According to Pop, rents for upcoming office projects will reflect to a certain extent the higher construction costs. In Bucharest, due to certain administrative blockages, the pipeline is likely to remain low in the coming years.
“The land plots without zoning will likely see limited progress in getting permits. Consequently, the sentiment changes towards a landlord market, particularly in central locations”, explained Silviu Pop.
The vacancy rate of modern offices, built in the last ten years in Bucharest, stood at around 10% in mid-2022 compared to almost 18% for the buildings that were delivered until 2012.
This major difference highlights the qualitative improvements of offices delivered in Romania, as older and well-positioned buildings have also managed to age quite well. Coupled with a shallow pipeline for the next few years, this could lead to some significant supply constraints if demand picks up, according to Colliers’ experts.
The annualized demand for office spaces has officially returned to pre-pandemic intensity, recording the level in 2019, but many challenges lie on the horizon, due to rising financing costs and the overall economic uncertainty.
After two and a half years since the onset of the pandemic, Colliers consultants note that the shift in workforce expectations towards hybrid or remote work clearly is permanent. Most companies seem to have adopted a hybrid work model, with a balanced shift between remote and office-based work. Currently, employees’ physical presence in the workspace rarely exceeds 40-50% as compared to pre-pandemic levels.
The modern office stock in Bucharest reached 3.27 million square meters at mid-2022, with around half of the market comprised of buildings older than ten years and the rest delivered since 2012, according to Colliers’ recent “ExCEEding Borders: CEE-15 Office Markets in Turbulent Times” report.
Colliers consultants expect some 130,000 square meters of new modern offices will be delivered in 2022, with a total of roughly 360,000 square meters possible for the 2022-2024 period, though the 2024 calendar could be postponed.