Logistics and retail in romania in 2010


Nr. 07/2010 July and August

A special sectorial newsletter edited by : camera imobiliara belgia romania www.cibr.be for more information mail us at cibr@telenet.be

1. Investments in Logistics in Romania and industrial investments in Romania
2. Contribution of Romania to intermodal transport between Europe and Asia
3. Employ Romanian workers & drivers and earn 1000 Euro/per worker/per month
4. Demand for investors in Dubai – via an old client in Romania (Lebanese company)
5. Retail & logistics in Romania in 2010
6. Logistics sector will revive in 2010 due to great demand and high yields
7. Warehousing space in Europe: meeting tomorrow’s demand
8. News on the Romanian retail & logistics market
9. Available plots
10. Linking partners

Selection of articles:

1. Investments in Logistics in Romania and industrial investments in Romania

Is Romania still an interesting country when it comes to logistic and industrial investments? Why yes/or not?

Romania is still an interesting country when it comes to logistic and industrial investments. For industrial production the salaries will stay low and the crisis will not end in 2011 in my opinion. Growth will be slower or slow down in the next years. In a global economy, language skills are a key workforce advantage. Born at the cross roads of different cultures and civilizations, where East meets West, Romanians are multilingual, open to new experiences, innovative and future oriented. This combination with relatively low salaries can be attractive to foreign investors. The geographical location is the second point were Belgians are keen on (close to Belgium and a central location in a wider area and the potential of an internal market). The emerging region of Central and Eastern Europe (CEE) is the main macroeconomic driver impacting European supply chains. Simply developing a warehouse that fits building requirements is no longer sufficient. A prime location and availability of additional services in a “logistics park” become more important. For logistic investments the investors look at the country and the possibilities and the area around the country. The industrial investments and the retail investments are booming in Romania even in crisis. We still produce around 20 hot leads with all contact data per month for the chamber members. This is a surprise and it is an indication that Romania is moving on. It's a big country with an extremely young and dynamic population. With its geographical positioning, bordering onto the Black Sea, the Romanian port of Constanta is also the new logistics gateway to Europe, but from the East this time, aside from the western gateway Le Havre-Hamburg. Investors will migrate towards other interesting parts of the country, after having invested largely in the Bucuresti-Ilfov area in 2009.

How do the Belgian investors see Romania in a time of crisis?

The number of investors has decreased with the crisis but Belgians are still looking at Romania. The proof is that we had 147 subscribers for a seminar in Brussels on 10 June 2010 around infrastructure and construction. CIBR co-organized this seminar. Belgians look at Romania as being most probably one of the best choices in the CEE region.

A second view point is that Belgians look at the crisis as being a second opportunity to take a position in Romania. It is possible that this opportunity will not be reproduced.

What are the most important problems the Belgian companies meet in Romania?

I want to brief on this question. Belgian people are pretty direct and straight forward. They want to focus on their business. In the field they encounter the Romanian administrative system. Some find it time consuming others are quite negative about this item.
I noticed that there is a difference and a change of mentality in the 10 years that have passed but there is still a lot of work left for the next decade.

Do you happen to know how many Belgian logistic companies have invested until 2008, and how many after 2008 or with what percent the number of Belgian investors dropped?

WDP from Belgium made substantial investments in Romania They opted for Romania because of the outstanding growth potential. 200 million Euro investment: the project concerns the Promoter’s strategic investment programme for its logistics network extension in the Romanian market, with the construction of four industrial estates for logistic warehouses to be erected and operated in two sites close to Bucharest (Corbii Mari and Fundulea), one site close to Ploiesti (Aricestii), and one close to Pitesti (Oarja). In total WDP has around 10 plots of land in Romania. WDP is the market leader in Belgium as well as a European player. WDP Romania is a member of the Belgian Romanian Real Estate Chamber. Feel free to contact us for more information on all WDP projects. “Warehouses with brains” from Belgium.

As a chamber we are actively looking for investors in logistics and industrial investments. We monitor the market and help the investors with their entry on a tailor made basis. Our members come from different continents and countries all over the world.

What are the main errors the government/ state has done and what should they do so that they encourage the Belgian investors and not only to come to Romania?

It is not my mission to give advice to a government as I am here as a facilitator and observer. However I understand that Romania is a young economy going through a transition period. On the other hand I would like to promote the Romania of the regions in order to remove the bottleneck that resides in Bucharest. In my opinion it is worthwhile to consider a decentralization in regions.

A second remark is that within the lines of the EU policy a new set of measures should be drafted and funds should be allocated to accelerate and facilitate absorption of funds and a higher amount of money is needed to ensure a sustainable development at a reasonable speed. Let’s look at agriculture: a lot of fields are not utilized. It might be the wish of the ministry of health to have new hospitals and medicaments but you cannot eat medicaments ...as an example. Complex matters and paradigm shifts that go way beyond my head. To be sincere: I would not like to give a solution to this complex matter. But one thing is sure somebody has to provide solutions.

What are the main qualities of the Romanian market that encourage logistic / industrial investments?

I have already answered part of this questions in the section above. But I would like to add some interesting facts. Romania has highly skilled labour force at competitive prices (solid knowledge in foreign languages, technology, IT, engineering, etc). This labour force can be used in Romania and in Europe. For this reason we have a special department that takes care of detaching to the EU (gains importance in times of crisis). On the other hand the same department provides the members with project teams and white collar workers for the existing or new projects. Especially for logistics I would like to conclude with the cliché that it is all about taking positions or not taking positions. Do not worry about your hesitation as an investor.Even in crisis somebody else is looking to take a prime position….

What about European funds. Do they attract the investors?

European funds attract European investors. More funds are needed after 2013 to ensure the continuity of what was initiated before the entry and realized in the period 2007-2013. Bottlenecks should be removed and the adsorption speed can quadruple….or sky rocket as it was the case with the pre-adhesion funds a couple of years ago.

Interview with constructive magazine Romania June 2010.

2. Contribution of Romania to intermodal transport between Europe and Asia

Pan-European Transport Corridors in Romania :

• Corridor IV: Central Europe – South East Europe Berlin/Nurnberg–Praha–Budapest–Arad-Bucharest–Constanta Arad–Timisoara–Craiova–Calafat–Vidin–stanbul/Thessaloniki
• Corridor VII: Danube (waterway corridor)
• Corridor IX: North East Europe – South East Europe Helsinki-S.Petersburg-Kiev/Moskva-Odessa-Chisinau-Iasi - Bucharest-Giurgiu-Dimitrovgrad-Alexandroupolis

Constanta Port – The turntable of European and Euro - Asian Transport:

• The biggest commercial port of the Black Sea
• Total surface: > 3.000 ha
• Loading and unloading capacities: > 200 mil. Tons/year
• Connection with Rotterdam through: Black Sea-Danube Canal, Danube, Main-Rhine
• God opportunities for intermodal transport (4 intermodal terminals)

Connection of Romania with:

• Middle East
• Caucasian Area
• Central Asia

Increase of Transport between Europe and Asia next 30 years:

• Transport of oil and other natural resources from Asia to Europe
• Transport of manufactured products in both directions
• Development of Eastern Europe (Enlargement of European Union)

Conclusion: increase in intermodal transport and investments in logistics in Romania

3. Employ Romanian workers in Belgium, The Netherlands, Germany or any EU country and save 1000 to 2500 Euro per month per worker

Romania has joined the European Union. Since January 2007 the Romanian state improved the mobility of Romanian workers throughout Europe. Per year more then 4 million workers are performing works in foreign countries. The quality of being a member state within EU entitles the citizens of these states to benefit from the four fundamental liberties, for instance, free movement of citizens (persons) which implies also free movement of workers. However the workers still need a A1 form issued by Romanian government if the workers want to work in a European country and get paid by a Romanian company. This creates an advantage and you are able to make savings on your budget. In a period of crisis these considerable savings are more than welcome.
How can a production company benefit form these measures ?

Instead of hiring the workers directly on your company you contract a Romanian company to do the Works. The Romanian company is entitled to send the workers to perform under the condition that the Romanian company can obtain a form E101 for the workers that they send.

Another way is to work from Romania with your own Romanian company. So you will have to create your company in Romania.
These are popular measures in the construction sector, metal construction, transport, logistics and similar sectors.

How can a service company benefit from these measures ?

A service company can hire Romanian companies to do the job. This is done for marketing, ict, web design, webhosting, engineering, architecture, service centres (100-400 people), call centres (50-250 people), help centres, back offices, etc…
This can also be your own company. If you have a larger project then you should take controll and do the operations with your own company.

What do we do for you in order to make sure that you have your money and your benefit ?

- company creation in Romania and pre-set-up you do not have to travel (you save money and time) !
- the pre-setup is “how to... and why ...”and this comes for free when you create the company with us. So you have all reasons to ask us to create your company.
- in the pre-setup we optimize the salaries for each and every worker so that you pay the lowest contributions (you earn money for the second time) 
-  we look for workers and make the contracts for you – you will only have to sign them
- we register the workers in Romania so that the labour contracts are valid
- we do the entire setup as defined in the preliminary setup that we do with your team before we start the execution of the works

How do we get paid ?

On average the initial amount invested is earned back in 3-4 months (or faster – depending on the number of workers). So basically you do a small investment and you are sure that you will have a return since we personally commit to make you company( set-up) work.

4. Call for an investor in Dubai

A client is asking for an investor that wants to put a transport hub in Dubai. They have work for 100-150 trucks and they will help the investor with the immatriculation of the vehicles . The hub could be build at Dubai Logistics City. They are willing to co-invest.
“Dubai Logistics City is the world’s first truly integrated logistics patform with all transport modes, logistics and value added services, including light manu-facturing and assembly, in a single customs bonded and Free Zone environment. It is part of the Dubai World Central with the upcoming Dubai World Central International Airport and adjacent to the Jebel Ali Port and Free Zone”
DLC facilities are designed to optimally enable operations of logistics businesses. Whether the focus of your business is on multimodal shipment handling, on multi-client warehousing or on dedicated in-house or contract logistics, and regardless of the size of your business – DLC offers the best facilities to match your needs.

Air cargo terminals: Directly at the apron and designed for air cargo terminal handling service providers. 
Land plots for industry or contract logistics: With most flexible plot layouts to support dedicated industry or contract logistics facilities, larger multi-client warehousing operations and light assembly operation. 
Land plots for forwarders: Exclusively for forwarders with access to the airport’s apron and optimal for mid-sized and larger forwarding businesses who want to combine shipment handling and consolidation operations and warehousing/distributions services. 
Land plots for aviation industry: A dedicated cluster will serve as a base for a host of aviation industry suppliers requiring direct access to the airside apron and/or any of the DLC cargo terminals and other logistics facilities. 
Shared forwarders warehouses: Near the air cargo terminals and optimal for small and medium sized cargo handling operations. 
Integrator facilities: DLC provides a dedicated section for integrator facilities directly at the apron. 
DLC Office Park: In the heart of DLC for any business which requires space for a customer front end, administration or back offices. 
Amenities: DLC provides amenities facilities throughout the premises. 
DLC Labour Village: Dubai Logistics City boasts its own Community Village with a built up area of 350,000 square metres and designed to eventually accommodate 40,000 staff all within easy travel distance of the workplace.

Mail me for more info at frjacobs@telenet.be  

5. Retail & logistics in Romania in 2010 – retail & logistic parks are popping like never before

The Romanian real estate sector can't complain about a lack of foreign interest, with the logistics sector attracting strong interest. Logistics parks surrounding the capital city of Bucharest are shooting up like mushrooms. This year 300,000 m2 of new distribution space will be completed.

Calculated risk

Last spring, ING Real Estate Investment Management, one of the largest asset managers in the world, opened an office in the Romanian capital. The office’s strategy is geared towards the acquisition of qualitative high-grade office, retail and logistics property in Romania. Meanwhile, the American real estate giant GE Real Estate and Helios Phoenix announced in June that they would be investing €175 million in the development of warehouses and distribution centers in Romania.

The most dynamic real estate investor is the Austrian fund, Immoeast. Their Romanian portfolio contains 113 structures and 3.85 million m2, including office buildings, retail and logistics premises. In June of this year, the Austrians signed an agreement with the European Future Group for the construction of eight to ten logistics centers in Romania. The total lettable surface area will amount to between 400,000 m2 and 500,000 m2. The investments are estimated at €300 million.

The current logistics developments in Romania are particularly concentrated along the A1 highway to the west of Bucharest. Situated here are: Prologis Bucharest A1 (56,000 m2 with a total development potential of no less than 300,000 m2 on 56 hectares); Bucharest Industrial Park (completion 2008); Mercury Industrial Park (20,000 m2); Cefin Real Estate (126,000 m2 and 47,000 m2 under construction); Bucharest West (on a total of 100 hectares, 47,000 m2 has been completed, the next phase of 30,000 m2 to be completed in the first half 2008) and A1 Industrial Park (25,000 m2 plus 50,000 m2 under construction).


According to Michael de Jong-Douglas, senior vice president and regional director for Central & Eastern Europe at ProLogis, the American world market leader in logistics property chose Romania a year ago because of the fast-growing economy, the increasing spending power and the big consumer market. ‘Our market is where our clients go. Nowadays you also see them looking outside of Bucharest, so we do that too.’ Wherever Prologis is, their arch-enemy, Goodman, the number 2 on the world table league of logistics property, is normally not far off. According to Zsombor Torok, Goodman’s Country Manager and CEE for the Czech Republic, Slovakia, Hungary and Romania, the Australian logistics real estate giant is indeed quietly working on its first Romanian project. ‘We first want to gain some experience with the local building market before we spread our wings. However, undoubtedly the potential is enormous, because the Romanian market is just as big as Hungary, the Czech Republic and Slovakia put together.’ Torok acknowledges that the competition is increasing rapidly. ‘Thanks to the major economic growth over the past three to four years there's a dire need for new logistics property.’ According to him, the inadequate road infrastructure is indeed a major problem. ‘According to the government plans however, the largest portion of the problem will have been resolved within three years, and thus a lot of new attractive property locations will come about which will create a better climate for foreign investments.’
Bucharest is the most important focus for Goodman. For the future however, Torok does not discount branches being established in Timisoara, Cluj and the industrial zone of Arad, for example. ‘We think that a large portion of our future business in Central Europe will shift to this country, when taking into consideration the extensive workforce, the growth of the economy and the access to the East’. The most important users of this real estate are logistics service providers, transportation companies and large international retailers such as Carrefour and Ikea. The largest letting transaction ever in Romania, occurred last year when the logistics service provider Frans Maas, currently known as DSV, signed a contract for 29,000 m2 in the Bucharest West Park.

Growth potential

When asked why a relatively small Belgian fund like WDP makes substantial investments in Romania, CFO Uwents replies: ‘We opted for Romania because of the outstanding growth potential. Although we've been in the Czech Republic since 1999, we seem to have missed the boat there somewhat, because we didn't anticipate on time. We won't make that same mistake in Romania. It's a big country with an extremely young and dynamic population. With its geographical positioning, bordering onto the Black Sea, the Romanian port of Constanta is also the new logistics gateway to Europe, but from the East this time, aside from the western gateway Le Havre-Hamburg which makes up the domestic market of WDP. Many of our clients go there too’. Romania's story as the new gateway to Europe is still far ahead in the future. One look at the official website of the port of Constanta shows that the transhipment of containers is indeed increasing rapidly, but at about 1 million TUE per annum (2006) it's still peanuts compared to Rotterdam, Antwerp, Hamburg or Le Havre, for example. Rotterdam alone, which is the largest container port of Europe, already handles ten times as many containers. Constanta doesn't even appear in the short list of the fourteen largest container ports in Europe. If the Romanians want to aspire to this at all, then something must first be done about the miserable condition of the road system. What about the ‘young and dynamic population’? In September, the Romanian president Traian Basescu himself warned the nation that the number of inhabitants in his country is rapidly decreasing due to the massive emigration and the low birth rate. The population has already shrunk from 23 million in 1989 down to 21.6 million. In Romania women, on average, have only one child. If that doesn't change, then Romania will only have 16 million inhabitants by 2050 and only 8.5 million by 2100. In August 2010 WDP announced the purchase of five properties with a total ground surface area of almost 950,000 m2 spread over three locations in the vicinity of Bucharest. At the moment this real estate company, which is an active investor and project developer, is busy obtaining the required building permits. Uwenst expects completion of the first two buildings, measuring a total of 15,000 m2, within a year. Another 20,000 m2 will be added to that in 2009. The properties which were acquired for €16.5 million will provide room for 300,000 m2 of logistics property in the coming five to ten years, which involves at least €150 million.

Rental level

WDP builds on risk, as do many other parties. Uwents is 'very confident' that the lessees will be found. The target group is small and medium-sized users, who want to rent from 1,000 m2. Until recently the country had an enormous shortfall of modern distribution areas. With rates at €45 to €55 per m2 per annum in which Bucharest is by far the most important logistics market, rentals are even above the level of Western Europe. According to Uwents, the high rentals level is not only because of scarcity. Due to the heavy winters, the hot summers and the dangers of earthquakes, logistics centres require extra structural facilities and are therefore relatively expensive to build. According to a report by Colliers International who, at a 55 percent share, is the irrefutable market leader in the Romanian industrial and logistics property, the total stock of logistics centres in the Romanian capital (per 30th June 2007) amounts to 438,000 m2. Of that, 178,000 m2 was completed in the first half of this year. This year a total of 300,000 m2 will be completed and there's already 330,000 m2 in Bucharest alone in the pipeline for the coming year. Due to the enormous building appetite of the recent past the rentals are already under pressure. The vacancy rate, which was almost nil, has increased since the beginning of this year by up to six percent. 'At present it's definitely not a matter of over-investment yet', says Uwents. ‘However, I do think that the competition will increase rapidly.

Source: Cushman & Wakefield

Mail us for more information frjacobs@telenet.be  

6. Logistics sector will revive in 2010 due to great demand and high yields

Logistics sector will revive starting 2010, when demand for industrial space will be high again and investors will, once again, focus on this profitable segment. According to an analysis realized recently by IBC Focus based on the data gathered from the Investment Report, there were 196 logistic centers and warehouses recorded during January-October 2009. When finalized, all these will add approximately 350.000 sqm to the logistics stock recorded at the end of 2008. As future trend, IBC Focus considers that investors will migrate towards other interesting parts of the country, after having invested largely in the Bucuresti-Ilfov area in 2009 (source IBC report )

7. Warehousing space in Europe: meeting tomorrow’s demand

The emerging region of Central and Eastern Europe (CEE) is the main macro economic driver impacting European supply chains. The expansion of the European market leads to a larger distribution area to be covered. However, companies do not move their distribution centres from West to East in anticipation of the eastward shift in demand. Instead additional Regional Distribution Centres are established in the CEE region. After the Czech Republic, Hungary and Poland a second wave of expansion to Russia, Slovakia, Ukraine, Romania and Turkey is now starting. Good quality warehouse space is becoming increasingly scarce in these new logistics markets. Increasing service requirements is recognized as the second most important macro trend. Shortening lead-times and tight delivery windows can only be met from a location near the customer. This creates an increasing demand for warehouse space in strategic locations, close to the market and with high transport availability. At the same time the function of warehouses is changing from merely a place to store into a “cross dock” or Value Added Services (VAS) operation. This modifies the requirements put on warehouse buildings. Number of dock doors and daylight access in the VAS area will become increasingly important. And also in the near future security within the warehouse will be even higher up on the list of requirements. The increasing volatility in customer demand and service requirements drives the need for adaptable supply chains. A truly adaptable supply chain needs to be based on the ability to easily change the warehouse space used and the location of the distribution centres. Companies therefore increasingly choose to lease warehouse space and terms of lease contracts continue to shorten. In the future more flexible lease structures for warehouse space will be required. Warehouse space vendors that can offer flexible solutions will have a competitive advantage in the marketplace. Having the ability to control land and rapidly develop facilities at premium locations is crucial for warehouse space providers. More and more consideration must be given to the re-development of obsolete logistics real estate in order to utilize advantageous locations of out-dated warehouse facilities. Simply developing a warehouse that fits building requirements is no longer sufficient. A prime location and availability of additional services in a “logistics park” become more important (source – report prologis).

8. News on the Romanian retail & logistics market (next issue we will have a special on this one)

A. New Yorker to Roll out Three More Romanian Stores in 2010
B. German discount retailer Kaufland will invest an estimated €45 million in opening six new stores, for a total of fifty-six Romanian stores. The new units will be located in Caransebes (Caras-Severin County), Sighisoara (Mures County), Orastie and Deva (Hunedoara County), and Vaslui and Ramnicu-Sarat (Buzau County).
C. Belgian retail company Delhaize le Lion Group will invest an estimated €500,000 in opening a new Mega Image store in eastern Bucharest. The store is set to open by the end of this month.
D. Minimax wants to increase the store count
E. C&A wants to enter Romania
F. Obi wants to open two stores
G. German Discount Clothing Retailer to Open Five Romanian Units H. Lidl to Open 20 Romanian Stores
I. Auchan Buys Land for Two Romanian Hypermarkets, Plans to Double Stores in 5 Years
J. Metro to Open 25th Romanian Store
K. Mega Image will open 200 discounts in Romania
L. Belgian Logistics Developer to Invest EUR 200 mln in Romania
M. Billa Launches Supermarket in Turda, Romania
N. Real Opens Third Hypermarket in Timisoara, Romania
O. Penny to Pour EUR 32 mln into 25-Unit Expansion in Romania
P. Leroy Merlin to Open First Romanian Store in 2010
Q. WDP – 200 million Euro investment - The project concerns the Promoter’s strategic investment programme for its logistics network extension in the Romanian market, with the construction of four industrial estates for logistic warehouses to be erected and operated in two sites close to Bucharest (Corbii Mari and Fundulea), one site close to Ploiesti (Aricestii), and one close to Pitesti (Oarja).

9. Available plots & logistic centers

Timis – excellent plot on the ring road of timis – 15 hectare
Arad – excellent plot of 20 hectare
Cluj – to plot of 15 hectare – at National road – near Nokia plant 12 Euro/sqm – TOP PLOT
Sibiu – top plot in front of the airport at the industrial parc
Constanta – Development plot south side – for fast movers – 14 hectare
Craiova – 20 hectares prime position for industrial or logistic development

Several logistic centers via the chamber members on 14 existing parks - on demand – tailor made solutions are possible

10. Linking partners

www.belgianconnection.be :  The PBS blog: NEW SITE : from idea to investment, funding and project execution + a complete list of the activities of rbbc and bc (the two leading business clubs)
www.structural-funds-romania.ro : NEW SITE: a complete overview on fundings in Romania
www.investromania.be  : The BLOG of the Belgian Romanian Chamber - cibr
www.offersrealestateromania.blogspot.com  - only top deals and top locations
http://structuralfundsromania.blogspot.com  - blog on structural funds
www.davidintercar.ro  – car rental in Romania and Bucharest
www.khafrely.eu  –  splendid hotel for your Romanian holiday or business stay

Freddy Jacobs
president cibr