The Bucharest office market reached the 3 million square meters (sqm) milestone in the first quarter of 2019, with new development poles emerging in the city on the back of growing demand. Large regional cities such as Timisoara, Cluj-Napoca and Iasi are also recording a dynamic pace of development for office spaces as companies look for complex buildings to accommodate their growing base of skilled workers.
The Romanian capital has another 216,000 sqm under development in the office segment, on top of the 3 million sqm already in operation, of which 51 percent are in Class A projects, says Daniela Boca, head of research at CBRE Romania, the real estate consultancy firm. Western Bucharest has generated 44 percent of the leasing deals in the first three months of the year and this area will continue to attract tenants in the next 6 to 12 months, alongside the Expozitiei area, suggested Boca.
Emerging points in Bucharest
In fact, consultants say that the Expozitiei area is turning into Bucharest’s new residential and office pole. The office buildings expected to be delivered at this location are Expo Business Park in Q2 2019, Atexpo Business Park in 2021, Fabrica de Paine in 2021 and City Rose Park – Phase 1 in 2021, according to the CBRE Romania representative.
“This is an alternative for the Floreasca – Barbu Vacarescu area, which has the lowest vacancy rate. The Expozitiei area has very good accessibility and many large plots of land available – this will allow organic growth,” says Simona Urse, associate director, office agency at real estate consultancy firm Crosspoint Real Estate. Other emerging office poles in Bucharest are Unirii/Timpuri Noi and the center-west part of the city.
For Geo Margescu, the CEO and co-founder of Forte Partners, northern Bucharest remains an important office hub, alongside the west of Bucharest, where his firm is developing the third stage of the office project The Bridge. Margescu sold this project to Dedeman, the DIY chain managed by the Paval brothers.
Currently, office developers are also looking at areas that have been experiencing high residential intensity such as Tineretului, Muncii or Jiului.
Maria Florea, key client director at real estate consultancy JLL Romania says that many employees working in the office buildings live in the west and south-west part of the city and have to spend more time in traffic to get to work.
In fact, finding an emerging office pole might prove to be a challenge. The center-east part of Bucharest might fit the description, according to Valentin Lupu, associate director for capital markets and Mirela Ciovica, regional corporate account manager for the office division at real estate consultancy firm Knight Frank.
“In our opinion, if an area already has five institutional developers, with significant projects on paper (with a green light), as well as bluechip tenants already present, it’s too late for it to qualify as ‘emerging’,” said the consultants.
The smallest office leasing deals have been closed in the south and east part of the city, areas which until now have largely been ignored by investors. Meanwhile, over 180,000 sqm of new office spaces have been delivered in Bucharest, according to JLL Romania estimates.
Some developers are placing their office projects close to the planned subway lines that are set to link the western and northern parts of the city. Near the future subway station Academia Militara in western Bucharest, for example, One Office will develop a business park with office, retail and residential components. The business park will be developed in two phases of 44,000 sqm and 34,000 sqm.
Nearby, AFI Europe is working on an office project with a gross leasable area of 50,000 sqm in an area with good public transit connections.
By the end of 2019, six office projects are slated for delivery on the Bucharest market: Business Garden Bucharest, Expo Business Park, Oregon Park – Building C, The Light, Equilibrium – Building A, Timpuri Noi Square – Building C.
Silviu Pop, head of research at Colliers International Romania, estimates that the center west, Floreasca/Barbu Vacarescu and Piata Presei/Expozitiei sub-markets will see some 0.5 million sqm of new leasable surfaces in the next couple of years if all developers’ promises were to come to fruition.
Companies looking for offices and talent in regional cities
Cluj-Napoca, Timisoara and Iasi, as well as smaller cities like Brasov, Constanta, Oradea or Sibiu are increasingly considered by companies seeking skilled and educated workforce, says Dimitris Raptis, deputy CEO & CIO at Globalworth, the biggest owner of office buildings in Romania.
In the first half of 2019, the new delieveries of office spaces in Cluj-Napoca, Timisoara and Iasi stood at 29,200 sqm, 37,000 sqm and 13,300 sqm respectively, according to JLL data.
“Bucharest has set the tone for office development in Romania, but demand is also increasing in secondary cities. While in cities like Timisoara we are already witnessing the development of major projects, there are other cities that will follow this trend as well,” says Ovidiu Sandor, the CEO of Mulberry Development, the developer of the ISHO mixed-use project in Timisoara, which has office and residential components.
Demand for modern office spaces in these regional cities remains high as all the available stock has been fully leased in cities such as Iasi or Cluj-Napoca, while Timisoara still has some projects with available spaces. Representatives of developer Iulius, which is currently working on a mixed-use project in Timisoara that includes offices, says that a central location, good access to road infrastructure and the presence of alternative means of transportation help companies recruit more staff in office buildings.