During periods of uncertainty, caution is needed, and this was evident in all aspects of the office market in 2023, a mixed year in terms of activity, according to an analysis by Colliers.

On the one hand, total demand recorded an increase of approximately 44% compared to 2022, reaching around 400,000 square meters, easily surpassing the previous record of 365,000 square meters reached in 2019, as shown in the annual report published by Colliers.

On the other hand, 2023 marked the lowest level of deliveries since 2015 and also a 42% decrease compared to the average of the last 5 years.

Short-term prospects remain favorable for certain areas of the market, and Colliers consultants estimate that, for buildings of good quality in terms of energy efficiency and well-connected to the city's infrastructure, the occupancy rate would continue to improve.

This would further tilt the balance in favor of landlords in certain submarkets, widening the gap between well-positioned offices that comply with ESG standards and older ones.

Last year, only 110,000 square meters of new modern office spaces were delivered in Bucharest, bringing the total stock to nearly 3.4 million square meters. The most significant new projects were the second phase of One Cotroceni Park from the One United portfolio (34,500 square meters), the second phase of U-Center owned by Forte Partners (32,500 square meters), and the second phase of @Expo from the Atenor portfolio (28,000 square meters).

Two other projects with areas under 10,000 square meters that were also completed are Arghezi 4 from the Strabag portfolio and Muse from the Primavera Development portfolio. The volume of deliveries will decrease even further considering that construction activity has slowed down, and only one significant project is expected to be completed in Bucharest in 2024 - AFI Loft (approximately 16,000 square meters).

The most significant transaction of the year was made by Oracle, known as one of the largest tenants in Bucharest, which reduced its total office space by about half, precisely to 26,000 square meters spread across two separate projects in the Floreasca - Barbu Văcărescu area.

Colliers consultants underline that the size of some tenants can lead to significant changes, considering that only the spaces vacated by Oracle represent a quarter of a percentage point of the total office space market in Bucharest.

However, conclusions cannot be drawn based on a single leasing contract. For example, in the largest distinct transaction of the year, Honeywell renewed its lease for 24,000 square meters, without making any changes to the occupied area. Another notable example is Adobe, which almost doubled its previously occupied area to 17,500 square meters.

Regarding rents, the situation has changed quite a bit, considering that in the previous decade, rents in Bucharest have been little changed. Last year, however, Colliers consultants observed an increase of about 16% in rents in the CBD (Central Business District) area, reaching 22 euros per square meter.

A similar increase was observed overall in buildings of good quality in terms of energy efficiency, which are also well-connected to the city's infrastructure. In parallel, older buildings or those in less attractive locations lose tenants and, therefore, cannot justify higher rents, contributing to the significant gap between offices that comply with ESG standards and are well-positioned and those in older buildings.

The vacancy rate rose slightly to 15.5%, with most of the upward trend likely being driven by a single transaction mentioned earlier - Oracle's halving of office space.

Top buildings have a much lower vacancy rate than the overall market average, even reaching single-digit values, compared to the average of over 15% for Bucharest as a whole.

With a leasable area of ​​approximately 3.4 million square meters in modern office buildings, the capital seems to be in a favorable position in the event of a strong slowdown in the global economy. The per capita stock is relatively low compared to Western European levels.

Moreover, the city's transformation into a service center has become increasingly prominent in recent years. Together with EU directives, this trend is expected to generate substantial leasing demand in the future, especially from the government or other state institutions, which have been relatively absent from the office scene.

Colliers innovates and responds to current challenges and future needs in the office market through Office 360, a holistic approach to workspaces and their impact on people.

Starting from identifying the needs of each company, it continues with mapping available solutions and implications, going to implementing the design project to meet the needs and strategic plans of companies.

Colliers' cost control mechanism at every stage of office transformation generates additional savings that often exceed 10-15% compared to values ​​usually obtained from contractors during the bidding stage.

In perspective, with only a few office projects on the horizon in 2024 - the estimated area for this year in Bucharest sums up to only about 16,000 square meters, and in 2025, only about 33,000 square meters could be delivered, in addition to the already limited stock of free office spaces in good buildings in some submarkets.

Thus, the office segment seems poised to transform into a landlord's market in the medium term, if leasing activity increases slightly, although in the short term, there may be a possible inclination towards a tenant's market in some areas where major tenants can vacate a substantial leasable area of office spaces.