Colliers: 2024 marks the lowest office deliveries in Bucharest in the last 20 years

In 2024, the Bucharest office market recorded the lowest level of deliveries in the last two decades, with only one major project completed – the c.16,000 sqm AFI Loft, according to Colliers’ annual report. Total leasing demand decreased by 18 percent year-on-year, while new demand remained at the same level as in 2023. At the same time, an increasing number of companies are encouraging their employees to return to the office, leading to increased interest in modern, energy-efficient spaces.

Colliers experts identify the ongoing segmentation of the market: the buildings which are part of the top 20 in regards of the largest unoccupied spaces have a vacancy rate of 33 percent, while the remaining nearly 190 office projects tracked have a vacancy rate of around 7 percent.

“According to preliminary data, total leasing demand declined to approximately 340,000 square meters last year. In contrast, new demand remained stable at 116,000 square meters, slightly above the 2023 level. The gap between total and new demand reflects the impact of lease renewals, as large companies postponed decisions due to uncertainty surrounding the post-pandemic hybrid work model. Now that many of these contracts have been settled in the years prior, the market is gradually stabilizing. Even so, new demand – which includes only contracts that lead to a positive impact on overall occupancy rates – remains below the decade-long annual average of 126,000 square meters and significantly lower than the record high of approximately 170,000 square meters in 2017. This suggests slower market growth and a more cautious expansion strategy among companies”, says Victor Coșconel, Partner | Head of Leasing | Office & Industrial Agencies at Colliers.

New demand accounted for only a third of total leasing activity last year, a lower share than in previous years, when it consistently exceeded 40 percent and, in some cases, approached 50 percent. This trend highlights a slowdown in market expansion compared to periods of rapid growth. The IT&C sector remained the primary driver of leasing demand, contributing 37 percent of the total, followed by professional and business services (excluding finance) at 18 percent.

At the same time, Colliers consultants are observing a growing trend of companies bringing employees back to the office. While hybrid work remains widespread, approaches vary across organizations. This shift is also evident in the significant decline in subletting compared to two years ago. More companies are realizing that to encourage employees to return to the office, they need to invest in modern, comfortable workspaces. Tenants favor new, energy-efficient, and well-connected buildings, which have significantly lower vacancy rates than the rest of the market. In contrast, older buildings in less accessible areas that have not been modernized are becoming increasingly unattractive.

Rents have largely stabilized, but upward pressure persists in central areas, including the Central Business District (CBD). The limited availability of space is making it increasingly difficult for tenants to find suitable options, giving landlords greater leverage to raise prices. This trend could continue into 2025 if market conditions remain unchanged. The vacancy rate is expected to be slightly above 14 percent by mid-2024. Colliers consultants point out increasing differences between buildings that have good technical standards and those that do not, as well as between those located in well-connected areas to the city’s infrastructure and those that fall short in this regard. These differences can be seen in both the level and dynamic of asking rents, as well as in overall occupancy rates. In this respect, Colliers notes that although the aggregated vacancy rate for Bucharest stands at around 14 percent, the buildings with the most unoccupied areas have an average vacancy rate of 33 percent, Part of these office projects suffer because of temporary factors (such as a big tenant leaving amid a relocation or hybrid work reshuffling), but others face deeper issues , from poor energy efficiency to an unfavourable location for employees who would come there to work.

In an unstable economic and political environment, both domestically and internationally, large companies are expected to remain cautious in the coming period, Colliers consultants emphasize. Uncertainty is further compounded by sluggish economic growth in many Western countries and the unclear policies of the new Trump administration in the US. This trend is also reflected in the labor market, where job growth in Romania continues but at a significantly slower pace compared to previous years.

As a result, Colliers consultants anticipate that company expansions will be fewer and more selective compared to the pre-pandemic period. In this context, new demand could see a slight decline in 2025. However, due to the limited availability of office space and the near-total absence of large projects under development, the vacancy rate is expected to continue decreasing. The only mixed-use office project set to enter the market in 2025 is One Gallery, developed by One United, offering 6,500 square meters of space, which is already fully leased.

“Although market prospects for 2025 may seem pessimistic, Romania’s long-term advantages remain strong. The economy continues to offer one of the most competitive labor cost-to-productivity ratios in Europe. For building owners, the market is far from oversaturated, with only 3.4 million square meters of office space, equivalent to approximately 1,500 square meters per 1,000 inhabitants in the Bucharest metropolitan area. In fact, the market appears underdeveloped, especially considering that less than half of this stock has been delivered in the past decade. However, a building’s age does not guarantee energy efficiency or compliance with the latest technical standards. A significant portion of the existing stock is outdated and may no longer meet the requirements of large international tenants. In this context, the market is expected to remain stable, while landlords’ ability to attract tenants should be safeguarded. This dynamic will support a steady flow of new investments as leasing demand gradually increases in the medium term”, concludes Victor Coșconel, Partner | Head of Leasing | Office & Industrial Agencies at Colliers.