2012 romania shoring paper

Onshore, Nearshore, Offshore: Unsure? A 2012 Romanian Perspective

Onshore, Nearshore, Offshore: Unsure? • October 2012 2

Romania switches from pure call centre locations into a higher value function destinationIntroduction

In this 4th edition of the publication we aim to underline the main trends and features of the shoring sector in Bucharest and the top regional cities, so far identified as preferred locations. While in our previous reports we presented Romania as an attractive shoring location, the current report will present the development of the BPO/SSC industry in the country.

Looking back to 2005, the first multinational company to open a BPO type operation in Romania was Genpact, which, at the end of 2011, was employing over 1,500 specialists in Bucharest and Cluj Napoca. Since then, the industry has flourished, each year announcing several new entrants to the Romanian market.

Today, new openings are still being recorded but, not at the same pace as we have witnessed 3 to 4 years ago. There is still untapped potential in a number of Romania’s regional cities, that are also well established university centres. These emerging destinations are often shortlisted by numerous companies, with either new or existing operations elsewhere in Romania. These include, but are not limited to: Targu Mures, Sibiu and Craiova.

Executive Summary

An enlarged list of Romanian shoring locations are presented in this report. These cities and established university hubs, are in competition to attract multinational companies looking for new geographies.

In the labour market section, provided by Grafton Employment Group Romania, we present the most up to date employment costs, salary ranges (recorded across various functions) and labour regulations.

The business environment section, provided by Ernst & Young, highlights available state aid schemes, eligibility criteria, as well as durations of these schemes.

Real estate market conditions have evolved over the last couple of years to easily accommodate shoring operations, both in Bucharest and the regional cities.

Romania has the competitive edge for productivity, labour, cost, revenue growth – key shoring drivers identified by Jones Lang LaSalle’s EMEA Location Consulting Services.

Regional Cities and Bucharest direct connectivity by air

Source: Jones Lang LaSalle

KPO, SSC/BPO, R&D, Call Center, ITO

At present, Romania is host to all type of operations. In the early stages, the country was of preference for call centres types of services. Soon after, the availability of a qualified work force, a good command of foreign languages, an excellent pool of university graduates, geographical proximity to Western Europe, good connectivity by air to the rest of Europe, and EU accession in 2007, were the key drivers behind the rapid development of the additional shoring services in Romania.

We have identified the following companies as an example of current activity in the market: Evaluserve and Genpact as KPO centres (knowledge process outsourcing), Adobe, Freescale, IXIA, EA Games and recently INTEL as R&D centres and HP/GeBOC, Endava, Genpact, IBM, Oracle, Wipro, Accenture, WNS as BPO centres.

Most major players have opened at least one centre in Romania. Romanian centres (with few exceptions) excel in the range of 100-500 specialists.


Romania Romania is situated in the South Eastern part of Europe, enjoying a strategic geographic location within Europe. The country has a direct access to the Black Sea, being crossed by the Danube River which forms in Romania an unique Delta, a tourist attraction for the foreign travellers. The country joined NATO in 2004 and EU in January 2007.

Demographics

With approximately 20 million inhabitants, Romania is the seventh largest country in the EU by population and the 9th largest by area. The capital city, Bucharest is one of the largest cities in CEE & SEE, with an official population of 1.7 million inhabitants to which the closest metropolitan area, Ilfov contributes with additional 300,000+ inhabitants. In accordance with the latest census from October 2011, the next tier of regional cities comprises only 2 cities, Cluj-Napoca and Timisoara (population of 309,136 respectively 303,708 inhabitants). These are followed by 5 cities with population exceeding 200,000 inhabitants: Iasi, Constanta, Craiova, Galati and Brasov. The current report will present Bucharest as well as few regional cities, a selection of the top cities identified above.

Economy

In 2011 Romanian economy surpassed local and foreign analyst expectations and recorded a 2.5 % GDP growth. Continued recovery will characterize 2012–13, but at a very modest pace because of a negative external economic environment. A modest recovery of household consumption appears to have brought the Romanian economy back to expansion in the second quarter, but challenges remain in the following 18 months given a poor outlook for key export markets and a continued need for domestic austerity. (IHS Global Insight, Country Report)

Growth is expected to accelerate to 2.7% in 2014 and further to 3.5% in 2015. However, in medium term is expected Romanian economy to outperform the majority of the EU countries, with an average of above 5% GDP growth to be recorded in the horizon 2014-2016.

Romania will continue to benefit from resource transfers from the EU's common budget for regional and agricultural development as well as seed funds for infrastructure investment.

Selection of the key economic indicators

Source: IHS Global Insight, September 2012, E-estimation, F-forecast

Education

As high importance for the companies looking to establish shoring services in Romania is the tertiary education system. In the year 2011/2012 cca 540,000 students were enrolled in the Romanian universities out of which 140,000 students in the private universities. The preferred areas of studies are engineering, social science and economy. Enrolled students by area of study - 2011/2012

Arts2%

Engineering28%

Medicin10%

Economy21%

Law13%

Social Sciences

26%

Source: INS, 2012 Romania Country Report

In 2010/2011 the number of the graduates of the tertiary education system is estimated to 187,000 specialists, a decrease due to shortage of the enrolled students recorded in the private universities.

Tertiary Education key indicators in Romania

Tertiary (‘000) 2008/ 2009

2009/ 2010

2010/ 2011

2011/ 2012

Enrolled Total 891 775 673 540 Private 411 322 240 140

Graduates 214.8 191.3 186.9 NA

Source: INS, 2012 Romania Country Report

2010 2011 2012E 2013F

GDP (%) -1.3 2.5 1.3 1.0 CPI (%) 6.1 5.8 3.1 3.4 Unemployment Rate (%) 7.6 5.4 5.3 5.3 LCU/US$ (YE) 3.205 3.339 3.560 3.641


Country Performance

Despite the economic downturn recorded in 2009, the slow economic recovery recorded in 2010, the political instability that has marked much of 2012, Romania has remained on the radar of multinational players. Nevertheless, EU membership has also helped Romania to navigate through the wider European economic instability, granting financial support through a 2-year Stand By Agreement, and has contributed to the economic recovery of the country.

In addition to all drivers that run the decision making process in the selection of a shoring location, the increased availability of state aid schemes, place Romania high up the selection list. Most of the state aid schemes, as detailed by Ernst & Young in the Business Environment section, became available in 2007 and were due to conclude in 2013 but, now have increased probability to be extended beyond next year.

Top 10 Shoring locations 2008-2012

For example, a recent study released by Jones Lang LaSalle’s EMEA Location Consulting Services team1, based on the information provided by fDi markets, shows that between 2008-2012, 40 new projects, creating over 11,000 new jobs, were identified in Romania, ranking the country in 9th place globally among the top 10 shoring locations. These new projects refer to Foreign Direct Investments in SSC, customer contact centres and technical support centres from January 2008 until December 2011.

What’s next in Romania? The recent movements on the shoring market revealed the presence of higher value functions such as legal services, software engineering and financial services which required a different profile of candidates. On the other hand, these candidates are attracted by stability, instead of salary, career, respect, responsibilities and fulfilling a decision making position within such companies (Grafton Employment Group).

Source: fDi Markets (from The Financial Times Ltd)

1 EMEA Location Consulting Services: Our leading edge Location Consulting team helps direct corporate decision-makers to informed and accurate decisions relating to location and business configuration, helping achieve revenue, margin and efficiency targets. Utilising unique management consulting methods to drive solutions from a business perspective, we offer comprehensive advice on the “why”, “where” and “how” of business rationalisation, expansion, and new market access. Our multilingual and multidisciplinary consultants bring to clients a wealth of skills, global field experience and expertise in the fields of economics, politics, supply chain, management consulting, real estate, business process configuration, demographics, GIS, international relations, engineering and infrastructure.


Business Environment Incentives - National Grants

An important factor in determining the location are the available "incentives" to encourage the development of the investment projects. In this respect we refer to the aid schemes which provide grants given by the Romanian state budget. It is important to note that Romania still has funds available. Some of the state aid schemes for stimulation of investments are provided under the following legal framework: Decision 1680/2008 regarding the implementation of a state

aid scheme for ensuring sustainable economic growth Decision 753/2008 regarding the implementation of a state

aid scheme for regional development through stimulation of investments

Decision 797/2012 regarding the implementation of a state aid scheme supporting investments promoting regional development by means of using new technologies and creation of new jobs

The main eligibility criteria for applying for the state aid scheme under the Decision 1680/2008 are the following: scheme under the Decision 1680/2008 are the followin

Category Investment size

(mil. EUR) Number of jobs

created 1 5 to 10 (inclusive) > 50 2 10 to 20 (inclusive) > 100 3 20 to 30 (inclusive) > 200 4 over 30 > 300

Source: Ernst&Young

The maximum value of the grant does not exceed EUR 22.5 million for investments in Bucharest – Ilfov and EUR 28.125 million for investments in the rest of the country. Decision 1680/2008 is applicable during the period 2009-2013. The main eligibility criteria for applying for the state aid scheme under Decision 753/2008 are as follows: Value of initial investment should exceed EUR 100 million

and the value of eligible costs should exceed EUR 50 million, and

The creation of at least 500 new direct jobs as a result of the initial investment

The beneficiary must be a large enterprise (an enterprise other than a small or medium-sized enterprise as defined under Law 346/2004)

Decision 753/2008 is applicable during the period 2008-2012 with a possible extension to 2013 - no extension has been announced yet.

Both decisions generally apply to all economic sectors, however, with certain exceptions specifically provided by each scheme. The main eligibility criteria for applying for the state aid scheme under the Decision 797/2012 are as follows: Investment should be aimed at: creating new units,

extending of existing units, diversifying the production of units by creating new products, performing fundamental changes of the production process of existing units

Investment must be an ‘innovative’ investment or have an IT&C component of at least 20% of value of the investment plan

Investment should create at least 200 new direct jobs in several types of industries, e.g.: software publishing, telecommunications, information technology services, research-development.

The maximum value of the grant does not exceed EUR 22.5 million for investments in Bucharest – Ilfov and EUR 28.125 million for investments in the rest of the country.

For all three schemes, in compliance with State aid rules, the aid intensity for investments in Bucharest-Ilfov is a maximum of 40% and 50% for the rest of the country

Tax incentives

Romania offers a highly competitive taxation scheme relative to many of its European peers. Since January 2005, the amended Fiscal Code has applied a flat tax rate of 16% on income and corporate profits, one of the lowest tax rates in Europe. Other favourable tax provisions are included in the Romanian fiscal legislation, such as: accelerated depreciation method for equipment; additional deductible allowance for profit tax purposes of

20% for eligible expenses related to R&D activities;


Various tax incentives for the employment of certain categories of employees.

Income tax exemption for employees working in the IT field

Structural Funds in Romania

As of 1 January 2007 Romania’s membership to the European Union became effective, making Romania eligible for funding from the European Structural Instruments: the European Regional Development Fund, the European Social Fund - known as Structural Funds - and the Cohesion Fund. In this context, the main goal is the reduction of the economic and social development disparities between Romania and the EU Member States, by generating a 15-20% additional growth of the GDP by 2015.

Through these Funds, the EU co-finances the national effort for development of priority areas previously identified in an EU-national partnership. The total financial support from the European Union amounts to EUR 19.7 billion, complemented by additional EUR 5.5 billion representing national co-financing from both public and private sources. Five national priorities have been identified and make up Romania’s developmental plan for the period 2007-2013: 1. development of basic infrastructure for transport and environment, 2. competitiveness of the Romanian economy, 3. human capital, 4. administrative capacity, and 5. territorial development. In the framework of the Convergence objective of the Cohesion Policy, seven Operational Programs have been elaborated by the Romanian Government and approved by the European Commission: Regional Operational Programme Increase of Economic Competitiveness Environment Transport Human Resources Development Administrative Capacity Development Technical Assistance

As mentioned above, private sector entities can access non-reimbursable grants by participating to competitive calls for proposals which are either with closed deadline or based on a first-come first served mechanism. The maximum value of the

grants and the aid intensity vary in accordance with State Aid principles, type of beneficiary and location of the project.

At the present moment, the following Operational Programmes (OP) and areas of intervention that may be of direct or indirect interest for private sector investor are still receiving applications:

Regional Operational Programme Urban Development Poles and Growth Poles social infrastructure projects business infrastructure (only North East region)

OP Increase of Economic Competitiveness support for poles of economic competitiveness and

consultancy services enhancing partnerships between universities/research

institutes and businesses and promotion of innovation and research within businesses

enhancing energy efficiency within enterprises and support for interconnections of power grids and gas grids

OP Environment water supply waste management systems heating systems protection against flooding and coastal erosion

OP Transport TEN-T networks development of national road, rail, air and naval transport

infrastructure port infrastructure modernization intermodal transportation development and enhancing

safety

Labour Market Shared Service Centres (SSC) and Business Process Outsourcing (BPO) is a specific market. They attract individuals with a strong educational background who can speak multiple languages. As a consequence, the hiring strategy can be challenging and there is a need to utilise the right sourcing techniques. A structured recruitment process which sets the right expectations and a well-developed internal talent management strategy is vital. Process reviews need to take place on a regular basis. In one of the most recent surveys undertaken by Grafton in the CEE Region, 3 key challenges that centres face as employers,


were clearly identified: quality of hire, time to hire and attracting the right skills set. The results suggest that talent acquisition strategies and employer branding activities need to remain a high priority (SSC/BPO Recruitment benchmarking survey 2012). The top 3 talent sourcing tools are: Employee referrals Recruitment agencies Job boards

Foreign language availability As the talent pool for SSC/BPO is quite specific, Grafton assesses the recruitment challenges and priorities every year, to monitor the development and changes in the labor market and talent management strategies. BPO/SSC centers are multilingual centers covering most European countries. To date, French, Italian Spanish and German are the most common language combinations on the Romanian market. Dutch/Finnish/Swedish/Norwegian would be considered as a difficult language, depending on the number of requested candidates. In accordance there is a language bonus available which may vary from 5% to 60% as set out below:

Language Combination Language bonus

English + German 10-20%

English + Dutch/ Norwegian/ Swedish etc

30-60%

English + French, Spanish, Italian 5-10%

Source: Grafton Romania, September 2012

By cities, the following features were identified:

Bucharest – capital city, with a population close to 1.7million, is considered a major market for SSC/BPO activity but, is easily saturated

Cluj-Napoca – second in demand after Bucharest; a dynamic market; some SSCs and BPOs present in the city; good level of languages (especially German, Hungarian, Nordics)

Iasi – very good universities in IT&C area; market is under development with an increased number of IT companies entering the city; perspective for creating a technical SSC/BPO hub in the area

Sibiu – good technical schools, high level of German and English languages.

Labour cost and regulations

Employment costs in Romania are split between employer and employee. To date, employee income tax and social contributions are set at 32.5%, while employers taxes stand at 28.85%. Therefore, the net salary is, on average, increased by 61.35%, resulting in the average gross amount. Salaries in Finance SSC/BPO

Position Gross Salary

Euro

Shared Service Centre Director 3,000 - 5,000

General Ledger Manager 1,300 - 1,800

General Ledger Clerk 550 - 650

Accounts Receivable/Payable Manager 1,000 - 1,500

Accounts Receivable/Payable TL 650 - 900

Accounts Receivable/Payable 450 - 600

Accounts Clerk (3 years’ experience) 550 - 600

Accounts Clerk (2 years’ experience) 450 - 550

Accounts Clerk (1 year’ experience) 350 - 450


The ITO sector in Romania records higher salaries. IT specialists are highly valued for their technical skills, high quality of education, and growing skills. We list below a selection of salaries recorded in the ITO sector.

Position Gross Salary Euro Shared Service Center Director 3,500 - 4,000 Team Leader 2,000 - 3,000 Service desk analyst “Level 1” 1,200 - 1,600 Service desk analyst “Level 2” 1,800 - 2,200


The labour market is regulated by the labour code, which, from time to time, is subject to amendments. The latest major changes were recorded in May 2011. The new regulations are in favour of the employee. The main general labour regulations are set out below:


Contracts: regular contracts are concluded for an indefinite period, while in the case of an employment contract, for a definite period, the regular limit is for 36 months

Trial period : 90 days for execution positions, 120 days for management positions

Holidays: between 21 and 24 days per year, including public holidays

Dismissals: in case of dismissal, if there is no fault on behalf of the employee, apart from the salary, there will be extra severance pay for the notice period (1 base salary – based on negotiations with the Union)

Overheads/overtime: available for overtime during the week, public holidays, night shifts. Overtime hours must be compensated with paid time off within the following 60 calendar days after the operation

Notice: 20 calendar days for execution; 45 calendar days for management; however this is negotiable between parties.

Real Estate The success of the shoring services in Romania, the continuous diversification of the range services offered by these centers, including within the companies and the launch of centers in various regional cities of the country, are proof that these companies have long-term plans, not only to operate from our country, but plan further growth of their Romania-based operations. Bucharest, as capital city, and with the largest office stock in the country adapted to the new trend by offering larger, phased business parks, in decentralized location such as north, north-east and west. Modern office supply is also available in the identified regional cities, mainly at a lower scale, as well as projects for larger business park type schemes. In response to the increased requirement for modern office accommodation, new trends have emerged as long as shoring services are set for significant growth:

Office & entertainment areas

A few years ago the RFP for identifying office locations to open a new shoring operation was quite simplistic. To avoid a detailed description, the desired office space had to offer decent natural light, AC (but not centralized), open space, Class B or lower, and well served by public transportation (applicable to Bucharest only). Saving costs through the real estate element was part of the strategy. However, the trend has rapidly changed. The massive entrance of multinational companies with their shoring

business arms increased competition for the same qualified work force. A quality work environment, together with the rest of the financial and non- financial package, contributes in either retention or attracting the talented labour pool. The office space started to play a major role: modern office space, availability of various entertainment options (i.e. playgrounds, commonly including mini-golf, fussball, table tennis, cafeteria, gym area), attractive space fit-out, decent and secure neighbourhoods, all had a major impact in relation to the employees. Therefore, a financial effort was made by the employer by selecting a modern business park or office building over obsolete buildings, or by increasing the leased area by converting office areas into large recreational areas.

‘’For Stefanini, Romania is an important delivery hub, we operate here our custom software development, service desk and IT infrastructure management centres. Romania is a highly attractive employer market due to availability of qualified workforce – over 100,000 highly skilled engineers active on the Romanian IT market – which in addition to their excellent technical and language skills, have a similar organizational culture and mentality to Western Europe. The main reason behind opening operations in Bucharest and Timisoara is the proximity to the well-established university campuses.

Our medium term plans include consolidation and expansion of client portfolio in both Western Europe and CEE markets by proposing an extensive IT service offering’’.

Sabin Girlea General Manager

Consolidation a new trend

The initial operations started by employing a couple of dozen of IT-specialists. The rapid growth was recorded by reaching hundreds of specialists in 3-5 years over 2 or 3 (or even more) waves of growth. Some of the office buildings offered expansion space, some did not. The operations expanded either in nearby locations or even worse, wherever decent office space was available for immediate occupation. These days, companies have reached a certain level of stability. Companies are looking either to consolidate operations or to consolidate all signed contracts in order to allow relocation of all operations under one roof and cost efficiency.


Quality office space

We have noticed an adaptation process to occupiers needs. Projects have been delivered to meet occupiers technical specifications. For example, there is improvement on HVAC systems to support high workstation density per sq m, IT&C systems, telecom operators, ability to accommodate heavy server rooms (increased floor loading capacity and low temperatures) but, less sophistication in other space features such as carpeting, rest rooms, meeting rooms, entrance lobbies, ground floor retail areas and landscaping. On the contrary, regional cities which offer modern office accommodation incorporate all the features mentioned above. New office buildings or business parks in regional cities often offer Class A buildings at discounted rents in comparison with the capital city.

Some of the most successful existing or upcoming projects in Romania include:

Swan Office & Technology Park by Chayton Capital in Bucharest

West Gate by Genesis Development in Bucharest AFI Business Park by AFI Europe in Bucharest Floreasca Park by Portland Trust in Bucharest Hermes Business Campus by Atenor Group in Bucharest City Business Centre by Modatim in Timisoara United Business Center by Iulius Group in Iasi LakeSide & Tower by Iulius Group in Cluj Napoca Commercial terms

Due to large leases signed by these type of companies, or the increased potential to expand operations in the selected locations, a financial package is set up to meet occupiers expectations. Incentives are added to discounted rents, which may include rent free periods, fit-out contributions and moving costs which are either granted at the beginning of the lease or over the lease period (one or a combination of the prior mentioned incentives).

In Bucharest, the average headline rent is estimated at €12-14 m2 per month, but could be further decreased depending on the location, brand awareness of the occupier, or size of the leased area, which refers to Class A buildings in term of quality of finishing, but enjoying Class B locations (decentralized office submarkets).

In regional cities, the headline rent is slightly discounted but, buildings are above Class B and are maybe considered Class A by local standards, with most of the projects enjoying very central locations. Another cost which contributes to the overall

cost is the service charge. The lowest service charge costs recorded in the regional cities and Bucharest are in former industrial sites converted into business parks for which subsidies are granted.

Availability of large areas for lease or pre-lease

Large available areas can be easily identified in Bucharest’s decentralized office submarkets. By large, we may understand areas which range from 1,000 to 30,000m2 per building. Currently over 80 buildings which can offer areas over 1,000m2 were identified in Bucharest’s modern office stock or planned to be completed by year end. For identified regional cities, by large areas we may consider office areas starting from 500 to 5,000m2. However, regional cities may accommodate 10,000+m2 requirements but, upon signature of a pre-lease agreement.

Occupier Traffic Lights

Source: Jones Lang LaSalle

To date, the largest relevant open market office transaction concluded in Bucharest is of 20,000m2 (consolidation of Oracle, 2012, pre-construction), while in the regional cities, the largest is of 9,500m2 (call center, in 2009, lease) recorded in Brasov.

Infrastructure & public transportation

Bucharest’s recorded major infrastructures upgrades. The opening of the Basarab Overpass has shortened the travel time from CBD to western areas of the city, while the opening of the Floreasca Overpass eased the access to the northern Pipera. On the other hand the recent opening of A3 highway Bucharest –Ploiesti will commute traffic from Baneasa/DN1. In regional cities upgrades refers to modernization of the airports, changes in the car traffic flow by setting up 1 way streets around trafficked areas, mainly central areas, where office projects are usually developed, as well as upgrades or construction of ring roads to avoid increased traffic within the city centers. Public transportation is mainly relevant in Bucharest, and driven by the presence of close metro hubs. If above ground public transportation facilities are available these represent a plus to a

City 2011 2012 2013 2014 2015 Bucharest Timisoara Cluj-Napoca Iasi Landlord Market: timing for lease expiries and rent reviews should be avoided

Balanced Market: market uncertainty – timing for lease expires worsening

Tenant Market: good timing for lease expiries and rent reviews


certain location but not necessary a must. Connection by railway is more relevant for regional cities and less relevant to Bucharest. Availability of shuttle buses offered either by the landlords or occupiers is as well considered a plus and not anymore a must applicable to both Bucharest and regional cities.

Office market standards

We list below the most common technical features of the office premises which could be find in the modern buildings in both Bucharest and regional cities which are considered established shoring destinations. These include, but are not limited to:

Standard

Floor layout: Large open, exceeding 1,000m2

Ceiling: Suspended ceiling

HVAC: 10m2/work station

Security: CCTV, card magnet access, human security services around the clock

Carpet: Heavy traffic resistant

Lighting: 500 lux in office area

Technical live load: 300 kg/m2

Telecom Operators: Access granted to preferred suppliers

Electricity: Back- up generator for the life safety system

IT&C: Electrical cable and sockets

Toilets: Modern finishes, no in accordance with local regulations to meet high density occupation

Bicycle: Secured parking ramps

Parking Ratio: 1: 40 - 1:70, under and above the ground levels

Reception: Central reception or dedicated reception areas to anchor tenants

Non Standard

Raised floor: 1 box/20m2, 10-12cm height

Property Management: Building Management System

Kitchenettes: Preparation for kitchenettes. Water supply and sewage can be delivered upon request.

The leasing market Bucharest and top regional cities is aligned to international standards. Historically, Bucharest was aligned to international standards while in top regional cities this need emerged in the last 5-7 years upon request of multinational occupiers to find same market condition as elsewhere in the wider European zone.

Summary During the research process carried out to identify main globally shoring services providers, we have come to the conclusion that most major players have opened at least one centre in Romania. In addition there is a constant trend to set up in Romania higher value functions.

There is increased competition to attract shoring services not only between Bucharest and top regional cities, but between Romania and neighbouring countries such as Hungary, Czech Republic, Poland and most recently Turkey.

Availability of the consistent state aid schemes will represent a key driver to attract larger multinationals to set up 200+ specialist centres in Bucharest and identified regional cities. The legal framework is straightforward, track record available, as well as increased probability to extend the duration of the state aid schemes beyond 2013.

Romania offers highly qualified and talented source pool. There is language availability for both common foreign languages as well as for Nordics languages. Combined financial and non-financial packages still maintain the country on the map of low end remuneration system compared with Western countries or even core closer Central European countries.

Real estate infrastructure has diversified and improved with modern office supply now available in the established Romanian shoring locations as well as other few emerging shoring locations. The fit-out of the office space started to play a major role in retention or attracting the talented work pool. The office space is not any more considered a high density cubicle environment but a place where highly qualified work force delivers services and products comparable with those achieved and delivered in Western countries.


Information on content providers Jones Lang LaSalle (NYSE: JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 195 million square meters worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $ 47 billion of assets under management. For further information, please visit www.joneslanglasalle.com

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com.

The Grafton Group was established in 1982 and we have 81 offices in 19 countries. We have placed candidates in over 70 Countries. Our two primary brands are Grafton Recruitment and SpenglerFox. Grafton focuses on a 'success fee' basis and temporary workers. SpenglerFox is our executive search brand. The case studies and commentary in this set of reports are just a short selection of the staffing work we have done with our client partners across Central and Eastern Europe. Our consultants are experts in their field and client references are available by request.

Market Practice

Lease length

The average lease length is 5 years, but lease length of 3 to 5 years can be secured in regional cities by smaller tenants. Leases of 7 to 10 years are rarely seen on the market, in general for larger pre-leases by multinational occupiers.

Payment terms

Rents denominated in Euro but paid in RON. Rents are paid quarterly or monthly in advance. The exchange rent is stipulated in the lease contract, most common used the Central bank’s exchange rate at the date of issuing the invoice.

Deposit

It is common to agree on a cash deposit or bank guarantee equivalent with 3 months rent.

Indexation

Annually, in general Euro CPI

Rent reviews

Rarely agreed by the Landlords. Could be granted to larger multinational occupiers.

Service Charges

Open book account system. Yearly reconciled, at the beginning of the calendar year. Mainly payable monthly in advance. Services are clearly listed in the lease contract. Utilities inside the leased areas are separately metered and paid.

Incentives

Rent free period spreads along the lease or at the beginning of the lease period, fit-out contribution, parking spaces free of charge, archive areas free of charge, etc.

Insurance

The landlord covers costs of building insurance (recovered from tenants from service charge). Tenants are responsible for insurance of their own premises, contents and civil liabilities.

Ad-on factor

Most common between 6-9%.

http://www.joneslanglasalle.com/

Jones Lang LaSalle

Troy Javaher Managing Director Jones Lang LaSalle Romania +40 21 302 3400 [email protected] www.joneslanglasalle-romania.com Levis Vlad Head of Research Jones Lang LaSalle Romania +40 21 302 3400 [email protected] www.joneslanglasalle-romania.com Marius Scuta Head of Office Agency and Tenant Representation Jones Lang LaSalle Romania +40 21 302 3400 [email protected] www.joneslanglasalle-romania.com Alex Ash Director – EMEA Location Consulting Services Jones Lang LaSalle UK +44 207 852 4848 [email protected] www.joneslanglasalle.com

Content Partners

Camelia Stanciu Senior Partner/ Advisory Services Ernst & Young SRL Romania +40 21 402 4000 [email protected] www.ey.com Robert Kicsi Country Manager Grafton Employment Group [email protected] +40731 460 460 Alexandra Tulceanu Senior Consultant [email protected] +40731 144 184 www.grafton.ro

October 2012 Advance publications are topic-driven white papers from Jones Lang LaSalle that focus on key real estate and business issues. www.joneslanglasalle-romania.com

COPYRIGHT © JONES LANG LASALLE IP, INC. 2012. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior 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 offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.

2012 romania shoring paper

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