New SSCs and BPOs to further boost Bucharest office market in 2014, says JLL

The Bucharest office market is projected to continue growing in 2014, fueled by newcomers in the IT industry, SSCs (shared service centers) and BPOs (business process outsourcing) and the expansion of existing players from the same sectors, according to Jones Lang LaSalle Romania representatives.

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In 2013 too, demand for office space came from new entrants on the market – mainly IT companies – as well as existing players relocating additional operations from other countries to Bucharest, said JLL representatives. That year, new office supply increased 2.5 times and both gross and net take-up went up compared to 2012, according to a recent JLL report.

Above EU average economic growth rates, a cheaper workforce and competitive office space in terms of quality and price now make Bucharest an attractive regional destination for SSCs and BPOs and several large international companies are considering coming to Romania, according to JLL. Bucharest is competing against secondary and tertiary cities in Poland by offering lower work costs, said Marius Scuta, head of the office department & tenant representation with the real estate service firm. Bucharest work costs are as much as three times lower than those in Prague, he added.

Moreover, in 2014 Bucharest could see office transactions involving international investment funds. “Romania is now on the radar after about two or three years of not being there. We hope to see transactions made by new players this year,” said Gijs Klomp, managing director and head of capital markets at JLL Romania.

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Take-up on the rise

Net take-up is expected to further increase in 2014 after rising by 65 percent y-o-y last year. The overall vacancy in Bucharest should decrease to a level closer to 12-13 percent until the end of 2014. Some temporary increase in vacancies, however, could be possible in the first part of the year given the large number of office buildings to be delivered then. By comparison, JLL estimates the overall vacancy rate in Bucharest in 2013 at 14.4 percent, but with considerable differences between submarkets.

Prime headline rents remained unchanged at EUR 18.5/sqm/month in 2013. One characteristic was the widening gap between headline rents and net effective rents as overall incentive packages went up. This should start to change in 2014, at least in the central business district, predicts JLL.

Overall, rents are expected to remain stable in 2014. However, in downtown Bucharest, JLL forecasts that effective rents will begin to show the first signs of increase in the second semester of 2014, while remaining under pressure in most other submarkets. Bucharest will continue to be a tenant’s market, at least in the first half of 2014.

Center-west Bucharest to be new hotspot

The central business district, the center-north part of Bucharest, the Floreasca-Barbu Vacarescu corridor, Dimitrie Pompeiu and the center-west part of the city are the most active office submarkets in Bucharest at present, according to JLL. The latter has the potential to experience further expansion and will see several land transactions this year and the start of some developments for which developers had previously bought land.

Overall, some 120,000-140,000 sqm of new office space could be delivered in 2014, estimated JLL.

Simona Bazavan

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