The report also shows that, overall, the total demand saw an increase of almost 6% versus 2021, up to approximately 279,000 square meters, while new demand climbed almost 17% versus 2021, up to 122,000 sqm.
Last year saw a delivery of 125,000 square meters in new modern office spaces in Bucharest, taking the overall stock to nearly 3.3 million square meters.
Colliers consultants note that deliveries were quite widespread throughout Bucharest, both in well-established locations and in developing areas. The new supply received a mixed reception, with fairly high vacancy rates for some of the newly delivered buildings.
“Last year saw a handful of meaningful events, like the fact that we have had some major new entries on the local market, notably the business service centers of Ford and Booking. It’s also worth noting the material slowdown of take-up from IT&C companies, which in previous years accounted for at least half of the total demand, but last year generated 37%. There are likely several factors behind this development, from the continued tightening of the labor market to the potential impact of the new hybrid work regime. The entrenching of remote work in almost every organization has meant that offices no longer represent what they did in the past. However, we are still pretty far away from seeing this shift in its final form, as companies are still seeking the most appropriate formula or the correct hybrid work dosage. However, it’s clear that increasing the number of employees no longer seems to necessarily lead to a higher office. At the same time, the need for a bigger office expressed by some companies which expanded greatly before the pandemic, can now be balanced by remote work”, said Victor Coșconel, Head of Leasing | Office & Industrial Agencies at Colliers.
Either way, given these shifts, there is quite a lot of activity regarding the renegotiation of contracts, including some of the bigger leases in Bucharest. On the other hand, less attention is given to relocations, as companies would rather keep their current offices given the increased costs such an operation would incur.
“In the next two years, the only relevant situations in which companies would be willing to actively seek relocations seem to be related to a suboptimal quality of the building. Some prefer to keep their space given the uncertainties, while others seem to believe that a smaller office is the way of the future,” Colliers consultants also said.
In terms of rents, Colliers consultants point out that they are under upward pressure in some submarkets, even beyond the inflation indexation, and expect landlords to transpose most of the inflation indexation into rent prices. At the same time, the half-year vacancy level 15.25% remained unchanged at the end of 2022, but was lower than 16.5% at the end of 2021.
“This is quite a positive development as a year ago, we were expecting a potential increase of up to 2-3 percentage points in 2022, on account of the softer economic prospects and the impact of hybrid work, both of which did not lead to the negative developments we were expecting. An important thing to note is that while the aggregate vacancy rate is at around 15%, the vacancy for good, fairly new and stabilized offices (so looking past the newest buildings added to the market) is in single digit territory. In regional office markets, with a high concentration of direct deals, vacancy was, at the end of 2022, below that of Bucharest, attesting to the growing strength of these markets”, said George Didoiu Director | Tenant Services | Office 360 al Colliers.
All in all, if Bucharest’s office market faces a stock shortage per capita as compared to Western European capitals, then the development potential of Romania’s regional office markets is even greater, particularly in light of their dynamic employment market.