With a specialized workforce, a well-developed infrastructure and a significant touristic potential, Cluj-Napoca has been one of the most dynamic economies in Romania.
Furthermore, the city is the most developed office market in the country, after Bucharest, performing extremely well, both in terms of demand and supply and is expected to continue the same trend going forward. The modern office stock is experiencing a quite major development phase, with over 90,000 sq. m of space being planned to be completed in the following two years. Compared with other regional markets, Cluj-Napoca will remain the second most developed market in the country in terms of modern office stock, given the total stock might increase by approximately 30% by the end of 2020.
The market has witnessed significant activity, with an abundance of spaces being committed to prior to building delivery. In recent years, Cluj-Napoca has been considered the most attractive city in Romania, after Bucharest, by companies active in the Technology & Telecommunications sector, business process outsourcing (BPO), financial or professional services.
Due to the high number of students, competitive salaries and relatively low occupancy costs, the city was chosen as a business location by major companies.
Location has become a major factor when deciding towards a new office. Tenants are usually looking to find the perfect balance between location, good connectivity to the public means of transportation, space flexibility, workspace environment, and occupancy costs.
The most sought-after destinations in Cluj-Napoca by companies looking to expand or open new offices are the central areas, which, at the moment, have a vacancy rate close to 0. In the Central Business District (CBD) for example, potential tenants do not have many options to choose from.
Areas larger than 1,000 sq. m GLA cannot be secured without a pre-lease agreement, given there aren’t any spaces available. The ‘’fight to attract tenants’’ that occupy over 1,000 sq. m will mainly be between large office owners that can offer flexibility both in terms of space and location. Thus, taking into account the increasing demand and the low level of available spaces in the city and especially in the city center, developers are starting to build modern office projects on a speculative basis. Moreover, in order to attract clients, developers will improve the standard delivery conditions of the spaces and will try to increase efficiency. Analyzing the current pipeline in Cluj-Napoca, we see that boutique type office projects have gained ground, given they offer a more convenient location, high quality of finishes and amenities, as well as a distinctive architecture.
For 2019, we estimate that demand will grow slightly, with pre-leasing activity accounting for a significant portion of the total volume, due to the high number of projects under construction to be delivered – approximately 40% of the projects currently under construction have already been pre-leased. In 2020, demand for class A office space in Cluj-Napoca will remain constant.
In terms of occupancy costs for class A office space, Cluj-Napoca is a competitive market, with headline rents being around 14.5 EUR/sq. m/month. The market has been “tenant led” in the past few years and the situation is unlikely to change in the near future.