Romania

RomaniaRomania is the second largest country in Central & Eastern Europe (CEE), accounting for an official population of 20.1 million. Approximately 55% of the population lives in urban areas. The Capital and the largest City is Bucharest, with a population of 1.88 million (2.3 million including the surrounding Ilfov county). Romania has 24 cities of above 100,000 inhabitants, the largest after Bucharest being Cluj-Napoca, Timisoara, Iasi and Constanta with approximately 300,000 inhabitants each.

The first modern shopping center outside Bucharest opened in 2000, in Iasi, while the market really started to develop around the EU accession, in 2007. As of the end of 2016, there is at least one modern retail scheme in every city in Romania with a population over 100,000 inhabitants.

The Romanian economy has maintained the strong momentum carried over from last year, recording the highest increase in GDP growth in the European Union. Domestic demand will be the main driver of growth over the medium term, being stimulated by low inflation, tax reductions, real income increase and a constant decrease in unemployment.

ECONOMIC SUMMARY
ECONOMIC INDICATORS*2016F2017F2018F2019F2020F
GDP growth 4.84.34.54.74.2
Consumer spending 7.75.04.84.74.1
Industrial production 2.35.25.55.24.4
Investment 7.84.92.92.31.4
Unemployment rate (%) 1.84.64.44.34.2
Inflation -1.62.32.52.32.2
RON/€ (average)4.484.464.444.424.42
RON/US$ (average)4.023.993.963.953.95
Interest rates 3-month (%) 0.82.93.73.73.7
Interest rates 10-year (%) 2.84.14.94.94.9

NOTE: *annual % growth rate unless otherwise indicated. E estimate F forecast
Source: Oxford Economics Ltd. and Consensus Economics Inc; National Commission of Prognosis

ECONOMIC BREAKDOWN
Population 20.1 million (2011 Census)
GDPUS$ 178 billion (2015)
Public sector balance -1.2% of GDP (2015)
Parliament Government formed by technocrats.
PresidentKlaus Iohannis
Prime Minister Dacian Ciolos
Election datesDecember 2016 (Parliamentary) 2018 (Presidential)
RETAIL SALES GROWTH:
% CHANGE ON PREVIOUS YEAR
Romania2016F2017F2018F2019F2020F
Retail Value7.7%5.0%4.8%4.7%4.1%

Source: National Commission of Prognosis


TOP TEN SHOPPING CENTRES IN ROMANIA (BY SIZE)
CENTER NAMECITYSIZE (GLA SQ.M)YEAR OPENED
Iulius Mall Timisoara71,2002005
Polus Center Cluj-Napoca62,0002007
Coresi Shopping Resort Brasov59,0002015
Shopping City Timisoara Timisoara57,7002016
Iulius Mall Cluj-Napoca57,3002007
Palas Mall Iasi57,1502013
Electroputere Parc Craiova55,0002011
Braila Mall Braila54,8002008
City Park Constanta51,4002008
Maritimo Center Constanta51,0002011

 

LARGEST CITIES (2010)
CITYPOPULATION
Bucharest1,883,425
Cluj-Napoca324,576
Timisoara319,279
Iasi290,422
Constanta283,872
Craiova269,506
Brasov253,200
Galati249,432
Ploiesti209,945
Oradea196,367
Braila180,302

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Bucharest: 44.437711, 26.097367
Timisoara: 45.755539, 21.237499
Iasi: 47.156944, 27.590278
Cluj-Napoca: 46.777248, 23.599890
Constanta: 44.173333, 28.638333
Craiova: 44.324760, 23.813471
Galati: 45.425720, 28.031044
Brasov: 45.655651, 25.610800
Ploiesti: 44.940000, 26.030000
Braila: 45.269194, 27.957472
Oradea: 47.072222, 21.921111

Source: National Institute of Statistics – Census 2011

 

MAJOR DOMESTIC FOOD RETAILERS

Regional chains of supermarkets such as Anabella, Diana, Unicarm, Succes, Merkur, etc.

MAJOR INTERNATIONAL FOOD RETAILERS

Kaufland, Carrefour, Cora, Auchan, Metro Cash & Carry, Selgros Cash & Carry, Mega Image, Lidl, Penny Market

MAJOR DOMESTIC non-FOOD RETAILERS

Dedeman, Altex, Flanco, Mobexpert, Carturesti, Nissa, Musette, Benvenuti, BebeTei, B&B Collection, Teilor

INTERNATIONAL RETAILERS in ROMANIA (a selection)

Inditex Group (Zara, Bershka, Pull & Bear, Stradivarius, Oysho, Zara Home, Massimo Dutti), H&M, C&A, New Yorker, Peek & Cloppenburg, LC Waikiki, Koton, Intersport, Hervis, Decathlon, Nike, Adidas, Deichmann, CCC, Humanic, Sephora, Douglas, DM drogerie markt, IKEA, Kika, Leroy Merlin, Kingfisher

FOOD & BEVERAGE OPERATORS

McDonald’s, KFC, Pizza Hut, Subway, Starbucks, Gloria Jeans Coffee, Paul Bakery, Salad Box, Chopstix

TYPICAL HOURS
MONDAY - FRIDAYSATURDAYSUNDAY
10.00-22.0010.00-22.0010.00-22.00

Romania is one of the most promising retail markets in Europe, with a solid 5% GDP growth and double digit retail sales increase in 2016.

The pioneer brands, such as McDonald’s (1995), Carrefour (2011) or Zara (2004) are today among the market leaders, but followers such as IKEA (2007), C&A (2009) and H&M (2011) succeeded to develop profitable operations.

The modern retail stock in Romania accounts to approximately 2.8 million sq m GLA at the end of 2016, distributed in more than 100 shopping centers, retail parks and commercial galleries. More than a third of this stock is concentrated in Bucharest, but cities such as Cluj-Napoca, Timisoara, Iasi and Constanta also have dominant regional shopping centers with total GLA between 50,000 sq. m to 70,000 sq. m each.

Except for electro-IT, DIY and bookstores, the rest of the retail segments are dominated by international groups, having IKEA (furniture), Kaufland (hypermarkets), Decathlon (sport articles), Inditex (fashion) and Deichmann (shoes) as market leaders. Many international retailers in Romania operate through franchises. Brands such as Inditex, IKEA, Carrefour and Auchan initially entered through franchises but have since decided to enter directly.

The market has a good momentum, with an equally balanced relation between tenants and landlords, since traffic and sales for the vast majority of retail schemes are increasing with double digit rates. Major shopping center owners in Romania are NEPI, Iulius Group, Immofinanz, AFI Europe and Immochan, each with more than 100,000 sq. m GLA of modern retail space.

E-commerce has developed quickly in Romania as a consequence of the large expansion of high-speed internet infrastructure, aggressive discounts promoted by online retailers, diversified payment methods and increasing number of retailers with on-line coverage. Internet sales record double-digit year-on-year growth and their share in total retail sales is increasing. eMag, the largest online store in Romania, owned by South-African group Naspers and focused on electro-IT segment, is today larger than Altex – Media Galaxy group, the market leader of the electro-IT offline segment.

New Entrants to the Market

COSForever 21LanidorMichael Kors
PepcoPupaTati

KEY FEATURES OF LEASE
ITEMCOMMENT
Lease TermsTraditionally, in Romania leases have been for a term of 5 - 10 years and could be higher – with 20 - 30 years often seen in parts of the retail market (eg for an anchor tenant). Leases are now more typically for 3-5 years. Break options were rare in the past but now are case by case negotiable, mainly for the anchor tenants. In the absence of a clear agreement in the lease, the tenant has no legal right to break so long as the landlord fulfils his obligations. Where agreed, breaks are typically at the first rent review for retail space.
Rental PaymentRents are payable quarterly or monthly in advance, depending on the agreement. Turnover/percentage rents are common seen in shopping centres and factory outlet. A security deposit is normally required for tenants as bank letter of guarantee or bank deposit in amount of 3 months of base rent + service charges + marketing fee + VAT. In specific cases of international anchors with a strong covenant or where a parent company guarantee (or less frequently a bank guarantee) is provided, it is not requested a security deposit. Premium payments are not common place in the retail market.
Rent ReviewAnnual indexation to CPI. There is no standard review mechanism and this may be negotiated in the lease. Reviews will typically be seen at the end of the initially agreed term rather than during this period.
Service Charges, Repairs and Insurance A service charge is usually payable in multi-tenanted buildings and covers management fees, security, cleaning, landscaping, internal maintenance of common parts, external maintenance and insurance, servicing of elevators, water, heating, air conditioning, management fees and property taxes. It excludes internal maintenance and insurance of rented accommodation, utility charges and VAT. The landlord is responsible for external/structural matters in shopping centres (charged back via service charge) or tenant (except in multi-let buildings). The tenant is responsible for internal matters. The landlord usually insures the main structure and external fabric but will charge this back to the tenant. Insurance for common parts is also paid by the landlord and charged back. The tenant usually pays for internal insurance directly.
Property Taxes and other costs The local government authority charge the ‘rates’, the local property tax for individual, while for the companies is calculated as percentage from the book value (0.75 – 1.50 %). Land taxes are based on sq. m basis.
Disposal of a LeaseSub-letting is usually possible under the terms of the lease, subject to landlord’s approval. Assignment rights are not normally barred in the lease but will also be subject to consent – which should not be unreasonably withheld. Early termination is only by break clause – to be negotiated at outset of lease by mutual consent upon negotiation. At lease end, the tenant is responsible for re-instating the premises to the same condition as at the start of the lease, subject to normal wear and tear. All tenant improvements must be approved by the landlord subject to the alteration covenant in the lease and the fact that approval should not be unreasonably withheld. Older leases may have Privity of Contract whereby all former lessees can be held liable for any default by a later tenant under the same lease.
Valuation MethodsShops are valued on the derived methods of income approach such as: direct capitalisation, discounted cash flow etc.
LegislationLeases must be in writing and the lease document forms the standard documentation required. A formal deed is required for all leases. A mandatory standard form of lease does not exist although a market standard is in place.