Colliers on RO office market: “it’s now a tenant’s market”

The office market in Romania neared the 3 million sqm milestone, and the new supply remained well-received in Bucharest, despite a lower demand compared to levels since 2012, according to the 2020 annual report released by Colliers.

In terms of delivery, 2020 was a robust year for the Bucharest office market, with some 156,000 sqm of new modern offices delivered, quite a bit less than the initial assessment of around 200,000 sqm at the start of the year.

“In general, the new supply remained well-received in Bucharest, as the city still has a low supply on a per capita basis compared to other European service centers. Simultaneously, a large part of the offices here are fairly old and not up to par with modern standards,” explains Sebastian Dragomir, Partner and Head of Office 360° at Colliers.

While rents are more inelastic in relation to demand, and it may take some time before they start moving lower, it is now a tenant’s market, and landlords are forced to become more flexible and more generous with incentives.

Older buildings with poor positioning and technical specifications should be much more exposed, and their landlords may be forced to be even more flexible and maybe cut back rents by 5-10% to remain competitive relative to newer buildings.

The vacancy rate increased to a four-year high of 13.75% in 2020, from a little over 10% in the previous year.

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