The first quarter of 2023 was one of the slowest in the post-pandemic period in terms of demand for the office market

Deniza Cristian 28/04/2023 | 15:37

Leasing activity in the Bucharest office market recorded a slowdown in the first quarter of 2023 by comparison to the recovery phase of the post-pandemic period, with new demand almost halving compared to last year’s first quarter, while total demand also declined by about 25%, according to data from Colliers.


Even so, given the robust pipeline of deals, Colliers’ consultants remain cautiously optimistic and expect leaving demand to be a bit higher for the whole year compared to 2022, assuming no extremely negative external shocks materialize and that the current trend of gradually returning to the offices remains in place.

The first quarter of 2023 saw the delivery of around 42,000 square meters in new modern office spaces in Bucharest, taking the overall stock to approximately 3.37 million square meters. The major additions were the second phase of One Cotroceni Park in the Center West submarket (34,500 square meters) and Primavera Development’s Muse in the Piata Presei Libere area (7,500 square meters). Further, only a few major office buildings are due to be finished this year, namely the second phases of Atenor’s @Expo and Forte Partner’s U-Center and Strabag’s H Tudor Arghezi 21, adding up to around 70,000 square meters, while the calendar for 2024 afterwards is virtually empty of any substantial completions, exceeding 15,000 square meters.

“As new demand has been on a downward trend since H2 2022, the annualized level has dipped again below the historic average as of Q1 2023, quite a departure from Q2 2022 levels, when it reached a fairly decent level, comparable to good pre-pandemic levels. This first quarter saw only quite small transactions, but we expect some sizable deals to be concluded sooner or later, which will improve the overall picture of 2023 quite significantly. In the last five years, we’ve seen each year between 9 and 19 leases over 5,000 square meters at the Bucharest Research Forum, but the total number is probably higher given that some direct deals (particularly renewals) end up unreported. This would suggest that we should see at least a few such transactions each quarter, however, the largest new transactions in Q1 2023 was a renewal of 4,900, followed by a relocation of 3,100 square meters”, explains Victor Cosconel, Head of Office & Industrial Agencies at Colliers.

Meanwhile, overall economic trends remain rather positive, as companies in the business services area are doing reasonably well and are keen to expand, as suggested by the European Commission near-term hiring intentions index.

Colliers’ consultants estimate that the vacancy remains around the 15-16% level as of Q1 2023, though the vacancy for class A buildings delivered in the last 10 years is rather in the 10% region. In terms of rents, the outlook seems mixed in the short term. On the one hand, the specter of large surfaces being let go by certain large tenants continues to loom over the market, potentially providing a hefty bump in the overall vacancy rate. But on the other hand, a limited pipeline of buildings exists over the next quarters, with the occupancy in the qualitative buildings clearly higher than the market average. Consequently, Colliers consultants see pressures to increase rents in certain submarkets, though for now, these remain fairly isolated instances.

“The outlook for the Bucharest office market remains plagued by significant uncertainties. We still expect, under our base case, for the Romanian economy to cope with the overall uncertain context thanks to hefty EU inflows and to see office leasing demand continuing to pick up relative to the pandemic period. On the other hand, economists and also we view the Romanian economy as being quite vulnerable in case of an adverse external shock, like a substantial recession in the Eurozone, a financial crisis in advanced economies or a material deterioration of relations between the advanced economies and China. Such a scenario would likely drag the Romanian economy into a deep recession and negatively impact the office scene by extension, taking several years to unwind the damage done in terms of occupancy”, concludes Victor Cosconel, who points out however that Colliers’ pipeline of transactions and the positive vibes in the economy as per sentiment indicators still support a positive outcome for the economy as a whole and for the office market as well.

The current context is a good moment for companies to transform their offices and adapt them to the future way of working and Colliers innovates and responds to current challenges and future needs in the office market with Office 360°, a complete approach to the office with all its touchpoints, carried out in a unique and highly complex process that is tailored to the very last detail to fit the companies’ needs and strategic plans. Colliers’ approach to cost control at each stage of the office transformation delivers additional savings often in excess of 10-15%, when compared to the values obtained usually from contractors, in negotiations during the tender stage.

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Deniza Cristian | 17/05/2023 | 15:38

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