Office vacancy rates reached historic lows in Bucharest: net demand remained at comparable levels over the past two years

The vacancy rate in the Bucharest office market dropped last year to an historic minimum of about 6.6 percent, compared with 9.2 percent at the end of 2017. The decrease occurred as a result of a lower development activity compared to the demand of office space, real estate consultancy JLL shows.

Last year, developers completed new office projects totalling 145,000 square meters (sqm), as the surface leased through real estate consultants was 335,000 sqm, of which 45 percent (150,000 sqm) represents new demand (pre-leases, new contracts, extensions of existing surfaces and relocations from other buildings than Class A and B buildings).

JLL was involved in the largest office space leased in 2018, being the market leader at national level, with 23 percent of the total traded, as well as Bucharest, with almost 25 percent, among the most important transactions being Microsoft (24,200 sqm) or Thales (5,300 sqm).

“Even though there are significant differences between the 12 office sub-markets in Bucharest in terms of office space available, the vacancy rate continued to decline in 2018 to an historic minimum, amid a relatively modest development of activity in 2017 and 2018,” said Marius Scuta, head of office of the agency and tenant representation in JLL Romania. “Net demand remained at comparable levels over the past two years, around 150,000 sqm, absorbing the new offer.”

According to JLL data, the fewest available spaces are in the Centre-North, Floreasca Barbu-Vacarescu, Centre, Centre West, and CBD areas, where the vacancy rate is below five percent, while in the Baneasa and Pipera Nord most of the empty spaces are located.

“We see areas where practically there are no options for a potential tenant who wants to expand,” said Maria Florea, head of office agency JLL Romania. “Against the backdrop of low availability of premises, we may witness an increase in rents, so those looking for offices need to make quick decisions in this regard. For those who want to move in the first half of this year, the speed of reaction and decision-making is crucial to securing attractive rents. We are currently seeing a gap between the speed of developing new projects and the pace at which companies are expanding, which will most likely begin to reduce this year if we look at the developer plans for 2019 and 2020, namely the construction of about 700,000 sqm of new projects.”

The prime rent in Bucharest continued for five years in a row at the level of 18.5 euro/sqm /month, with changes being recorded at the level of the incentive packages offered by the landlords. In 2019, if all the announced projects are completed, the stock will grow by about 300,000 sqm, of which 50 percent is already pre-leased.

The areas with the lowest vacancy rates will also benefit from the highest deliveries this year, so two large projects, totalling more than 40,000 sqm, will be completed in Floreasca – Barbu Vacarescu. The CBD will increase the stock by 30,000 meters squares, and in the West-West three projects have been announced with a total of over 80,000 sqm.

(From the print edition)