Romania reaches the highest transaction volume on the office market

The first half of the year brought the revival of tenants' interest for new office spaces, generating a total take-up of 128,500 sq meters, out of which net take-up represented approximately 55,000 sq meters, a 40% increase compared to the similar period in 2013 - shows the Midyear Market Review published by Colliers International Romania. In H1 2014, Colliers International topped the real estate consultancy activity, leading the office market with a 42% market share.

"H1 2014 was definitely a good start of the year in the office market, given the fact that the transactional activity – a total take-up of 128,500 sq m – surpassed for the first time the peak levels registered in the corresponding periods in 2007 (115,000 sq m) and 2008 (125,000 sq m). After five years of precaution, the market shows evident signs of confidence and growth, with new developments on the horizon, spurred by increased demand for new entries, expansions and consolidations. Most buildings carried on persistent efforts to adapt their offers and, despite financial pressure, landlords show creativity and responsiveness to adapt to the structures required by the tenants, both in terms of financial packages and space delivery", states Georgiana Andrei, Director of Colliers International Romania Office Agency team.

Among the main market trends, the report indicates the continuing dominance of IT&C companies, a significant uplift in preleasing transactions and new companies set to enter the local market in the following year. In H1 2014, Colliers International ranked again as the number one real estate consultancy company in the Romanian office market, reaching a 42% share in the total occupational activity, through landmark transactions such as: Vodafone, the largest pre-lease of the year (16,000 sq m in Bucharest One by Globalworth), Schneider Electric (3,100 sq m in Skanska's Green Court Bucharest), Bayer (2,500 sq m in Nusco Tower), TNT (1,600 sq m in Platinum Business & Convention Center) or L'Oreal (2,200 sq m in NEPI's Floreasca Business Park).

A significant percentage of the new demand was represented by new names entering the local market (Kellogg, Lenovo). In the "avant-garde" of this movement marched the IT companies and the Finance and Insurance Sector. Furthermore, the net take up is expected to continue its upward trend, as a wave of expansion from IT&C companies, new BPOs and side businesses from industrial production and agriculture will bring new demand in the second half of 2014. Newcomers from the USA and China have been actively prospecting the market and will probably close deals over the following 12 months.

The banking segment is also likely to produce a series of new consolidations as the M&A activity is peaking up and some of the players will announce acquisitions.

The first half of 2014 also marked a strong come back of the pre-completion transactions which accounted for 32% of overall market activity, with the IT&C segment accounting for most of the transactions. This was mainly due to the organic growth most companies experienced, which, in turn, augmented their space requirements. The main prelease agreement of H1 2014 was mediated by Colliers Office Agency team and involves the consolidation of Vodafone's operations into a 16,000 sq m office space in Bucharest One, developed by Globalworth in Floreasca-Barbu Vacarescu area.

In terms of supply, the quality office stock in Bucharest totaled 1,735,000 sq m at the end of H1 2014. A total of 79,000 sq m were delivered in this period, contributing to an increase in stock of 5%. More than half of this volume was available for lease at the end of the semester. The only fully preleased project was AFI Park 2, which welcomed an important gaming company while the other buildings opened their gates with 30 to 60% occupancy rate.

As demand over the last 12 months outpaced the delivery activity, the vacancy rate dropped from 18% to 17.2%. Some of the healthiest areas in terms of vacant spaces are Charles de Gaulle, Center West and Dimitrie Pompeiu, each boasting rates between 5% and 8%. We expect an additional 42,000 sq m to be delivered by the end of the year, most of which however is already leased. The new deliveries are expected to increase the stock in the already established Barbu Vacarescu Floreasca area, but also in Politehnica area, which seems to consolidate as the IT hub of Bucharest.