However, the medium-term outlook remains positive, as companies continue efforts to bring employees back to the office more frequently. Colliers consultants also note that certain areas of Bucharest show signs of transitioning to a more landlord-friendly market.

“New demand, which helps fill vacant office space and is generated by transactions by companies new to the market, expansions or relocations from Class B buildings, reached a level of 104,000 square feet in the third quarter of this year, measured as a four-quarter rolling amount. This level is closer to the lows of 2021-2022 than the highs of 2017-2018. We are still in a period where companies are adjusting to the post-COVID labor reality, but there appears to be growing momentum to encourage employees to return to the office. However, some firms continue to downsize their office space, even though the number of employees is similar to five years ago. In addition, companies remain cautious given the economic uncertainties and the fact that a stable working model has not yet been established. However, compared to previous years, the role of offices seems to be becoming more important again”, explains Victor Coșconel, Partner | Head of Leasing | Office, Industrial & Logistics at Colliers.

The year 2024 will mark three consecutive quarters without any new modern office completions, the longest period without deliveries since 2005. The only project confirmed for delivery in the next two years is the 16,000-square-metre AFI Loft, expected to be completed later this year. Colliers consultants anticipate a significant market rebalancing. While some areas of Bucharest show signs of transitioning to a more landlord-friendly market, the overall vacancy rate remains around 15% citywide. Colliers consultants also note that the market continues to be dominated by tenants occupying spaces between 1,000 and 2,000 square metres. Although there have been a few larger deals this year – including one of the most significant in the market’s history, the Genpact renegotiation at Hermes Business Campus – the average size of a recorded transaction is under 1,400 square metres, below the 10-year average of nearly 1,500 square metres per year.

“There is clearly a slowdown in the IT&C sector, which is the main reason the market is going through a weaker period. So far this year, IT&C tenant transactions have totalled almost 70,000 square meters, making the quarterly average in 2024 nearly 24% lower than the quarterly average between 2015 and 2023. In contrast, non-IT&C lettings have totalled 166,000 square meters, or an average of 55,000 square meters per quarter in 2024, which is 14% higher than the quarterly average for the 2015-2023 period”, concludes Victor Coșconel.

In the last two years, renewals have made up a larger-than-usual share of demand, following a trend also seen in other CEE countries like Poland. In Bucharest, renewals have accounted for up to 50% of signed lease transactions, as many companies have delayed decisions on office leases due to uncertainty around hybrid work. By comparison, the share of renewals averaged 28% per year in the pre-pandemic years, dropping to 19% in 2011 and 22% in 2019.