Higher unemployment rate, lower salaries and lower rent attract investors to regional cities in Romania

Romania's main regional cities, with higher unemployment rates, lower salaries and lower rent for offices, attract investors that want to expand or relocate, shows a recent report from CB Richard Ellis.

The stock of office space in Romanian capital Bucharest totaled 2.1 million sqm at the end of last year, and 14 percent of it was unoccupied, while Cluj – Napoca, the second largest city in Romania, had only 210,000 sqm of offices, or a tenth the amount in Bucharest, with 10 percent of them unoccupied, according to the recent study by CB Richard Ellis. The regional cities of Cluj – Napoca, Iasi, Timisoara, Brasov, Sibiu are attractive for investors who either want to expand operations or relocate from capital city Bucharest. Rent in these cities is lower than in Bucharest. A sqm of office space costs an average of EUR 19.5 per sqm per month in Bucharest, while the price is EUR 12 to EUR 15 in Cluj – Napoca and Timisoara, EUR 10 to EUR 12 in Iasi, EUR 10-13 in Brasov, while in Sibiu (in picture), rent is between EUR 9 and 11 a sqm a month. The stock of offices is much lower in secondary cities of Romania compared to Bucharest, matching the smaller number of inhabitants and the lower level of average income. Around 1.9 million people live in Bucharest, where the average gross salary is of EUR 700 and the unemployment rate is of 2 percent. Cluj – Napoca is six times smaller, with 300,000 inhabitants, an unemployment rate of 3.5 percent and a gross salary of EUR 400 a month. The city has become the preferred destination of manufacturers and IT&C companies. Iasi, in the North of Romania and of similar size to Cluj Napoca, has a lower stock of offices – just 70,000 sqm, and an even higher rate of unoccupied offices, of 20 percent. Unemployment is at 6 percent there and the average salary is of EUR 350 a month, according to the CBRE report. IT&C, manufacturing and pharmaceutical companies are choosing the city for their operations. Timisoara, in the Western area of Romania, with around 300,000 inhabitants, had a stock of 80,000 sqm of offices end-2011 and a rate of unoccupied offices of 15 percent. The average salary there is of EUR 400 a month and the unemployment rate, of 1.9 percent. The Central city of Brasov, with some 275,000 inhabitants and just 170 km away from Bucharest, hosts some 50,000 sqm of offices, of which 15 percent are empty. The gross salary there is of around EUR 350 a month and the unemployment rate is 4.5 percent. Sibiu has a similar office market size as Brasov but higher average salaries – EUR 480, and an unemployment rate of 3.8 percent. Overall, Romania is attractive to foreign investors due to its 16 percent flat tax, the high speed connection – ranking 2nd in Europe and 6th in the world, the skilled workforce - especially in IT&C and foreign languages.