OFFICE DEMAND

What's new on tenants' side?

2023 has started with the kneading of most players, strongly pushed by business decisions that were long delayed. Following thorough assessments of office space utilization and new ways of working, we expect that in 2023 most companies will adapt the surface accordingly, leading to reductions of the leased space. While the strategy is clear, the implementation needs a lot more effort and creativity to find the right solution, and openness from the landlords.

Rent indexation and increases in operational costs are also encouraging companies to optimise their premises.

Overall, in terms of numbers, 2022 brought a 4% increase in total leasing activity compared to the previous year, to around 300,000 sqm transacted throughout the year.

Should I stay or should I go ?

While contract renewals maintained their share to around 40% of the total market activity, we begin noticing tenants contracting their offices, by surrendering space to the landlord, or, in some cases by finding limited solutions, short-term band aid, like subleasing.

On the other hand, as occupiers started to seize opportunities and plan for the upcoming cycle, relocations and new leases were the main driver of last year’s activity, with 60% of the total activity on the market.

Moreover, we are enthusiastic to see new companies opening offices in Romania. Last year, 3% of the total market activity was driven by new entrants, mainly active in the tech sector or business services solutions.

Another trend that we see materialising is the set-up of new business service centres, such as Booking, Ford or Siemens Energy, that gained traction last year and reinforced demand for new office space.

Where Tenants

Tenants went after new buildings

Bucharest, 2022

Leasing activity (excl. renewals)

183,803 sqm

New deliveries

118,725 sqm

All in all, net take-up recorded approximately 120,000 sqm, counting new entries, expansions, and relocations from older buildings or non-competitive stock.

On the medium term, the palette of office options to be considered for large requirements will narrow down, as new supply becomes scarcer starting with 2024.

Although working from anywhere remains the norm, strategies on workplace occupancy are becoming clearer and decisions are taken. Teams are strongly encouraged to return to the office, in different scenarios and timetables.

Supply

During 2022, merely 120,000 sqm of office space has been delivered to the market, out of which 43% in the Center West business district, 23% in downtown buildings, followed by Expozitiei and Floreasca – Barbu Vacarescu areas, each adding 17% to the newly delivered stock.

Last 5 Office Projects To Be Delivered Before End Of 2024

For 2023 we expect another 110,000 sqm of office space to be finalised, mainly second phases of existing projects and boutique buildings. For next years though, the outlook becomes blurry as the stall in permitting is severely altering the new supply of office buildings in Bucharest. Many projects planned but only one building under construction, part of a larger expansion initiative, to be delivered in 2025 – 2026.

Another 95,000 sqm development pipeline might start construction, enhanced by specific demand.