Office market rental transactions reached 75,300 sqm in Q3 2018

The Bucharest office market recorded a total volume of 75,300 sqm of rental transactions in the third quarter of 2018, of which new demand was 20,400 sqm. According to real estate consultancy Colliers International, the demand came largely from the professional services and IT & C sectors.

“The total leased area – which includes, in addition to the actual rentals, renegotiations and contract extensions – was approximately 73,500 sqm, up 18 percent from 2017. In contrast, the new demand was lower than 20,400 sqm, half the level recorded last year. For the first nine months of the year, there is clearly a moderation in rental activity and a balancing of the office market,” said Silviu Pop, head of Research at Colliers International Romania.

In the first nine months of the year, most of the demand came from companies offering professional services (26 percent – including co-working), followed closely by IT & C companies (25 percent) and energy and industrial companies (19 percent). Also, the co-working segment alone accounted for 20 percent of net demand, or 10.4 percent of total demand.

“The magnitude of this phenomenon, highlighted by the entry of Mindspace and Spaces onto the local market, contributes to the sense of a slowdown on the office market, as this part of the new demand is not correlated with an increase in employment,” said Sebastian Dragomir, head of Office Advisory at Colliers International.

In the first three quarters of 2018, rental activity was dominated by central areas (32 percent), followed by North-West (18 percent) and West (13 percent). On the other hand, areas in northern Bucharest – Dimitrie Pompeiu, Press/Exhibition Square and Floreasca-Barbu Vacarescu – were less sought after (12 percent, 10 percent and 6 percent respectively).

Rents remained broadly stable, although some subsections, such as Floreasca – Barbu Văcărescu, felt some pressure on them as a result of the strong demand from tenants and the low vacancy rates.

“Similarly, downward pressure on rents may also be felt in the future due to more and more frequent relocation of modern office buildings in others (competitive stock), a phenomenon that increased in the first three quarters of 2018 to a maximum post-crisis of 26 percent of total demand,” added Sebastian Dragomir.

According to Colliers International’s Bucharest Office Market Q3 2018 report, after a modest increase in inventory in the first half (33,000 sqm), the third quarter was more dynamic, with 83,000 sqm delivered. The last months of 2018 will be as active, with over 69,000 square meters scheduled for delivery, although some of this stock could be postponed to 2019.