Across Romania, the new office spaces delivered in the first half of 2020 reached almost 105,000 sqm, with Colliers International consultants expecting a stagnation in new contracts, except companies that are pressured to move or expand, considering that their representatives have no clear vision for the way in which employees will carry out their activity in the future or the way in which businesses will evolve.
As regards the construction activity on the office space market, Colliers experts say it continued almost normally in the spring, even in the context of a deadlock caused by the coronavirus pandemic, adding there are no major delays for the office buildings scheduled for completion in 2020, with a potential to deliver approximately 230,000 sqm of office space, which has already been fully contracted or largely pre-leased.
Of almost 105,000 sqm of modern office space delivered in the first half of 2020, the bulk was carried out in the first quarter of 2020. Two thirds of the total surface area delivered are covered by the Ana Tower project and the third phase of the Campus project developed by Globalworth.
“The decline in new demand is starting to be felt only now, with the second quarter of 2020 seeing one of the lowest levels of this cycle – just 16,000 sqm. Although the first half of the year does not look bad at all, there still is a huge inertia at stake and, moreover, based on our experience, talks regarding the future lease contracts are not going well at all. The second half of the year could bring an additional slowdown in the office space lease activity,” said Sebastian Dragomir, Partner & Head of Office Advisory within Colliers International.
No major changes in rent prices have bene noticed so far, but Colliers International consultants say changes are likely to occur. On the short term, there are several aspects impacting the evolution of rent prices: first of all, since tenants may not be open to moving, against the backdrop of related costs, and current owners may not be as flexible as to offer charge lower rent; meanwhile, companies willing to occupy new spaces (through relocation or new demand) will probably motivate owners to be a little more generous (mainly via incentives/gratuities, rather than reducing the rent). Also, there are enough large spaces, fully equipped and available for sublease at competitive rent prices.
“In general, the pressure on rents seems to grow, with arguments for an evolution in the same direction and on a longer term. Meanwhile, the vacancy rate kept growing in the first half of 2020, reaching 11.25% end-June 2020, higher by one percentage point than at the end of 2019, with the bulk of important market segments seeing an increase in available spaces, except the Center-West (modest decrease) and Dimitrie Pompeiu (stagnation) areas,” Dragomir also said.