Crosspoint: Currently, there is a relatively small number of green office buildings throughout Romania
2017 has been a good year for the office market all throughout the CEE region: low vacancy rates (Bucharest - nine per cent, Warsaw - 14 per cent, Budapest - 9.2 per cent, Prague - 10.3 per cent, Sofia - 9.5 per cent, Bratislava - 6.6 per cent), growing demand for large spaces, new quality deliveries, and a large number of new leases, according to Ilinca Timofte, Research Analyst at Crosspoint.
2018-04-04 09:48:46
The prime rent in Bucharest (18.5 Euro/sqm), even though lower than in Warsaw or Budapest (around 22 Euro/sqm) has almost reached Prague′s level (19 Euro/sqm) and exceeded cities like Sofia (13.5 Euro/sqm) and Bratislava (14 Euro/sqm).
Romania is quickly catching up to its CEE peers, Timofte told The Diplomat-Bucharest: "With a qualified, educated workforce, Romania has become a new target for multinational companies and especially for those operating in the IT and BPO/SSC sectors. Unlike some other CEE countries like Slovakia and Hungary, where the office market is concentrated in the capital cities, a lot of Romania′s regional cities (Timisoara, Iasi, Cluj-Napoca) have growing office markets. The office transactions in 2017 accounted for 16 per cent of the total real estate investment volume - around 170 million Euro. We are expecting that 2018 will bring new investors in the office segment, thus deepening the Romanian office investment market which is less diverse than that of other CEE countries."
The main areas in Romania in terms of office space are Bucharest (2,100,000 inhabitants), Iasi (372,000), Timisoara (331,000) and Cluj (324,000), becoming in recent years players of the global economy and attracting worldwide players, according to Alin Obretin, Account Manager, Office & Retail Agency, Crosspoint.
"The development of IT&C and R&D (Research and Development) companies has boosted the office market, appealing to international and local companies, they are particularly interested in cities that have university centres and can deliver high-quality workforce that suits their business needs," he added." Also, they are interested in Class A office buildings, green buildings that can attract employees, offering more benefits than can re-energize them. In Bucharest the current stock is 2.75 million sqm, of which 125,000 were delivered in 2017, in the same year in the office market were traded over 320,000 sqm, the largest new leases in the Romanian capital were Amazon - pre-lease 13,500 sqm, Stefanini - pre-lease 6,750 sqm in Globalworth Campus, and Bitdefender pre-lease 9,200 sqm in Orhideea Towers. New buildings such as The Bridge (Phase 1 - 36,000 sqm), Timpuri Noi Square (Phase 1 - 32,500 sqm), Landmark (22,000 sqm), Aviatorilor 8 (8,000 sqm), and Sema Office Paris Building (10,800 sqm) have been delivered in the past year.
"The total office stock in Cluj-Napoca at the end of 2017 was 280,000 sqm, out of which 75 per cent is class A, 15 per cent class B and 10 per cent class C, while the vacancy rate is seven per cent. The following projects were delivered in Cluj-Napoca: The Office (16,770 sqm), Novis Plaza (14,171 sqm), Vivido Business Centre (7,000 sqm) and Central Business Plaza (4,000 sqm), totalling 44,000 sqm in 2017.
"Timisoara currently has a total stock of 240,000 sqm, of which 63,000 sqm were delivered in 2017, the city being one of the preferred IT&C and R&D centres by international companies constantly expanding their space. The most important leased spaces were by Bosch, Autoliv, Visma Hella, Sap, Atos, and Nokia.
"In Iasi, the current stock is 230,000 sqm, into which companies such as Accenture, Xerox, Amazon, Oracle, Unicredit, Continental, Arcadis have expanded in recent years, leading to a lower vacancy rate in office buildings of four per cent. Buildings such as Ideo 1, Tester 2, Sandru Office, and Tudor Centre have a 100 per cent occupancy rate, and UBC Palas, Moldova Centre around 90 per cent."
According to Obretin, the same trend is expected in the following years for the big cities of Romania, with office deliveries at 350,000 square meters in Bucharest, and over 100,000 square meters in Cluj, Iasi and Timisoara.
Currently, there is a relatively small number of green office buildings throughout Romania – around 70 such buildings, most of them in Bucharest, said Ilinca Timofte: "However, driven by the demand from the young generations and the increasing global need for sustainable developments, green office buildings will continue to appear on the Romanian market. We are already noticing a trend towards campus style developments, with green areas and interior gardens. Aside from the energy efficiency aspect, developers will also need to pay more attention to the buildings' interiors. Green walls and roofs, an increased integration of daylight versus electrical light, fresh air intakes. Given these circumstances, 2018 and the following years will see a rising trend in the development of green office buildings."
Referring to main market stimulators these days, Cosmin Grecu, MRICS, Managing Partner, Head of Valuation & Research at Crosspoint explained: "Given the diversity of the demand, whether this is sourced from IT&C, Consulting, Banking or Manufacturing all are influenced by the good economic outlook, especially the strong GDP growth. In the short term this growth is generating new demand; companies are looking to expand and invest in new operation. So, the general economic outlook is generating office demand throughout all sectors. In the medium to long term, GDP will generate low unemployment and high wages, and this will hurt mostly low-qualification outsourced services and some of the BPO/SSC services. Also, the need to update existing office space to new environmental regulations and standards, the need for a more productive and friendly work environment, and special amenities are key factors for a strong demand for new and up to date office developments."
Furthermore, 2018 is presenting a series of great opportunities for the Romanian real estate market, but especially for the office market, which has gone through significant changes during past years, according to Simona Urse, Associate Director, Office Agency, Crosspoint.
"Deliveries will accelerate in 2018 after the slow rhythm in 2017," she added. "The high level of deliveries on the office market will lead to the overrun of office demand in Bucharest, we expect that in 2018 many new office buildings will be fully leased before completion. The Bucharest office market is maturing and is willing to pay more for buildings which offer an exclusive location and amenities. Experienced developers are placing the demands of their clients at the core of their business, they care more about services and facilities. The extension of the metro network will bring new opportunities for developers. The Bucharest office market is now focusing on new hotspots like Centre-West, Expozitiei/Piata Presei, well suited for the office market. The main challenges for the developers are regarding the infrastructure. Some of the established office areas are close to reaching their maximum potential due to infrastructure limitations."
In her opinion, 2018 has the premises of becoming one of the best years for the Romanian real estate market: "This is driven by the massive growth in both offer and demand, particularly in Bucharest and Cluj and by the growing interest of international companies seeking to expand their business."