The office space market in Bucharest was strongly affected by the coronavirus pandemic in the first half of 2020, the demand in the sector registering a decrease of 45% compared to the same period in 2019, according to an analysis made by the real estate consulting company Avison Young.
The total demand for office space was in a downward trend, registering a sharp decrease due to the pandemic: 112,000 square meters, 45% lower compared to the same period last year. Net demand represents 72,000 sq m with transactions (approximately 65%) and is divided between new demand (71%) and relocations within the stock of modern office space (29%). Comparing the structure of the new demand registered in the first semester of 2020 with the situation from the same period of last year, the area rented by the companies interested in opening new operations in Romania decreased by 80%. On the other hand, relocations from old office spaces, such as villas or apartments, to modern office spaces increased by 9%.
According to consultants, the Central West area remains preferred to companies interested in new office space, attracting a third of the volume of net demand registered in Bucharest in the first half of this year, followed by the North (18%) and the South (13%).
At the same time, the renegotiation transactions amounted to 39,500 sq m, 25% less than in the same period last year. Most of the spaces for which the contractual terms were renegotiated are found in the Central West area and in the Piața Presei Libere-Expoziției area, the consultants also show.
The most dynamic tenants of the first half continued to be companies in the IT&C sector, with 25% of net demand, followed by those in the financial-banking and insurance sector (21%) and professional services companies (17%). The largest rental transactions carried out by these companies were those of renegotiation and relocations from old spaces to modern office spaces.
On the other hand, the general vacancy rate of modern office spaces in Bucharest at the end of the first half of 2020 is 9.8%, 80 percentage points higher than at the end of 2019. In total, there are 315,000 sq m of offices available for rent, most of them (23%) being located in the Pipera Nord area. Instead, the southern area has a vacancy rate close to zero, and the lowest vacancy rates are recorded in Barbu Vacarescu – Floreasca (3.5%), the western area (3.8%), Piata Presei Libere – Bd. Expozitiei (6%) and the Central West area (13%).
“The overall vacancy rate for modern office space could continue to rise, given that approximately 345,000 sq m of office space is currently under construction with a completion date by the end of next year,” said David Canta, Managing Director Avison Young.
New construction completion rate, 50% lower
According to the analysis, many projects failed to be completed. The completion rate of new constructions decreased by 50%, compared to the same period last year. The good news is that developers are not discouraged and continue to build, say consultants.
By the end of the year, four more large projects will be completed in areas such as West Center, Barbu Vacarescu or Floreasca. The rent level for modern office spaces in Bucharest remained stable, 19 euro / sqm / month. The information is presented in the latest study conducted by Avison Young.
The concept of “work from home “(WFH), tested before only by a few companies, has become very popular this year of the pandemic. Although tenants are still analyzing the effects of implementing this concept, there are two main points of view: companies will need of the same space or less because of WFH or they will need the same space or more to carry out their activity – taking into account the physical distance”, says David Canta, Managing Director of Avison Young.
According to Avison Young’s analysis, the stock of modern office space reached 3.22 million square meters in the first half, which means an increase of only 3% compared to the same period last year, given that specialists expected at the beginning of the year to a record demand in this segment. In the first half of 2020, six office projects with a total leasable area of 107,000 sq m were completed. The most dynamic tenants remain the companies in the IT&C sector, which cover 25% of the net demand. (Source: Avison Young)