Zacaria Group started its activity in 2008 in Sibiu, specializing in residential projects. In 2009 they expanded in the industrial sector and now own and administrate eight parks across Sibiu, Craiova, Oradea, Arad, and Alba Iulia.
What is Zacaria’s current footprint in Romania and the angle you chose when approaching the country’s secondary cities?
In 2008 we founded Zacaria Developments with the purchase of several plots of land. The initial plan was to exit for a profit, but as the financial crisis hit, we decided that it was wiser to develop them rather than wait for better times. At the end of 2009 we bought our first industrial building which today is known as General Industrial Park. After renovating it, we started leasing spaces and it quickly became evident that this business would prove to be a viable model. Between 2009 and 2012 we primarily focused on buying brownfield buildings, which we stripped down to bare structure and refurbished into modern spaces. As the design of these brownfields was not unitary, we were able to attract and accommodate smaller clients and inadvertently we became a type of business incubator. In 2018, we modified our plans to include the purchase of well-located lands for the development of greenfield class A industrial parks. On these lands we developed buildings in excess of 40,000 m2 which consequently attracted a more discerning type of client, namely those looking for warehousing or production facilities of the highest standard.
Modernizing brownfields is not a challenge many like to take on – what was your experience with them, and how do they differ from the new builds?
The main difference between the two is mainly cosmetic, however circulation and parking can be a challenge in these older parks. Whilst energy efficient materials are used in refurbishments a new build will always be somewhat more efficient. It is also easier to modify the size of spaces in newbuilds than brownfields which modifications are often necessary to meet the client’s needs. A major advantage of refurbished brownfield industrial parks is that they are normally located closer to the city, and residential neighborhoods have in the last years been expanded and are getting closer to these parks. This affords our clients to easily employ people as most employees are looking to work closer to where they live with short or no commute time.
All your industrial properties are located outside the capital city - what is the reason behind this business strategy?
It's more exciting, and certainly riskier to be a pioneer. Of course, we could have taken the safe route and developed where all our competitors did, but our research suggested that sufficient demand existed in locations where the competition had not yet developed anything. So, we started in Sibiu where, until 2.5 years ago, none of our competitors were present. Later we extended to Oradea, Alba Iulia and Craiova - Craiova was a no-brainer for us since the industrial platform we bought over there is 100 m away from Ford. In the end our financial results have proven that our research was sound and taking the risk was not so risky after all. Our CEO from Malta once told me: "Jonathan, build it and they will come." The wisdom and accuracy of these words have been proven time and time again.
Very interesting business perspective - what are some of the projects you're working on at the moment, in light of the latest crisis?
Since the pandemic started, we focused on filling any voids in our industrial parks and in the meantime, bought two plots of land: one in Sibiu West - on the highway and another one in Pitesti – at the intersection to Craiova. These two locations are ideally suited for logistics and manufacturing. Construction permits for both locations will be issued shortly and development is planned. As competition around the country has increased sharply in the last 3 years, rental rates are suffering. This is further exacerbated by the recent increase in the cost of construction materials. It is unclear what the long-term consequences of these two factors will be, but one could accurately conclude that either rental rates will increase, or the larger developers will start to accept a lower yield. However, we are in talks with interested clients and by the middle of 2022, will likely resume works. Our business model is based on developing speculatively rather than signing up our clients beforehand. Our solid reputation gives a great deal of comfort to any prospective clients. Generally, we're considered to be a flexible and friendly landlord.
You speak like you are here to stay for the long term - what makes Romania a good place for long term business in the industrial space?
The industrial market in Romania still has immense room for growth. The demand is constant, and the supply is, at this time, unable to keep up. So, besides the opportunities that demand creates is also the people who I employ. I have been an employer since I was 21 years old and the loyalty and dedication towards the success of Zacaria that I found among my Romanian colleagues’ is simply incredible and something I have only ever experienced in Romania.
Your first development steps were in the residential sector though – are you also looking to capture opportunities in this segment in the coming years?
So far, we have developed three residential projects that are fully sold - two in Sibiu (Valetta Lane and Valetta Valley) and one in Bucharest (Valetta Residence). In Q3 of this year we are going to start two new residential projects - one in Sibiu (125 apartments in three blocks) located near the future regional hospital, and one in Craiova, in the heart of the historical center (200+ apartments and a boutique mall). In the meantime, development of the American Village residential project located in Voluntari is ongoing and due to be complete in the next 24 – 30 months.
