56,000 sqm of office space leased in Bucharest in Q1, says DTZ Echinox

Leasing activity involving office space in Bucharest amounted to 56,000 sqm in Q1 2015 which was down by 8 percent compared to the same period last year, according to data from real estate services firm DTZ Echinox. Take-up represented 71 percent (40,000 sqm) and was divided between expansions and new operations (58 percent), relocations within A & B class office space (31 percent) and relocations from old stock to modern office space (11 percent).

Renegotiation and renewal transactions amounted to 16,000 sqm, half of this involving office space in Pipera South. Most of the take-up was recorded in the central north submarket – 61 percent, followed by Pipera South – 15 percent and the central business district (CBD) – 7 percent.   Oracle leasing approximately 10,000 sqm in Sky Tower and Carrefour pre-leasing approximately 7,000 sqm in the second building of Green Court represented the largest transactions these quarter, according to DTZ data. Other than these two transactions, the average deal size was 600 sqm, only six transactions exceeding 1,000 sqm.

IT and telecom companies remained the most active players, with 42 percent share in take-up, followed by companies active in retail, with 26 percent and professional services, with 15 percent.

A total of 37,000 sqm (GLA) were delivered in Q1, as part of two office projects – City Offices (27,000 sqm) and Auchan Tricodava (10,000 sqm).  This increased Bucharest’s modern office stock by 2 percent q-o-q to a total of 2.2 million sqm. New supply is estimated at 130,000 sqm for the entire year. Other projects that will be delivered this year include Bucharest One and Green Court – B in the central north submarket, George Enescu OB in the central area, PC Business Center in the north and Sema Office 3 and AFI Business Park IV&V in the west.

The average vacancy rate was 14 percent in Q1, up by 70 basis points q-o-q. There were a total of 309,000 sqm of vacant space in Q1 in Bucharest, a quarter of which is located in Pipera north. The lowest vacancy rates were reported in CBD (Victoriei – Aviatorilor) – 5 percent, followed by the west submarket, with 6 percent. Pipera South registered q-o-q an increase in vacancy rate of 400 basis points. Central north had a general vacancy rate of 10 percent, being the only submarket experiencing a major drop in vacancy q-o-q. Barbu Vacarescu – Floreasca (central north submarket), with an office stock of approximately 280,000 sq. m, had at the end of Q1 2015 a vacancy rate of 7.5 percent.

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Rent levels experienced no changes in Q1 according to DTZ data. Prime headline rent stood at EUR 18.5 /sqm /month. In CBD headline rents for A class office space were between EUR 15 – 18.5 / sqm / month, while in the central north sub-market they were in the range of EUR 15 – 17 / sqm / month. In semi-central locations the headline rents for prime projects were around EUR 12 –15 / sqm / month, while in peripheral areas A class office space is transacted between EUR 9 –12 / sqm / month. However, net effective rents continue to be lower by 10 –20 percent.

Simona Bazavan