romania too large to be ignored
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RomaniaToo large to be ignored
advanceMay 2013
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Dear Readers,
Romania is one the most developed countries in the region when compared with its SEE peers, though it still has some way to go in order to
reduce the economic gap when compared with the more mature CEE economies. Maybe this is both the curse and the advantage of the
country? Which is the most similar and most relevant country to compare Romania with?
In this report we will look into Romania's opportunities from various angles. Regardless of how we approach the issue, please bear in mind
that Romania has been an EU member state for many years, obtaining membership on 1 January 2007 following years of implementation ofnecessary reforms. Its EU membership as well as its NATO membership (since 2004) are Romania's wild cards, placing the country into the
larger EU trade zone and into the pool of countries with a stable political and social environment.
This report is meant to offer a fresh, updated overview of the country's key macroeconomic indicators, investment opportunities, real estate
markets and to be an easy tool to be used by any multinational corporation interested in placing investments into Romania.
We would like to thank our partners, FiNEXPERT and Lugera - The People Republic, for their valuable input and interest in supporting the
initiative in highlighting Romania as an attractive business and investment location.
Gijs Klomp, MRICSManaging Director
Jones Lang LaSalle Romania
2Romania. Too large to be ignored
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3Romania. Too large to be ignored
With a population of some 20 million inhabitants (October 2011Census), Romania is simply too large to be ignored. In the
European Union, Romania ranks 9th largest in terms of area and
7th largest by population. These factors make Romania one of the
largest consumer markets in the EU, as well as an attractive
manufacturing hub.
The country is divided into 42 counties, with its capital and largest
city being Bucharest (and Ilfov) with almost 2 million inhabitants.
The metropolitan area of surrounding Ilfov County increases theThe modern economy began in the year 1990. After two decades of
capital's population by additional 320,000 inhabitants.
privatization, there are currently only a few companies that remainin the hands of the Romanian state. The banking sector is almost
entirely privately managed, with a couple of the commercial banks
being largely owned by the Romanian State (i.e. Saving Bank/
CEC). Historically, the first 10 years after the collapse of
communism were the most fragile. The following years, featuring a
more stable economy, are considered to have preparation years for
European Union accession. At present, the country is seeking to
join the Schengen area and in 5-7 years, to be part of the monetary
union and adopt the Euro.
Romania's economy is however highly dependent on its Western
European partners. With a weak recovery in consumer demand, a
low level of activity in the construction sector, a large agricultural
sector with its inherent unpredictable results, the country's GDPThe second tier cities are mostly selected by economic importance
growth is supported heavily by export.rather than population and include: Cluj Napoca, Constanta,
Timisoara and Iasi each having a population of some 300,000
The country's 5-year average forecast (2013-2017), places itsinhabitants. The third tier cities include, but are not limited to:
economic performance at a level of 2.9%, which is well above theBrasov, Sibiu, Targu Mures, Craiova and Galati.
EU average.
As in other CEE & SEE Countries, the capital city Bucharest, is
the most developed and represents the economic, social and
cultural center of Romania.
About Romania Macroeconomics
Source: IHS Global Insight, Country Report April 2013, 2013-2017 Forecast, * - INS data
2009 2010 2011 2012 2013 2014 2015 2016 2017
Real GDP (% change) -7.1 -1.3 2.5 0.7* 1.2 2.7 3.5 3.2 3.6
Nominal GDP Per Capita (USD) 7,631 7,670 8,519 8,000 8,662 9,228 10,153 11,386 13,081
Consumer Price Index (% change) 5.6 6.1 5.8 3.3 4.8 3.1 3 3.1 2.9
Policy Interest Rate (%) 8 6.25 6 5.25 5 3.75 3.75 3.75 3.75
Unemployment Rate (%) 6.3 7.6 5.4 5.1 5.2 4.6 4.5 4.3 4.2
Current Account Balance (% of GDP) -4.2 -4.4 -4.7 -3.9 -3 -3.5 -3.6 -3.3 -3.1
Exchange Rate (LCU/USD, end of period) 2.94 3.2 3.34 3.36 3.32 3.35 3.1 3 2.95
Key economic indicators
Romanian Athenaeum, Bucharest
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Romania benefits from an excellent geographic location in South RailEastern Europe. The country is crossed by 3 Pan European The rail network has a length of approximately 10,700 km out of
Corridors (IV, VII, and IX). Corridors IV and IX are for both road and which, 4,000 km operates electrified lines. Currently, ca. 3,000 km
rail, while Corridor VII is only partially serviced by road and rail. are part of the TEN-T network, part of the Pan European Corridors
IV and IX.
Roads
The length of the road infrastructure is estimated at 198,000 km,
out of which ca. 16,000 km are represented by national roads. Freight rail transportation is ensured by the state owned company,
Sections of these national roads are incorporated in the 7 main The National Freight Railway Company - CFR MarfaS.A. - which
European Roads and a further 10 secondary European Roads was set-up in 1998 from the Romanian National Railway Holding
spread throughout the country. The country started its highway (CFR) following the institutional reform. Today, it remains the
construction efforts only relatively recently, but made significant biggest rail freight operator in Romania.
progress in recent years. In December 2012, Romania had ca. 530
km of highways (including city ring-roads) out of which, only the Airports
Bucharest-Constanta A2 highway of 203 km is currently fully Romania is well connected by air with all major European cities.
completed. Other highway sections were delivered between The country offers a network of 15 airports out of which 12 are
Bucharest Pitesti (109 km), between Bucharest Ploiesti (62 km), international airports. The busiest airport is Henri Coanda
between Arad-Timisoara (32 km) and Gilau Campia Turzii (52 International Airport (Otopeni, 15 km from Bucharest city center). It
km). At the beginning of 2013, it was announced that one of the is worth noting that in November 2012 a new terminal was opened
major priorities of the current ruling coalition is the upgrade of (19,600 sqm) with 14 boarding bridges that are in line with the EU
infrastructure and mainly of the road infrastructure by attracting regulations to access the Schengen Area, providing a secure flow
partners in undertaking the highway development and exploitation. of Schengen passengers. With these upgrades, the airport's annualcapacity increased to 6 million passengers.
Ports
The country has direct access to the Black Sea with the Constanta
port (both maritime and river port) being the largest and also the
only deep sea port in the Black Sea area. The country offers 3
maritime ports, and over 10 ports along the Danube River. The
Constanta Port has a handling capacity of over 100 million tons per
year and 156 berths, of which 140 berths are operational. The total
quay length is 29.83 km and the depths range between 8 and 19
meters.
These characteristics are comparable with those offered by theThe three main highways proposed to be completed are as follows:
most important European and international ports, allowing the
accommodation of tankers with a capacity of 165,000 dwt and bulkA1 Bucharest Nadlac at the Hungarian Border
carriers of 220,000 dwt.Pan European Corridor IV, partially completed
A2 Bucharest Constanta
fully completed
A3 Bucharest Bors/Transylvania Highway
partially completed
(Source: Ministry of Transportation, Romania your Business Partner
2012)
4Romania. Too large to be ignored
A2 Highway, section Cernavoda - Medgidia, cnadnr.ro
Infrastructure
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5Romania. Too large to be ignored
Pan- European Corridors crossing Romania
Source: Jones Lang LaSalle
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II. Investment > 100 million - State aid scheme supportingregional development by means of investment stimulation (under
Decision no. 753/2008). Beneficiaries are the big enterprises
meeting the following three conditions:
?initial investment > 100 million (RON equivalent);
?investment eligible costs > 50 million (RON equivalent);
?minimum of 500 newly created jobs as a result of the initial
investment.
III. Investment using new technology and creating new jobs -
State aid scheme supporting investment promoting regional
development by new technology use and new job creation (under
Decision no. 797/2012). Application field:
?manufacturing (exception: beverages and tobacco products)
?electricity, gas, steam and air conditioning supply
?software publishing
?telecommunications
?computer programming, consultancy and related activities
?information service activities
?
scientific research and development
The information presented in this section represents a synthesis of
the most important aspects regulated by the state aid schemes that IV. Investment in research & development and innovation -foreign investors showed interest in. The selected state aid Regional state aid scheme Financing initial investment in R&Dschemes will be ending in December 2013, with no additional (Order no. 1293/2008). Beneficiaries are the following:clarification on the potential prolongation of the duration beyond the
?enterprises with R&D activities mentioned in their statutes,end of this year. implementing initial investments according to operation 2.3.2
Development of business R&D infrastructure and creation ofI. Investment of more than 5 million (inclusive) - State aid new research jobs;scheme ensuring sustainable development (under Decision no.
?productive enterprises not having R&D as main activity,1680/2008). Applies to the following 4 investment categories: implementing initial investments according to operation 2.3.3?initial investment between 5 and 10 million and creating a Promoting innovation in enterprises.
minimum of 50 new jobs;
?initial investment between 10 and 20 million and creating a
minimum of 100 new jobs;
?initial investment between 20 and 30 million and creating a
minimum of 200 new jobs;
?
initial investment >30 million and creating a minimum of 300new jobs.
Duration of the scheme: 2008 - 2012 with the possibility of
extending this period in 2013.
Duration of the scheme:
?period of financing agreements issuing: 2 years, 2012 - 2013
?period for aid payments: 2013 - 2018, within the limits of the
annual allocated budget
stDuration of the scheme: 2008 - 31 December 2013
Duration of the scheme: 2009 - 2013
6Romania. Too large to be ignored
State Aid Schemeswith the support of FiNEXPERT
CEC Bank, Bucharest
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Romania's human capital is one of the most educated in the CEE & A second foreign language, compulsory for all, is introduced whenSEE Region due to the country's long university tradition. In the students are 10. The obligation to learn two languages lasts until
academic year 2011-2012, the student population of 540,000 was students are 18 years old. All schools, for students aged between 6
enrolled in 108 universities with 614 faculties, out of which 57 and 18, therefore have some flexibility in designing the school
universities and 410 faculties were state owned higher education element of the core curriculum. The same report shows that
institutions. The largest university hubs are Bucharest, Iasi, English, French, German, Spanish and Italian are the most
Cluj Napoca and Timisoara. common foreign languages learnt in most European Countries,
including Romania.
We are of the opinion that proficiency in foreign languages in higher
education is highly dependent on achievements secured during
high school. This represents a major competitive advantage of
Romania in attracting larger FDI's in BPO/SSC/ITOs. However,
proficiency in a foreign language other than English can bring
employees better financial arrangements. Below is a selection of
salaries in SSCs/BPOs in Bucharest by spoken foreign language.
The most popular fields of education were the following: technical The same market research shows that on average salaries are
(28.3%), teacher training (26.3%), economics (21.2%) and law slightly lower in regional cities by 10-20%, compared with
(12.5%). Bucharest.
The 2011 evaluation of universities was based on criteria such as:
teaching and learning, scientific research, assessed university
relations with the external environment and institutional capacity.
The evaluation of universities is conducted every four years and the
ranking results are valid until the next institutional assessment.
The top Romanian universities were classified in four main
categories:
?Advanced research and education universities
?
Education and scientific research universities
?Education and artistic creation universities
?Universities centered on education
Romania can be considered one of the countries in the CEE & SEE
region where language skills are most proficient. The Key Data on
Teaching Languages at School in Europe 2012 Report, issued by
Eurostat, shows that in Romania, all students start learning a
foreign language as a compulsory subject from the age of 8.
Top Universities in Romania
Foreign Languages
12 universities identified under this category
22 universities identified under this category
8 universities identified under this category
53 universities identified under this category
7Romania. Too large to be ignored
Source: National Institute of Statistics
Source: Lugera - The People Republic
Labor Poolwith the support of Lugera - The People Republic
County City Universities
(state&private)
Faculties
(state&private)
Bucharest Bucharest 34 170
Iasi Iasi 11 50
Cluj Cluj-Napoca 10 48
Timis Timisoara 8 41
Positions Net Gross
Operations Manager 5,000 6,600
Project Manager 3,000 3,900
Team Leader 2,000 2,600
Customer Support English (0-2 years) 412 493
Customer Support French (0 - 2 years) 412 493
Customer Support German (0 - 2 years) 436 522
Customer Support Italian (0 - 2 years) 436 522
Customer Support Spanish (0 - 2 years) 436 522
Customer Support Dutch (0 - 2 years) 799 956
Customer Support English (2 - 4 years) 557 666
Customer Support French (2 - 4 years) 557 666
Customer Support German (2 - 4 years) 587 703
Customer Support Italian (2 - 4 years) 587 703
Customer Support Spanish (2 - 4 years) 587 703
Customer Support Dutch (2 - 4 years) 1,138 1,362
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Romania has one of the lowest fiscal burdens in the EuropeanUnion - a flat tax of 16% for both personal income and corporate
profit. Foreign individuals and legal entities can establish a
company in Romania. All companies must be registered with the
National Trade Register Office, organised by the Romanian
Chamber of Commerce and Industry. On average, it takes about 14 Corporate Income Tax:
days to establish a business in Romania. The most common types Corporate income tax is levied at 16%. Small businesses with a
of businesses in Romania are: turnover of less than 100,000 and fewer than nine employees may
opt to pay a much lower tax on revenue earned, instead of profits,
Joint Stock Company (SA): The minimum capital requirement for although the rate was raised from 1.5% when the flat tax was
establishing an SA is RON90,000 . This requires at least two introduced. Resident companies are taxed on their worldwide
shareholders (reduced from five in 2007), with no maximum. income, whereas non-resident companies are taxed on Romanian-
Amendments effective from 2007 also reduced quorum and voting- source income only. A company is resident in Romania if it is
majority requirements, and lowered the share capital required to incorporated as per the relevant legislation or, if Romania is its
call a general meeting from 15% to 10%, in a bid to improve place of effective management. From January 2010, residents also
shareholder rights. The management system was opened up to include legal entities that have headquarters in Romania but, are
allow a choice between unitary and dualist systems (such as the incorporated under EU rules.
choice of instituting a supervisory board).
Withholding Taxes:
Limited Liability Company (SRL): SRLs are the most popular Withholding tax on dividends is levied at a rate of 16%, unless
form for investors, requiring a minimum share capital of RON200, otherwise stated by a tax treaty. Dividends paid by a Romanian
with share values of at least RON10. SRLs can be formed by one legal entity to an EU resident are subject to a 10% tax, unless
shareholder and may include up to 50 (persons or legal entities). otherwise specified. Similar rules also apply for interest and
However, one person may be the sole shareholder in only one SRL. royalties.
There are restrictions on third-party share transfer. An SRL is
managed by one or more foreign or Romanian administrators with Capital Gains:
full or limited powers. Capital gains are only charged for gains made from the sale of
Romanian securities for individuals, but for companies it is
Branch: Foreign companies are allowed to establish a branch deducted as tax on earnings. Profits are taxed at a flat tax rate of
office in Romania. Branches can operate in the same activities as 16%.
their parent companies, and must have a foreign or Romanian
general manager. Branch Tax:The tax treatment of a branch is similar to that of other Romanian
business forms.
The basic rate for value-added tax (VAT) is 24%. There arepreferential rates of9% for certain basic commodities, such as
some food products, books, newspapers, and medicines; and 5%
for the supply of buildings.
8Romania. Too large to be ignored
Business Environmentby IHS Global Insight, Country Report April 2013
16%
0% 5% 10% 15% 20% 25%
Slovakia
Croatia
Poland
Hungary
Czech Republic
Romania
Serbia
Bulgaria
Source: IHS Global Insight Country Reports
Corporate Income Tax
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The Romanian real state market provides plenty of opportunities inall market segments. The opportunities lie mainly on the
development side, where to date, the market has attracted only a
few institutional developers. In each market sector there is a blend
of both local and international developers with the predominance of
local developers. A non exclusive overview of international office
developers include: GTC, AFI Europe, Portland Trust, Skanska,
Nusco Group, Anchor Group and Bluehouse. In the retail sector,
Sonae Sierra, GTC and AFI Europe are active. The industrial
sector is much more complex but, is still not comparable with other
CEE countries. The main industrial developers currently shaping
the Romanian industrial market are: Prologis, Portland Trust, WDP,
Alinso Group and Graells & Llonch.Following the boom and bust cycle of 2005-2010, developers have
acknowledged the need to deliver high quality developments inWhile industrial developers are placing projects throughout the
accordance with specifications required by international tenants. Incountry, office developers are much more in favour of developingaddition, developers have started targeting green certification from
projects in Bucharest or top secondary cities with a long universityearly stages of design, with very few of them ignoring the need totradition. Retail developers are present in all cities with a highimplement sustainable technical features in newer projects. The
population density, and a lower modern retail stock.trend is relatively new, with the first green building pre-certified in
early 2008-2009. EU legislation and an increased view on
importance from developers, means that only a limited number of
pipeline office projects, are not targeting green certification.
Furthermore, iconic office buildings are retroactively in the process
of obtaining green certification for building operations and
maintenance. The most common sustainability rating system used
is BREEAM followed by LEED.
The increased interest in sustainability is proven by the variety of
certified buildings: administrative, libraries, big box retail units,
office buildings, shopping centers and production facilities.
Geographically, certified developments are being completedThe real estate market however features a number of influential throughout the country.local developers. Their projects range from the small to some of the
largest schemes completed in Romania to-date. On the one hand,
local developers ensure development continuity but, have lower
appetite in exiting/selling their projects. Consequently, this
represents an important barrier in the progress of the investment
market in Romania. A list of the noteworthy local developers
includes, but is not limited to: Genesis Development, Baneasa
Development, Primavera Development, Iulius Group and Modatim.
9Romania. Too large to be ignored
Real Estate Market
Bucharest Financial Plaza, view from Dambovita River
City Gate, Bucharest
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preference of developers due to existing connections to utilities,relatively central locations and good access to public transportation.
With the exception of Bucharest, which features an extensive metro
network (consisting of 4 main lines, 69.25 km of double track and
51 stops) the rest of Romania's public transportation system is
limited to above ground transportation (bus, tram, trolley-bus and
shuttle bus).
Today, we can only speak about office development clusters or
location preferences in Bucharest. In the regional cities, the majority
of projects with a high probability of completion, are scattered
throughout the central areas.
The history of the Romanian office market starts in the early 1990's.
In the 20 years of modern, post communist development, only 22
million m of offices were completed in Bucharest. By local market
standards, 50% is considered Class A. By international standards2
(new development, over 5,000 m GLA) we can probably discount
the Class A office stock to closer to 30%. The story repeats in major
secondary cities, in which only a very limited number of speculative
developments can be graded at international standards (except
owner occupied buildings, mainly developed as bankheadquarters). In the category of major secondary cities, we include
cities with a population of over 150,000 inhabitants with a long
university tradition, served by an airport connected either directly or,
via Bucharest, with Western European capitals.
The list of secondary cities comprises: Cluj Napoca, Timisoara, Iasi,
Brasov and Targu Mures. The largest modern office stock can be2
identified in Cluj and Iasi (est. 120-150,000 m ), followed by2 2
Timisoara (est. 90-110,000 m ), Brasov (est. 80-90,000 m ) and2
Targu Mures (est. 50-70,000 m ).
Between 2004 and 2006, the strong presence of multinational
companies in Bucharest and our selection of secondary cities,
encouraged reputable local and international developers to invest in
larger office projects. The increased number of outsourcing
operations in Romania, which generate the majority of new
demand, shifted the development pattern from business center type
developments, to multi-phased business parks.
In Bucharest, projects located within close proximity to a metro
station and university hubs, drive the development pipeline. In
regional cities, former industrial areas (brownfields) take top
Office Market in Romania
10Romania. Too large to be ignored
Source: Jones Lang LaSalle
Liberty Technology Park, Cluj Napoca
Project City GLA
(m2
)
Green
Certification
Green Court Ph I Bucharest 19,000 Yes
Hermes Business Campus Bucharest 18,000 Yes
Green Gate Bucharest 30,000 Yes
AFI Park 2 Bucharest 15,000 Yes
Liberty Technology Park Ph I Cluj 5,600 Yes
Cluj Business Center Cluj 19,800 N/A
United Business Center Cluj 9,800 Yes
United Business Center 4 Iasi 6,400 N/A
City Business Centre 5 Timisoara 9,000 N/A
Coresi Business Park Brasov 15,000 N/A
The Science City Tg Mures 2 buildings N/A
2013-2015: Business parks pipeline in Romania (selection)
0 1,000 2,000 3,000 4,000 5,000
Belgrade
Zagreb
Bratislava
Bucharest
Prague
Budapest
Warsaw
'000 m2
Source: Jones Lang LaSalle
Modern Office Stock in CEE & SEE Capitals
SEE or CEE?Bucharest has the lowestoffice stock in the CEE...
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The modern office stock in the capital city is graded in line withlocation and technical specifications. While location is of high
importance in Bucharest, this is less important in the smaller
regional cities. For example, in Bucharest the highest vacancy is
recorded in the northern peripheral locations poorly served by
public transportation, though in these locations, which emerged as
office submarkets in the last 5 years, some of the top quality office
buildings/business parks have been developed in Romania to date.
The modern, Class A developments by technical specifications offer2
larger and open floor plates (of over 1,000 m /floor), 4-pipe HVAC
system, raised floors, glazed faade, minimum 2.7 m floor to
suspended ceiling height, incorporated lighting system (LED's for
green certified bui ldings), CCTV, 24/7 security, BMS, heavy traffic
resistant carpeting in the office areas and prestigious main lobby Recent market assessments show that average rents for non-CBD2areas. locations in Bucharest are in the region of 14-16/m /month while
decentralized locations for similar Class A accommodation2These features are applicable to Class A buildings completed in command headline rents of 10-12/m /month with net effective rent
Bucharest, as well as projects recently completed or, in the pipeline decreasing to 1 digit rental price. Secondary city offices are2in secondary cities. The trend emerged due to occupiers' interest in currently marketed at 13-15/m /month, with the net effective rent
selecting good quality office accommodation for their Romanian depending on the leased area, lease length, expansion
operations as real estate plays an important role in achieving and opportunities and covenant of the occupier.
maintaining a good attrition rate of the qualified workforce.
Service charges and parking space rent are additional to the office
Given the stock difference between Bucharest and the secondary rent. For the vast majority of modern buildings, leases are triple A,
cities, indisputably the real estate offer is more diverse in the capital with all costs included in the service charges, which are reconciled
city, both in existing and pipel ine offer. However, the cost gap is not annually.
that wide considering that the comparison should be made between
average rent in Bucharest and the prime rent in secondary cities.
The reason behind this rationality is that occupiers interested inregional cities are also assessing non-CBD locations in Bucharest.
11Romania. Too large to be ignored
Source: Jones Lang LaSalle
Market Practice Bucharest Secondary
cities
Prime Rent 18.5 15
Average Rent Class A 14-16 13-15
Lease Length
Indexation
Add-on Factor Typically 6-8%
Rent Reviews Rarely, more common in case of
expansion within the same park
In case of lease renewals
Incentives Fit-out contribution
Rent free period
Free parking
3-5 years
Annually, with Euro CPI
Service Charge 2.5-4/m2/month
All costs recovered by the Landlord
Triple A leases
Charles de Gaulle Plaza, Bucharest
America House, Bucharest
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These cities are mainly established manufacturing hubs withsufficient tertiary populations to accommodate outsourcing
operations.
The gap is also explained by the size of operations. Very few2
operations outside of Bucharest exceed 1,500 or 2,000 m .
Therefore, an increase in demand is expected in the medium term,
due to an increase in larger space enquiries for various cities in
Romania. These active searches are encouraging developers to
assess potential development sites and enlarge the market beyond
Bucharest.
The increased presence of international companies with their
BPOs/SSCs/ITOs (Outsourcing and Shared Service Centres) has
greatly influenced real estate development activity in Romania. In
early 2005, only a few companies were present in Romania with
such operations. Over the following 3-5 years, the number of new2
openings increased the annual take-up from a level of 119,000 m
in 2009 to the highest take-up ever recorded in Romania of2
270,000 m , in 2010. In this time frame, real estate developers,
whether established or opportunistic (local and international), havetapped into the Romanian market and secured land for further
development. Larger projects were completed between 2009 and2 2
2010 and increased annual stock by 370,000 m and 275,000 m
respectively. As new supply outstripped take up, the market also
witnessed an increase in the vacancy level from 1-2% in Q4 2008
to 15-16% in Q4 2009. Vacancy, however, is concentrated in the
peripheral areas of Bucharest such as Pipera North and Baneasa.
This is reflective of the market activity in Bucharest, however,
developers were more cautions in secondary cities, with smaller
scale office developments completed speculatively. These
developments sufficiently accommodated the real estate demand,
due to the smaller scale of operations opened in these cities. Today,
secondary cities are competing with Bucharest in attracting existing
or newer requirements, by offering highly competitive office
There still remains limited cross county development activity withaccommodation, both financially and technically.
Iulius Group and Modatim being the two main developers with
activity outside of their city of origin.Although there is still a gap in demand between Bucharest and the
secondary cities, we do expect a further increase in demand for
secondary cities as well as interest in other cities than those
identified in this report. We expect the rise of cities such as:
Craiova, Galati, Oradea, Constanta and Ploiesti, to list just a few.
12Romania. Too large to be ignored
Emerging Outsourcing Location
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2
The modern retail market began in 1996, which corresponds with floors, with a GLA of between 20-30,000 m in secondary cities,the opening of the first cash and carry store of Metro in Bucharest. have also been very successful. Bucharest has again a different
Soon after, the German retailer was followed by Selgros which development path with the largest projects proving to attract the
opened its first store in Brasov. The next stage of the retail market highest traffic and generating the highest turnovers.
was marked by the opening of the first shopping center by Turkish
Group - Anchor, with Bucuresti Mall. The same group completed the After a hectic development decade, the market finally settled.
second mall in Bucharest, in 2004, Plaza Romania. This also Although the pipeline is constantly revised, the market still
represented an important milestone as Inditex opened its first witnesses a few important openings each year. Though the retail
Romanian Zara store in Plaza Romania and was considered for a market can be considered as almost saturated, on a nationwide
few years as the best performing store in the network. basis, case by case opportunities can be identified, even in
Bucharest or in certain larger secondary cities which still lack
In 2001, Carrefour opened its first hypermarket in Romania. In modern retail supply. For example, Galati, one of the top 5 regional
2003, it was shortly followed by the second unit, in an unusual cities by population, still has no modern shopping center.
central location in Bucharest. Anecdotal sources, place this The pattern of modern retail stock varies from region to region: in
centrally located Carrefour Orhideea among the best performing
stores in its global network. Anecdotal or not, the need for modern
retail was tremendous at that time in both Bucharest and Romania.
Any modern retail scheme performed very well and delivered the
best financial results.
In just 10 years, the retail market has witnessed an incredible path
of development. Many developers have even secured adjacentlands in secondary cities. The demand for modern retail has
increased the pipeline to unsustainable density levels especially in
the context of the drop in consumer spending in 2009 caused by some locations, retail parks are in demand, in other cities retail
the economic slowdown. With very few exceptions, most of the galleries attached to hyper- or supermarkets are sought after and in
pipeline shopping center projects remain on hold in their planning several cities, medium sized shopping centers have been
stages. completed. Apart from this, the development pattern has changed in
the last couple of years, from a strong shopping center pipeline, to
During this decade, a few concepts have emerged as being highly a current pipeline consisting of either retail parks or retail
successful in Romania. Retail parks can be considered the most agglomerations.
successful retail format in Romania. Shopping centers over 1-2
Retail Market
13Romania. Too large to be ignored
Source: Jones Lang LaSalle
Crt Shopping Center GLA Completion City Major Retailers - Selection
1 AFI Palace Cotroceni 80,000 2009 Bucharest Real, Inditex Group, H&M, Humanic, Cinema City, Imax, C&A, Deichman
2 Baneasa Shopping City 80,000 2007 Bucharest Carrefour, Peek&Cloppenburg, Inditex Group, Sport Couture, Collective, H&M
3 Sun Plaza 80,000 2010 Bucharest Cora, H&M, Douglas, Zara
4 Iulius Mall 67,000 2005/2009 Timisoara Auchan, Zara, World Class Health, Camaieu
5 Polus Center 63,000 2007 Cluj Carrefour, C&A, Zara, H&M, Takko, Decathlon
6 Electroputere 55,000 2011 Craiova Auchan, Zara, LC Waikiki, H&M, Intersport
7 Ploiesti Shopping City 55,000 2012 Ploiesti Carrefour, Zara, H&M, Cinema City8 Palas Iasi 54,100 2012 Iasi Auchan, Zara, H&M, Cinema City
9 Maritimo Shopping City 51,000 2011 Constanta Auchan, Peek&Cloppenburg, Domo, Altex, Humanic, H&M, C&A
10 Iulius Mall 49,800 2008 Suceava Auchan, Zara, H&M, Cinema City
Selection of completed shopping centers in Romania
0 50 100 150 200 250
Czech
Republic
Poland
Slovakia
Croatia
Hungary
Romania
Serbia
Total GLA in sq m / 1,000 inhabitantsSource: Jones Lang LaSalle
Shopping Centers Stock Density per Capita in CEE & SEE
Romania showsretail development
potential
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High Street Big BoxRomania's cities mainly because of historical reasons suffer from a Big Box supply is well represented and diversified throughout the
lack of high street retailing. High street retail supply presents country. Relatively recent market entrants IKEA and Leroy Merlin
numerous opportunities in any major city of the country, but street are the exceptions with each having only 1 box in Romania,
fashion is one of the most under developed market sectors. Pre- respectively in Bucharest. The rest of the major players have at
90's state-owned companies were responsible for managing the least 1 box in each of the larger regional cities. In the last 3-5 years,
high street portfolio. Once privatized, the new owners were a number of consolidations were recorded, the latest major one
interested in maximizing the rent roll. The results were translated being the purchase of the real hypermarket stores by Auchan (20
into a lack of high street fashion retail, and a high occupancy rate out of 24 stores existing in Romania), while the Bricostore network
generated by the banking sector, during the peak of retail banking was acquired by UK-based company, Kingfisher.
between 2005 and 2009, and by the pharmaceutical industry, with
numerous privately owned pharmacies generating active demand.
High street retail is still patchy today with very few success stories
recorded in Romania. In Bucharest, the main reason is that high
street retailers opted for shopping galleries attached to luxury 5-star
hotels instead. In the secondary cities, Sibiu is one of the few
exceptions, having an attractive pedestrian retail location, due to
intensive refurbishment works of the city center prior to 2007 when
it was designated as a European Capital of Culture.
Factory Outlet Centers
In 2008, the first factory outlet center was opened in Romania.2
Fashion House Outlet Center Bucharest, is a 16,000 m scheme
developed by Belgian company - Liebrecht & wooD. Despite the
project opening with a high occupancy rate of close to 80%, the
decline of the retail market also influenced the performance of the
center and placed other outlet projects on hold.
Source:?????
14Romania. Too large to be ignored
Source: Jones Lang LaSalle
Source: companies websites
Retailer Location
Burberry Radisson Hotel
Boss Hugo Boss Calea Victoriei street unit
Emporio Armani Calea Victoriei street unit
Ermenegildo Zegna Radisson Hotel
Escada JW Marriott Hotel
Gucci Athenee Hilton
La Perla Calea Victoriei street unit
Louis Vuitton JW Marriott Hotel
Max Mara Calea Victoriei street unit
Moschino Calea Dorobantilor street unit
Paul & Shark Calea Victoriei street unit
Roberto Cavalli JW Marriott Hotel
Valentino JW Marriott Hotel
Selection of luxury retailers and their locations in Bucharest(listed in alphabetical order)
Type Big Box Retailer No of Boxes
Cash&Carry Metro 32
Selgros 19
DIY Praktiker 27
Bricostore 15
Leroy Merlin 1
Hypermarkets Carrefour hypermarkets 24
Auchan+real 10+20
Cora 10
Supermarkets Kaufland 83
Billa 72
Discounters Lidl 158
Penny 136
Profi 151
Furniture Ikea 1
Kika 2
Sportswear Decathlon 10
List of Major Big Box Occupiers in Romania
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RetailersRomania's long history of limited modern retail, helped international
retailers, especially fashion retailers, to achieve high turnovers per
store, once they entered the market. Mass market fashion retailers
opened their first stores in 2004 in the Plaza Romania shopping
center. Zara, Mango, Promod and Marks & Spencer all opened their
first units in Romania almost 10 years ago. The next milestone is
set by retailers that committed to the Romanian market in the late
2000's, in the so called third generation shopping centers
completed in Bucharest: Baneasa Shopping City and AFI Palace
Cotroceni. In these centers, the retail market witnessed the opening
of the first Peek & Cloppenburg multibrand store, Douglas,
Reserved, Max Mara Weekend and Massimo Dutti units. H&Mexpansion opportunities to those international retailers with a solidentered the market in March 2011 with their flagship store in AFIfinancial background, proven results and that have the ability toPalace Cotroceni. Today, the H&M network has 22 stores and plansnegotiate excellent, long term financial packages with shoppingto open up to 50 further stores throughout Romania, compared withcenter owners and developers. These packages may include:the 106 currently trading in Poland.discounted rents, step rents, turnover rents, fit-out contributions and
for the some of the highly desired retailers, turn-key retail units.The vibrant activity of new retailers entering the market slowed
down in 2012, when only 2-3 new mass market retailers openedIn these market conditions, with retailers eager to take advantage ofstores in Romania. Among these Subway has already opened 13
the favorable leasing conditions, we do not forecast an increase ofunits in the country and is targeting a network of 40 stores by 2016.the vacancy rate. Furthermore, rents for shopping centers and
street units have stabilized to a sustainable level and no furtherLuxury retailers have also opened flagship stores in Bucharest, withsoftening is expected for 2013.Max Mara being one of the first luxury retailers with a constant
presence since 1999, while La Perla, Valentino and Escada are
some of the latest entrants in Romania.
With a limited pipeline, both in Bucharest and the regional cities, the
active retailers are re-leasing the units either recently vacated or,
those that are to become vacant by local retailers due to their weak
financial performance. In addition to the local retailers, some
international retailers have stepped out of Romania, creating
Prime rent definition: Represents the top open market rent that
could be expected for a notional prime position shop situated in a
specified shopping centre or for a notional prime position unit in a
prime retail location in the market, as at the survey date. Standard2
unit area: 100 m .
15Romania. Too large to be ignored
Source : Jones Lang LaSalle, Q1 2013
Prime Rents
(/m2/month)
Bucharest Regional
Cities
Shopping centers 55-65 20-35
Prime retail street 55-65 20-40
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Compared with other real estate sectors, the industrial and logistics Representative BTS units were recently completed in Bucharestmarket is the least developed, considering the country's potential. West, WDP Oarja and Ploiesti West Park.
The current modern industrial stock is estimated at almost 1.82 2
million m , with close to 1 million m located in the surrounding The main market standards are as follows:
industrial hubs of Bucharest. Other modern industrial hubs have ?Longer lease terms of 5-7 years or longer
been established in Ploiesti, Timisoara, Arad, Brasov, Oradea, ?Longer negotiation periods
Constanta and Cluj-Napoca. ?Handover of the space: between 6-9 months after concluding
the lease agreement
With a country level vacancy rate estimated at between 12-14%, ?Selection of the site is subject to the agreed site plan of the park
the market is mainly developed on a built-to-suit (BTS) basis, with
fewer speculative projects in the pipeline. Who are the occupiers?
?New entrants, looking to establish production facilities in
The most common leasing market drivers are the following: 1. lease Romania with regional distribution
of an existing vacant unit, or 2. secure a BTS unit through a pre- ?Existing companies looking to upgrade their production facilities
lease in an existing logisti park. or strating up a new project
1. Leasing space in an existing warehouse park It is also possible for occupiers to purchase BTS units in some of
the existing logistics parks. The development process could be
This scenario applies to distribution and logistics companies. It is undertaken either by the park owner or, by any other third party.
rare that existing units can be easily converted into production
facilities. However, some of the existing units, with lower clear The decrease in land prices for logistics development has
height (up to 4m), an inner-city location and access to existing increased the interest of some industrial occupiers to purchase well
public transportation, could be converted into production facilities. located industrial plots and to move into owner occupied premises.
This mainly applies to larger production companies such as, Saint
The process is straightforward as in any lease agreement: Gobain or, major 3PL companies such as: Gebruder Weiss and FM
?standard lease length of 3 years Logistic.
?use of space in line with existing technical specification
?fit-out of the space in line with occupiers requirements
?leasing space in special industrial parks might offer lower
occupation costs
Who are the occupiers??Companies that need to lease space immediately / relocate
?Companies which are comfortable with the existing industrial
stock
?Logistics operators, distribution companies, e-commerce
?Companies requiring smaller light industrial facilities
2. Built-to-suit in an existing logistics park
Romanian industrial developers that can accommodate such
requirements usually own larger plot of lands, often with
infrastructure and utilities in place. BTS units can either be leased
or, at hand over, they will enter into the possession (freehold) of the
occupier.
16Romania. Too large to be ignored
Logistics
Source: Jones Lang LaSalle
Prime Rents
(/m2/month)
Bucharest Regional
Cities
Distribution centers 3.8-4.0 3.5-3.75
Distribution centers
(exceeding 20,000 m2)
3.5-3.7 3.25-3.5
Light industrial 3.5-4.25 3.5-3.75
Service charges 0.7-1.0 0.7-1.0
Other costs
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The manufacturing sector is well diversified but, with fewer In particular, the spare parts and car system production facilitiescompanies under each category when compared with Poland for have developed around the main car production locations.
example (see report - Made in Poland). As in other CEE countries,
with former centralized economies and industry driven by the state, Another criteria that was considered in establishing such facilities,
we identified a mix of greenfield and brownfield investments was the ease of access to Western Europe, due to the more
(production units formerly owned by the Romanian state). developed highway infrastructure and shorter commuting time from
Romania to Western Europe. Spare parts and car systems are high
Automotive Industry up the value chain of car brands and the country is currently
With over 50 years of automotive tradition, Romania is an important producing components for: Volkswagen, Audi, BMW, Porsche,
automotive hub in the CEE and SEE region. Through privatization, Mercedes-Benz, Ford, Renault and Nissan, amongst others.
2 major car producers are present in Romania. Renault has a 10
year presence in Romania through the successful privatization of
the former Dacia plant. The second car producer is Ford, who took
over the Daewoo factory in 2007. Initially Daewoo took over through
privatization the former Romanian car production plant of Oltcit, a
joint venture of the Romanian state and French car producer
Citroen.
Romania's long tradition in car manufacturing played a major role in
establishing various automotive related industries. The majority of
these automotive related production facilities are located in the
western half of Romania where larger manufacturing plants of tires,
car seating, steering wheels, electrics and electronic systems,
plastic components and exhaust systems can be found for
example.
17Romania. Too large to be ignored
Manufacturing
Source: Romania Your Business Partner 2012
Source: Romania Your Business Partner 2012
Type of components Companies
Selection of automotive components producers
Lisa Draxlmayer
Delphi Packard
Alcatel
Lear Corporation
Leoni Wiring System
Yazaki Corporation
Siemens Automotive
Continental
Valeo
Borla
Honeywell Garett
Johnson Controls
Faurecia
Dow Automotives
AD Plastik
BOS Automotive
Hutchinson
Renault
Daimler ChryslerDCI Wallbridge
Star Transmission
Continental
Michelin
Pirelli
Takata Corporation
Magneto Wheel
Ina Schaffers
Thyssen Krupp
Koyo Seiko
Auto Chassis International
Dura Automotive System
Steering Wheels
HVAC Systems
Exhaust Systems
Seating
Plastic & Rubber Components
Electric & Electronic Systems
Gear Boxes
Tires
Car Manufacturer Main Figures
Present since 1999
18,000 employees
4 million cars
80% of the cars exported
R&D Center in Titu, investment value est.
at 450 million
Car production capacity: max 330,000
units / year
Presence since 2007
3,500 employees
90% of the cars exported
Romanian made Ford BMax since 2012Car production capacity: max 350,000
units / year
Renault
FORD
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Other manufacturing industries such as petrochemical,pharmaceutical, heavy industry and machinery are also present in
Romania due to the countries long tradition over the last 30-40
years in the afore-listed manufacturing industries.
FMCG companies
A number of large multinationals have opened brand new
production facilities in Romania or, have converted existing
brownfield sites into modern production units. These companies
entered Romania in the early 1990s and through privatization,
entered via the possession of former state owned production sites
related to their businesses. Representative examples are Pepsi,
Coca Cola, P&G, Kraft Jacobs Suchard and Colgate Palmolive.
Today, some FMCG companies are controlling their SEE and
Republic of Moldova operations from Romania, while a few of them
have even relocated their production facilities from Romania in the
past 3-5 years, into countries with cheaper labour costs, such as
Moldova and Bulgaria.
As 35-50% of Romanian's household expenditures go towards food
and beverages, this industry has a wide presence in Romania. A
balanced mix of local and international companies cover milk and
meat processing, fruits and vegetables, sugar and oil production.
The beverage industry is well represented by local and international
companies for both non-alcoholic and alcoholic beverages.
Furthermore, international tobacco brands have opened production
facilities, mainly in Bucharest and surrounding industrial hubs of the
capital city. The industry is well organized and represented in
relation to the local authorities. The industry was subject to major
tax increases over the past 10 years as Romania was producingthe cheapest cigarettes when compared with Western European
countries. The producers present in Romania include: Japanese
Tobacco International (JTI), British American Tobacco (BAT) and
Philip Morris.
Domestic Appliances & Electronics Sectors Electroluxprivatization of a former state owned production unit,
Very few domestic appliances and electronics companies have privatized in 1995.
established production facilities in Romania. Philips started the production of coffee machines in 2011, in the
Those that are present in Romania include the following production unit previously owned by Saeco.
companies: DeLonghi undertook the former Nokia plant in Jucu, near Cluj
Arctic former state owned production unit, now owned by Turkish Napoca. Production started in early 2013.
group Arcelik, since 2002.
18Romania. Too large to be ignored
Source: Jones Lang LaSalle
FMCG Producers
Selection of FMCG Manufacturing Companies
Danone
LaDorna
Napolact
Albalact
Hochland
Bunge
Cargill
Dr Oetker
Agrana
Nestle
Supreme Chocolat
Boromir
Hutton
Orkla Foods
PepsiCo
Coca Cola HBC
RioBucovina
European Drinks
RomaquaAlcoholic Domeniile Halewood
Beverages Ursus Breweries / SABMiller
Heineken Romania
URBB (Tuborg, Carlsberg)
Bergenbier / StarBev
Romaqua
Unilever
P&G
Henkel
JTI
BAT
Philip Morris
Non -alcoholic Beverages
Detergents
Tobacco
Food
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19Romania. Too large to be ignored
Source: Lugera - The People Republic, Bucharest commands salaries with 10-20% higher compared with the country level
Major Automotive Companies in Romania
Turnu MgureleZimnicea
SATU MARE BAIA-MARE
ZALUORADE A
CLUJ-NAPOCA
BISTRIA
ARAD
TIMIOARA DEVA
ALBA-IULIA
TRGU-MURE
REIATRGU-JIU RMNICUVLCEA
SIBIUBRA OV
MIE RCURE ACIUC
SUCEAVA BOTOANI
PIATRA NEAM IAI
BAC U VASLUI
GALAIOC ANI
SFNTUGHE ORGHE
DROBETATURNUSEVERIN
CRAIOV A SLATINA
PITETI
ALEXANDRIA GIURGIU
TRGOVITE PLOIETI
BUZ U
CLRAI
SLOBOZIA
BR ILATULCEA
CONS T AN A
UrziceniBUCURETI
Bihor
Arad
Timis
Hunedoara
Autoflex SRL (Bosal)Ficamt (JV Ficosa)
Takata-Petri Romania SRLLeoni Wiring Systems Arad SRLEKR-Elektrokontakt Romania SRLBos Automotive Products RomaniaNexans Romania SRLYazaki Component Technology SRLValvetek SRLCoindu Romania SRLERT Group Automotive SRL
Continental Automotive Products SRLDelphi Packard Romania SRLKromberg & Schubert Romania SRLEybl Automotive Romania SRLSiemens Vdo Automotive Romania SRLDPR Draxlmaier Procese de Productie Romania SRLEybl-Automotive-Components SRLDSR Draxlmaier Serviceleistungen Romania SRLHella Lighting Romania SRLDura Automotive Romania SRLHella Electronics Romania SRLMahle Componente de Motor SRL
Sews Romania SRLKey Safety Systems SRL
Satu MareDRM Draxlmaier RomaniaSisteme Electrice SRLPhoenix Romania SRL[Phoenix Automotive AG]Schlemmer Romania SRL
Salaj
Cluj
Silvania [Michelin] SAMichelin Romsteel Cord SA
Automobile ComponenteElectrice SRLEckerle Romania SRLTrelleborg Romania SA
Bistrita-Nasaud
Mures
Brasov
Prahova
Bucharest
Leoni Wiring Systems Ro SRL
Parat Ro SRL
Autoliv Romania SAIna Schaeffler Brasov SRLRolem SRLStabilus Romania SA
SC Victoria [Michelin] SAYazaki Romania SRLFreudenberg Flexibile de Frana SRLCalsonic Kansey Romania SRL
Honeywell Garrett SRL
ArgesLisa Draxlmaier Autopart Romania SRLJohnson Controls Romania SRLLear Corporation Romania SRLAuto Chassis International Romania SRLValeo Cablaje SRLEuro Auto Plastic Systems SRLBorla Romcat SARonera RubberDow Automotive SA
Automotive Complete Systems SAValeo Electrical Connective Systems SRL
SibiuThyssenkrupp Bilstein Compa SAThyssenkrupp Compa Arcuri SAKuhnke Production Romania SRLFaurecia Seating Talmaciu SRLBrandl Ro SRLSNR Rulmenti SRL
Takata Petri Sibiu SRLContinental Automotive Systems SRLMarquardt Schaltsysteme SCSCaucho Metal Productos SRLKromberg & Schubert Romania Me SRL
Alba
Valcea
Star Transmission Cugir SRL
Magnetto Wheels Romania SA
Cord Romania SAPirelli Tires Romania SRL
Source: Central Europe Trust Company
Annual
Net Salary Gross Salary Company Taxes Total Costs Gross Salary
Production Manager 2,619 3,734 1,049 4,783 57,392
Quality Manager 2,024 2,885 811 3,696 44,356
Technical Manager1,667 2,376 668 3,044 36,532
Finance Manager 2,381 3,395 953 4,348 52,176
HR Manager 1,667 2,376 668 3,044 36,532
Logistic Manager 810 1,154 326 1,480 17,757
Quality Manager 1,071 1.528 430 1,958 23,496
Buyer 905 1,290 364 1,654 19,846
HR Officer 619 883 250 1,132 13,588
Payroll Specialist 619 883 250 1,132 13,588
Receptionist 476 678 192 870 10,442
Operator - Skilled 333 468 134 602 7,223
Forklift Operator 310 433 124 557 6,686
Operator - Unskilled 214 294 85 378 4,538
Competitive Wages in the Manufacturing Sector in Romania (except Bucharest)
Position Monthly Costs ()
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May 2013Advance publications are topic-driven white papers from Jones Lang LaSalle that focus on key real estate and business issues.www.jll.ro
Front page photo by Diana Iorgulescu
COPYRIGHT JONES LANG LASALLE IP, INC. 2013. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means withoutprior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offerany warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them
Content Partners
Manuela FurduiManaging PartnerFiNEXPERT145 Calea PlevneiBucharest, Romania+40 21 311 44 65
Marius DobrescuBusiness Development ManagerLugera - The People Republic98 Vulturilor StreetBucharest, Romania+ 40 21 318 71 [email protected]
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Victoria Center145 Calea Victoriei, 10th FloorBucharest 1, 010072Romania
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Levis VladHead of Research Romania+ 40 21 302 [email protected]