables the right to apply for various incentives on behalf of industrial parks residents and as such is granted by the Ministry of Regional Development and Public Administration. To obtain the title, the company must meet specific conditions. The administrator of the industrial park for example must be duly incorporated, must not undergo insolvency proceedings, and must not have debts towards the State’s budget. The industrial park’s land itself must be owned / held under concession / administration / use by the founders / administrator / residents of the park; must have access to a main road or a ring road; must have a compact surface of no less than 50 000 square meters; must not be encumbered (except for encumbrances created by the administrator of the park for park related investments). These conditions were outlined by an international law firm based in Romania, which published a report on industrial parks back in 2014.
An industrial park functions under the direct management of the administrator, which enters into administration and services agreements with the residents of the park; performs maintenance, repairs or modernization works; ensures the residents’ right of use over the industrial park units forming the object of the above mentioned agreements; concludes utilities agreements; and cooperates with local / central administration. Administration and services agreements concluded with the companies forming part of the industrial park are the main ways management is carried out.
Setting-up and operation of an industrial park
As mentioned above, founders of industrial parks may be people and/or legal entities, i.e. public authorities and / or non-public firms, that initiate the setting-up of the industrial park by incorporating an organization as administrator (with the precise purpose of building, operating and administering the same). The industrial park title (which gives the right to apply for numerous incentives on behalf of industrial park residents) is granted by the Ministry of Regional Development and Public Administration in addition to an application submitted by the founders of the relevant industrial park. The industrial park title is issued to the administrator and encompasses the land, the infrastructure and duration of the industrial park.
An industrial park functions beneath the direct management of the administrator, which enters into administration and services agreements with the residents of the park. The administration also ensures the residents’ right of use over the industrial park units forming the item of the above mentioned agreements, performs maintenance, repairs or modernization works, concludes utilities agreements, and cooperates with local and central administration. The management of an industrial park is thus primarily carried out through the administration and services agreements complete with the companies forming a part of the industrial park.
The industrial park title renders the businesses operating there eligible for the incentives stipulated by the Industrial Parks Law, such as: exemption from payment of the levies charged for the modification of the land category; exemption from payment of land tax for the industrial park real estate; exemption (based on the relevant public authorities’ approval) from taxes for the supply of urban planning certificates and / or building and/or demolition permits.
As far as benefitting from the incentives industrial parks goes, residents have to meet particular criteria, such as: they conduct an economic activity among the industrial park based on a legitimate title; they did not receive State aid for the previous three consecutive years, or, as the case could also be, the whole quantity of the received State aid doesn’t exceed EUR 200 000 (EUR 100 000 for corporations within the transportation sector); they submit a feasibility investment plan for getting funds; and that they haven’t been subject to a call for restitution of State aid.
The Industrial Parks Law in Romania defines that other facilities may be granted by the local public authorities, acting in accordance with State aid rules. In this respect aid to support the construction or modernization of local infrastructure has been included in the categories of aid that are exempted from notification to the European Commission, provided that certain conditions are met, outlines the Romanian law firm that summarized the report on industrial parks. The aid is supposed to be awarded transparently, proportionally and limitedly, to have a genuine incentive effect, apply across all sectors of activity, and not alter trading conditions in a way contrary to the general interest.
Growth of the Romanian industrial and logistics market
The industrial and logistics market was the second biggest growth driver of the Romanian real estate market in 2017, closely following the office sector. This information was brought to light in a business analysis conducted by the Romanian media network Bloc-Notes and published in the mid-summer of this year. The analysts outline that the market was powered by growing consumption, with retailers and logistics players seeking more storage space and developers in turn readily providing it, mostly in Bucharest and the west of the country.
Around 3 million sq. m of space are currently part of the Romanian industrial and logistics market; the experts forecast that if the economy continues to grow, the available surface is expected to reach 3,5 million sq. m by the end of 2018.
A major event on the market that related to its growth was the entry of logistics developer and operator P3 into the portfolio of Singapore’s sovereign investment fund GIC. The agreement follows a global transaction of EUR 2,4 billion. P3 owns one of the largest logistics parks in Romania, P3 Bucharest, which was purchased from CA Immo back in 2015. It currently houses 14 warehouses and spans on a total area of 488 235 sq. m.
Another large player on the industrial park market is the Dutch-founded company CTP. They own properties in Bucharest, Cluj, Timisoara and Pitesti, and this year will deliver 300 000 sq. m. The company is said to plan to become the biggest developer on the market, with the goal to own 1 million sq. m of logistics properties in the country. CTP occupies positions in the west of the country, which is home to one of the highest levels of rental demand in the industrial and logistics market, states the business report of Bloc-Notes, which was published in the media’s website Business Review. Reportedly, what draws CTP’s expansion ambitions are factors such as the infrastructure improvements in this region, proximity to the western border and the abundance of new entrants to the area, from sectors such as IT, automotive, electronics, retail and FMCG.
“The capital city naturally records the largest demand for industrial and logistics space. We have three parks – CTPark Bucharest, CTPark Bucharest West and CTPark Bucharest Chitila, whose cumulative surface has already exceeded 500 000 sq. m, and we expect it to reach 700 000 sq. m at the end of this year, which makes us the biggest owner of logistic parks near Bucharest. The same situation exists at a national level, where we have industrial and logistics parks in the western region: Arad, Cluj-Napoca, Deva, Ineu, Salonta, Sibiu, Timisoara and Turda. Currently, at national level, we are focusing on finishing the developments started in the Timisoara and Cluj parks, as well as the further development of the Pitesti Park,” says Iulia Busca, commercial & business development manager at CTP Romania, as quoted by Business Review.
According to the analysts at Bloc-Notes, players say there are two areas where the stock is high: Timisoara, in the west of the country, with 370 000 sq. m, and Bucharest, the leader and the country’s strongest economic point, with more than 1,7 million sq. m. The western region as a whole and not only Timisoara is developing fast. The observation is based on its economic growth as a region near to the border. Cluj-Napoca, for example, has reached around 210 000 sq. m and Arad close to 100 000 sq. m.
“In the future we do not exclude any area in Romania, as long as the basic conditions for the development of our clients’ business are fulfilled: infrastructure, labor force, economic development,” adds Busca of CTP Romania.
Globalworth is also a major investor interested in the western region of Romania. The company is generally concentrated on the office market, but it has also owned the 103 000 sq. m TAP industrial park in Timisoara since 2014. Last year the investor spent EUR 42,5 million on another logistics project of 68 000 sq. m in Pitesti, with the opportunity to expand by additional 40 000 sq. m. According to Business Review, the company announced recently that it is moving its focus from the Bucharest market in order to buy industrial and logistics properties.
The market profile of Eastern Romania is, unlike the real estate, retail, office and residential sectors, evenly balanced between three major areas, which are the capital, the center of the country and the west of Transylvania. Regardless, Moldova, although lacking fast road infrastructure - highways, seems to be interesting to players, although at present it has only 47 000 sq. m of storage space, according to Costin Banica, head of industrial agency of JLL consultancy company. Nonetheless, the region is appealing, and is additionally well positioned for malls and is open to other markets outside the country – including the Republic of Moldova and Ukraine.
“Moldova is a region that has major development potential in the logistics segment, both in terms of surface area and population, or potential labor force. The development of quality infrastructure to facilitate connection with the northern and eastern countries of Romania would certainly increase interest in new and significant investments in the region,” says Busca of CTP as quoted by Business Review. Players on the market also said that no matter how exciting it may become, Moldova will not be able to compete in the foreseeable future with the west of the country, but the eastern region has a trump card: its workforce.
The business analysis that was published by the Romanian media outlet also consulted experts from the Canada-based global commercial real estate services organization Colliers International. Laurentiu Duica, the director of the industrial agency at the organization, said that lately there has been increasing interest in less-cleaned areas such as the northeast of the country, with retailers being interested in developing distribution centers serving the north of the country, while also aiming to access the Moldovan market.
“Not surprisingly, the center and west of the Carpathian Arc are generally the most attractive for companies that have trade links with Western Europe. Potential employees are located in other areas of the country, and Romania also has rather low internal labor mobility. For example, Iasi and Suceava counties together account for a seventh of the total number of people committed at national level, from our calculations. Structural reforms to increase productivity and two highways on the north-south / east-west axes could lead to explosive and lasting economic growth,” says Silviu Pop, head of research at Colliers International Romania.
Rents in the Romanian industrial parks sector
Rents are roughly equal across the country, and they have been stable in recent years.
Rents in Bucharest stand at EUR 3,75 – 4,2 / sq. m, and in the other cities they are EUR 3,5 - 3,8 / sq. m. They vary and may also be lower, depending on company specifications, leased area, contract length etc, says Rodica Tarcavu, senior broker, industrial agency, at Cushman & Wakefield Echinox real estate consultancy.
Emilian Podaru, head of industrial & logistics at Crosspoint Real Estate, confirms the level of rents, and claims that the highest rent is in Bucharest where the vacancy rate is the lowest, below 5 percent for Class A spaces. In the Cluj area rents can also exceed EUR 4 / sq. m. Bringing up the rear is Moldova where average net rent can be around EUR 3,25 – 3,5 / sq. m. Demand comes mainly from logistics companies, retailers, traditional or online, and FMCG. Trade provides most of the demand for logistics space, especially as there is a sizeable difference between the demands of retail or logistics and industrial players.
The top eight rental deals in the first quarter of this year reveal the structure of the market. According to JLL Bucharest City Report Q1 2018, four of them involved logistics spaces, and total 45 000 sq. m. Two involve production facilities and account for 10 500 sq. m, and the others were for a storage space and a data center, with areas of 2500 sq. m and 6000 sq. m, respectively.
“Most of the demand in 2017 came from logistics, transport and distribution companies, which leased more than 55 percent of the total space. Production companies need buildings with special technical specifications tailored to their needs,” concludes Busca of CTP.
“Logistics projects are usually developed in areas that provide easy and fast access to major cities / neighboring regions; the main factor in choosing the location is the distance to motorways and national roads. However, it also depends on the specifics of the activities carried out by the firms in charge of the deposits. For example, in the case of light production units (activities that can be hosted in logistics warehouses), an important factor in the choice of the area is also the availability of labor force. So it is easy to understand why major cities are the urban centers chosen by developers of logistics space, especially for speculative projects,” says Laurentiu Duica, director of the industrial agency at Colliers International.
P3 Industrial Parks
Total Space: 488 235 sq. m
P3 Bucharest is located in the area of Chiajna commune, approximately 13 km west of Bucharest’s city center, with direct access to the A1 motorway, that is part of the Pan-European Corridor IV and it is planned to connect Bucharest with the western part of Romania. The park is close to Bucharest’s ring road, providing easy access to all the city’s six districts and to Henri Coanda International Airport 22 km away, while also connecting up to the A2 highway.
Construction of this park began in 2005 and it currently comprises 14 warehouse buildings. The largest tenants of the park are Carrefour, Yusen Logistics, Dante International, Interbrands, Altex and Gebruder Weiss.
CTP Industrial Parks
Total area: 500 000 sq. m
CTP owns the industrial parks Arad, Arad II, Bucharest, Bucharest Chitila, Bucharest West, Cluj, Cluj II, Deva, Deva II, Ineu, Pitesti, Salonta, Sibiu, Timisoara, Timisoara II, and Turda in Romania.
In 2017, CTP made significant progress in the market of Romania. Romanian projects now comprise around 16% of the company’s overall portfolio, compared to less than 12% during 2016.
TAP Industrial Park
Total area: 103 000 sq. m
The Timisoara Airport Park (TAP) is built by investor Globalworth and is located in Timisoara, in close vicinity to the international airport. The complex is almost exclusively let to Continental, Elster (Honeywell), Litens Automotive and Valeo.
Åòèêåòè: industrial parks Prahova Cluj Brasov P3 Industrial Parks CTP CTPark Bucharest Globalworth TAP Industrial park