Bucharest’s modern office stock reached 3.30 million sqm at the end of the third quarter of 2022, as only five office projects were delivered during this period. Moreover, according to CBRE Romania, just one additional project is estimated to be completed by yearend, making 2022 the year with the lowest number of office buildings delivered in the last five years.

CBRE explained that a combination of factors led to this limited number of new deliveries, among them the challenging context of permits, the rise of construction costs, and the pandemic’s effects on the construction market. The investors’ appetite to buy and develop is quite low in Bucharest, where public authorities didn’t manage to solve the urbanistic plan (PUZ) issues and the approval blockages linked to it.

In the medium to long term, the effects have the potential to reverberate both in the new supply shortage and in price increases, CBRE also said.

“There are two major topics that the office leasing market in Bucharest must address nowadays, one is the limited number of projects under development in the short term, and the other is the growing pressure on rents caused mainly by the economic climate. In addition, the overall vacancy rate started to register decreases, small ones, but the descending trend indicates a lesser availability for large compact spaces to lease. The ace in the sleeve is now at the office landlords who have their buildings ESG certified because companies are willing to incorporate in their corporate strategy environmental sustainability and to pay for their employee’s wellbeing at the office,” says Tudor Ionescu, Head of A&T Services Office at CBRE Romania.

Covering 31,500 sqm, Sema Offices II London and Oslo, developed by River Development, is the largest scheme of the five office projects completed in Bucharest in the first nine months of 2022. The second phase of AFI Tech Park (24,500 sqm) is second in the top, followed by the Tandem building (21,000 sqm) developed by Forte, Expo - Phase 1 scheme (21,000 s m) developed by Atenor, and Hagag’s H Tudor Arghezi (6,500 sqm).

The second phase of One Cotroceni developed by One United is the only new development estimated to be finalized by the end of the year in Bucharest. With a GLA of 34,500 sqm, it is also the biggest office building the local market welcomes this year.

However, CBRE’s forecast for next year is optimistic: another 94,000 sqm in five buildings, now in different construction phases, will raise the capital city’s modern stock to 3.43 million sqm.

The total leasing activity (TLA) in Q3 summed at 73,300 sqm, 5% less compared to the same quarter of the previous year. Computers & Hi-Tech companies continue to dominate the leasing activity and maintain their leading position with 40% from leased areas.

“The Q3 prime rent was maintained at EUR 19/sqm/month, while net effective rents continue to benefit from the landlords’ flexibility when negotiating lease terms and incentive packages. Nonetheless, the economic environment most likely will have a toll on rents’ evolution, as office owners will have to address the rising inflation and increased operational costs, all these aspects in conjunction with the limited pipeline to be delivered on short-term in Bucharest,” reads the company’s press release.

CBRE Romania also said that, in the first nine months of 2022, the investment volume in Romania amounted to EUR 654.2 million, 16% higher compared with the same period of the previous year but 12% lower compared to the same period of the pre-pandemic year 2019. Properties in Bucharest attracted 55% of the investment volume, while 45% was spent on properties located in regional cities.

“With several major transactions found in the negotiation process at the end of Q3 but estimated to be signed by the end of the year, the annual investment volume is forecasted to overpass the EUR 1 billion threshold, resulting in a total value comparable with record years such as 2019 and, looking further on, 2014,” the same source said.

irina.marica@romania-insider.com

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