Colliers: The vacancy rate for newly built modern offices is almost half compared to those of older buildings

The vacancy rate of modern offices, constructed in the last 10 years in Bucharest stood at around 10 percent mid-2022 compared to almost 18 percent for the buildings that were delivered up to 2012. This major difference highlights the qualitative improvements of offices delivered in Romania, as older and well-positioned buildings have also managed to age quite well. Coupled with a shallow pipeline for the next few years, this could lead to some significant supply constraints if demand picks up, according to Colliers’ experts.

Annualized demand for office spaces has officially returned to pre-pandemic intensity, recording 2019 levels, but many challenges exist on the horizon, due to rising costs of finance and the overall economic uncertainty. After two and a half years from the onset of the pandemic, Colliers consultants note that it is clear that the shift in workforce expectations towards hybrid or remote work is permanent. Most companies seem to have adopted a hybrid work model, with the split usually quite even between remote and office-based work. Currently, employee footfall in offices rarely moves past 40-50 percent when compared to pre-pandemic levels.

“Besides increasing the uncertainty factor, the conflict in Ukraine has not had visible effects on the local office market, but it’s fallout – particularly the higher inflation and subsequent rising cost of risk – is relevant. Rents for upcoming projects reflect the higher construction costs to a certain extent. In Bucharest, due to certain administrative blockages, the pipeline for the next few years will likely remain low. The land plots without zoning will likely see limited progress on getting authorizations. Consequently, the sentiment changes towards a landlord’s market, particularly in very central locations”, explains Silviu Pop, Director CEE & Romania Research at Colliers.

The modern office stock in Bucharest reached 3.27 million square meters mid-2022, with around half of the market comprised of buildings older than 10 years and the rest delivered since 2012,, according to Colliers’ recent “ExCEEding Borders: CEE-15 Office Markets in Turbulent Times” report. Colliers consultants estimate that around 130,000 square meters of new modern offices could be delivered this year, with a total of roughly 360,000 square meters possible for the 2022-2024 period, though the 2024 calendar could be postponed.