DTZ: 108,000 sq. m office rented in H1 2014 – highest volume registered for a semester since 2008

There are still 132,000 sqm of space left to be delivered by the end of the year, 60 percent of it already leased.

The first half of the year saw the delivery of five office buildings, with a total rentable area of 68,500 sq. m: Hermes Business Campus, Metropolis Bravo, Afi Business Park phase II, Green Gate and Floreasca Cube. Most of the spaces were delivered in Western Bucharest, over 63 percent of the deliveries (45,100 sq. m) taking place in 2Q.

Centre-Northern area continue to be the most attractive for tenants with 55 percent share of the transacted area in H1, followed by the West with 15 pct. and Pipera with 13 pct. In the CBD most of the transactions were signed in 1Q and the average leased area was 500 sq. m.

Most of the request – over 52 pct – came from technology and telecom companies (Vodafone, Orange, Ericsson, WNS), followed by companies in the production and industrial sector (Schneider Electric, Kellogg’s, Lenovo) with 15 pct and those from the professional services sector (Peli Filip, Lavalin, TNT) with 16 pct of the total.

In the first half of the year the total volume of rentals was 108,000 sq. m, with 25 pct higher than the one registered in the same period of 2013. This represents the higher rental volume registered in a semester since 2008, without taking in consideration the consolidation made by Petron in 2010 in its own office buildings.

Relocation transactions dominate the market with a 72 percent share of the total leases. More than half of relocations are based on pre-lease contracts.

The new request – expansion and companies new entered on the market – is 40 pct higher than the value registered in the same period of last year and represents 28 pct of the total rental volume. In the first half of the year a significant number of companies operand new operations in Bucharest, while other decided to expand the existing ones. Generally the new request has grown significantly compared to the similar period of last year and it is expected to prove the same consistence in the following period.

In the first semester,  26,500 sq. m represented renegotiations and renewals, with 60 pct concluded in the Centre-Northern area of Bucharest. Generally the renegotiation and renewal activity has decreased with 25 pct compared to the same period of last year and with 60 pct compared to H2 2013. The pre-rentals represented the largest transactions considering the area. Vodafone pre-leased 16,000 sq. m in Bucharest On, while Orange will relocate its back-office activities from Iride Business Park to Green Court phase I, where it will occupy 14,000 sq. m . Both transactions are made in Barbu Vacarescu – Floreasca area.   

 “Demand increased steadily in the first part of the year and we anticipate the trend will maintain in following quarters. The preferred option for tenants continues to be relocating in already existing buildings or buildings that are about to be delivered within the span of 6-12 months. This behavior is encouraged by occupation costs which continue to be attractive thanks to incentive package but also by the quality of the new spaces delivered. We identify on the market big companies that are looking to consolidate their operations but also companies that are looking to open new divisions in Romania which offers an interesting perspective for future real estate projects”, according to Madalina Cojocaru, head of office department DTZ Echinox.

The vacancy rate of office space in Bucharest has dropped slightly this year, to 15.7 percent, and 330,000 square meters are still vacant, even though the market saw a record lease volume in the first half, mainly due to relocations, DTZ Echinox said Wednesday.

The vacancy rate is down 1 percent quarter to quarter and 0.8 percent year on year, from 16.5 percent, according to the study. At present there are 330,000 square meters of office space in Bucharest without a tenant and over 30 percent of the area is located in Pipera.

In Center-North, the vacancy rate is 16 percent, while in Barbu Vacarescu – Floreasca, it drops to 14 percent.

Rent rates remained stable in the first six months of the year, with variations from 16-18 EUR/sqm/month in central areas to 15-17 EUR/sqm in Central-North, dropping to 12-15 EUR/sqm in semi-central regions and 9-12 EUR/sqm in suburban areas.

Considering the level of rents there are no major changes to occur, but by the end of the year a slight growth of the prime rents could be registered. Generally the occupancy costs in Bucharest will continue to remain attractive for the companies looking for offices. (source: DTZ)