Around 130,000 sqm of new modern offices could be delivered this year, with a total of roughly 360,000 sqm possible for the 2022-2024 period, though the 2024 calendar could be postponed, according to real estate consultancy Colliers.
The agency’s consultants point out that annualized demand for office spaces has officially returned to pre-pandemic intensity, recording 2019 levels, but many challenges exist on the horizon, due to rising costs of finance and the overall economic uncertainty.
“Besides increasing the uncertainty factor, the conflict in Ukraine has not had visible effects on the local office market, but it is fallout – particularly the higher inflation and subsequent rising cost of risk – is relevant. Rents for upcoming projects reflect the higher construction costs to a certain extent. In Bucharest, due to certain administrative blockages, the pipeline for the next few years will likely remain low. The land plots without zoning will likely see limited progress on getting authorizations. Consequently, the sentiment changes towards a landlord’s market, particularly in very central locations,” explained Silviu Pop, Director CEE & Romania Research at Colliers.
At the end of H1 2022, the office stock in Bucharest reached 3.27 million sqm, with around half of the market comprised of buildings older than 10 years and the rest delivered since 2012.
“As a matter of fact, all office buildings delivered since 2017, i.e., 31% of the modern office stock in the capital, are LEED and BREEAM certified, vacancy for these prime office spaces being mostly around 11% on average and prime headline rents are in €17 -19 per sqm. The rent gap between older and newer similarly located buildings will remain in place and only widen as capex cannot fully compensate for the advantages that the latter have,” says Victor Coșconel, Head of Leasing | Office & Industrial Agencies at Colliers.
Across CEE markets, office vacancy rates have been slowly stabilizing, following a rise into double digits for many markets during the pandemic, as both supply and demand adjust.
“Most typical risks in the process of procuring office space include a lack of flexibility in the lease terms and unrealistic assumptions about what can be delivered within the available fit-out budget,” added Coșconel.
