Cushman & Wakefield Echinox: Center-West is Bucharest’s new main office hub

With almost 300,000 sqm of office projects delivered in the past three years, the Center-West area has become the largest office hub in Bucharest, overtaking the Floreasca-Barbu Vacarescu submarket in Q1 2023, according to Cushman & Wakefield Echinox. The real estate consultancy company expects this situation to remain constant in the medium term, at least, given the plans announced by developers.

The Center-West area reached a stock of 614,000 sqm compared with 589,600 sqm in Floreasca-Barbu Vacarescu, where the new supply amounted to 132,000 sqm since 2019.

Dimitrie Pompeiu (440,700 sqm), Center (412,500 sqm) and CBD (357,300 sqm) are the other top 5 office markets in the Romanian capital.

In the first quarter of the year, the office supply in Bucharest consisted of the second building of the One Cotroceni Park mixed-use project (34,500 sqm GLA) developed by One United Properties in the Center-West submarket and the Muse building (7,500 sqm GLA) in the Expozitiei area. The office stock in Bucharest thus reached 3.35 million sqm at the end of the quarter.

In terms of leasing activity, the demand was low, as only 55,800 sqm were transacted in Q1 2023. According to Cushman & Wakefield Echinox, this is the lowest level since Q1 2021 and corresponds to a 31% YoY decrease.

Madalina Cojocaru, Head of Office Agency Cushman & Wakefield Echinox, said: ”The first quarter of 2023 was relatively poor in terms of transactions because it is more difficult to adopt business decisions in an unpredictable economic context. However, the market sentiment remains relatively strong, as a series of important deals are currently under negotiation, and the leasing activity is expected to pick up starting from Q2.”

The vacancy rate in Bucharest decreased to 14.8% in Q1, as a net absorption of almost 40,000 sqm was registered during the quarter.

The evolution of demand in Bucharest follows the trend observed in the other capital cities in Central and Eastern Europe, a region where the transaction activity has seen a 22% decrease compared with the first quarter of 2022, the same source said.

Meanwhile, rental growth was recorded in the first quarter of this year, with the prime headline rent in the CBD area reaching EUR 21/sqm/month, a level which reflects a YoY increase of 13.5%. “This upward rental movement in Bucharest also comes in a more regional context of higher rental costs throughout CEE, where corresponding benchmarks of EUR 28.5/sqm/month, EUR 25/sqm/month, and EUR 24.5/sqm/month were recorded in Prague, Budapest and Warsaw, respectively,” reads the press release.

Office projects totaling 139,400 sqm GLA are currently under construction in Bucharest, while other projects cumulating an area of around 300,000 sqm GLA are under different planning stages.