The financial sector, medical service operators, IT&C, and retail companies were the most active tenants in the office leasing market in Bucharest last year, in terms of the average transaction size, according to Cushman & Wakefield Echinox real estate consulting company.
With an average transaction size of almost 2,000 sq. m, the financial sector ranks first from this perspective, being closely followed by the medical and pharmaceutical sector with an average of 1,890 sq. m/transaction. Retail and IT&C companies, with average transactions of 1,580 sq. m and 1,370 sq. m respectively, have also contracted office spaces above the market average, which stood at around 1,100 sq. m/transaction.
Moreover, the largest leasing transactions concluded in 2021 have also pertained mainly to these sectors, namely Medicover (15,000 sq. m), Wipro (11,000 sq. m), Provita (11,000 sq. m) or Allianz Țiriac (4,700 sq. m).
It is important to mention that the average transaction size is related to the net take-up volume – excluding renewals of existing contracts – which reached a level of 170,000 sq. m in 2021, corresponding to a year-on-year increase of 34%. The total leasing activity, including lease renewals, has also increased by 26% in 2021, up to 298,300 sq. m.
Mădălina Cojocaru, Partner Office Agency Cushman & Wakefield Echinox: “Although the office market had to deal once again with the uncertainty caused by the pandemic in 2021, a series of companies decided to increase their headcounts, therefore leasing new office spaces to further support their business expansion. As a result, the share of new demand in the total take-up has gone up, reaching almost 60%, and, based on the current discussions with our clients, we can positively estimate a further increase. However, it should be noted that given the low volume of projects due to be delivered in 2022 and 2023 we may face difficulties in accommodating these requests in the following 12-24 months.”
Overall, there have been projects totaling 244,300 square meters delivered in Bucharest in 2021, corresponding to an increase of 54% when compared with 2020. In terms of submarkets, the largest office areas delivered in 2021 were in Center-West (65,800 sq. m, 27% share), Expoziției (46,000 sq. m, 19% share) and in Center (41,700 sq. m, 17% share).
In regards to the future supply, new projects of 224,000 sq. m are currently under construction and are expected to be delivered in 2022 and 2023, a 44% decrease when compared with the 2020-2021 period.
The office stock in Bucharest reached 3.19 million square meters (excluding owner-occupier buildings), as the vacancy rate has slightly increased to 14.9%. However, there is still a wide gap pertaining to A and B class office buildings, with vacancy rates of 12.5% and 23% for A and B-class offices respectively.
Taking into account the existing pipeline and the absorption potential of the currently available office spaces, there is a strong indication that yearly take-up volumes in excess of 300,000 sq. m will be the norm during the next 4-5 years, which will implicitly lead to a decrease in the vacancy rate.
@Expo by Atenor, One Cotroceni Park II, Sema Parc, AFI Tech Park II or Equilibrium II are some of the most important deliveries announced for the following two years.
The prime headline rent in Bucharest remained stable in Q4 2021 at 18-18.5 euro / sq. m / month in CBD, while values of 17-18 euro / sq. m / month are recorded in the Center and Floreasca – Barbu Văcărescu submarkets, as a small rental increase is expected in the CBD area by the end of 2022 as a result of the reduced supply and of the sustained demand in this part of Bucharest.