Around 500,000 sq. m of office spaces are unoccupied in Bucharest, reflecting a vacancy rate of 15.2%, the highest availability being reported in the Pipera North, Center-West and Floreasca – Barbu Vacarescu submarkets. There is still a significant discrepancy between A and B-class projects in terms of vacancy rates, a difference which could be addressed through investments made with the purpose of modernizing and bringing old buildings to current standards, including those related to ESG, according to data from the Cushman & Wakefield Echinox real estate consultancy company.
As a consequence, 50% of the total vacant spaces (~250,000 sq. m) can be found in buildings developed over 15 years ago, most of them requiring new investments in order to attract new tenants. On the other hand, unoccupied spaces in projects built in line with market expectations in terms of efficiency and quality standards, will benefit from a higher degree of absorption in the following period, thus reducing the risk of a market blockage in an environment characterized by a sharp decrease of the development activity on the short and medium term.
Madalina Cojocaru, partner Office Agency Cushman & Wakefield Echinox:” The global office market is going through a period of readjustment imposed by the hybrid work model, a challenge which we are also facing in Romania. More specifically, we refer to the actual space utilization rate, to the resizing of the rented areas and to the higher tenants demands pertaining to the overall quality and also to the energy efficiency of the office buildings. Having the employees back in the offices will continue to be a challenge, but most companies have defined their workplace and occupancy strategies, and we therefore expect to see an increased activity in the market in the sense of consolidations or relocations”.
According to the Bucharest Office Market 2022 report released by Cushman & Wakefield Echinox, 50% of the Bucharest office stock has an average age of over 10 years, and almost 15% is older than 15 years.
The “youngest” office areas are Center-West and South, with an average age of the office buildings of 7 and 9 years, respectively.
In terms of leasing activity, the new demand (new leases, pre-leases and relocations from non-competitive stock) had a share of 57% (185,000 sq. m), of the total office take-up in 2022. This marks an increase by more than 10%, a positive aspect which encourages us to be optimistic in regards to the general office market demand.
Center-West, Floreasca – Barbu Vacarescu, Center, CBD and Dimitrie Pompeiu are, in that order, the sub-markets which attracted the most requests for office spaces in 2022. In comparison, Floreasca – Barbu Vacarescu, CBD, Dimitrie – Pompeiu and Expozitiei were the preferred destinations in 2021.
Out of the 11 office sub-markets in Bucharest, only 4 benefited from new projects in 2022, a number which will be reduced to 3 in 2023.
The prime headline rents have seen an upward movement in 2022, reaching a level between €19.00-21.00/ sq. m/ month, the highest in the last 14 years, as a result of the low pipeline and of the surging inflation. Bucharest remains one of the least expensive capital cities in the Central and Eastern Europe in terms of office rental prices, thereby maintaining a competitive advantage when it comes to attracting new businesses.
However, the real estate consultants expect this upward rental trend to continue over the next 12 months, given the low pipeline for 2023 and 2024.