Cascade relocations, caused by legislative changes and large headquarter consolidations carried out by multinational companies, will lead to the office rental market growing by 20-25 per cent in 2016 compared to 2015, a real-estate consultancy company report shows.
2016 could be the first year of a stage of giving up on poorer quality office space in Bucharest, the number of company headquarters located in apartment buildings, buildings vulnerable to earthquakes or lacking fire protection being set to drop over the next 3-4 years.
Large pre-lease contracts for “mammoth” office spaces with surface areas ranging from 10 to 40,000 square meters, closed in 2015 or currently in the pipeline, will lead to the freeing up of more A and B+ class buildings located in central areas, the Esop Consulting 1 Corfac International report shows. Demand for these types of buildings is already shaping up from clients that are currently renting villas and residential apartments, the demand being determined by the company administrators’ new attitude toward fire protection and earthquake hazard norms.
“Several factors having significant influence on the office space market will come together in 2016; there will be migration on all segments of the office space market in Bucharest, against the backdrop of the rise in the offer: large tenants will consolidate their headquarters in the newest and best located office buildings in the centre-north and centre-west areas, buildings that will garner the best demand,” ESOP Consulting 1 Corfac International Managing Partner Alexandru Petrescu stated.
Their place will be taken, in centrally located but small buildings built in the last ten years, by medium-sized companies undergoing expansion or on seeking to improve their image, companies that will rent offices with a surface area ranging from 500 to 2,000 square metres. In parallel, there will be huge pressure on tenants in apartment buildings or villas, because of the rise of property taxes for this type of buildings and of the possibility of hiked rents and harsher legislation concerning earthquake hazards and fire protection norms. For companies that have less than 50 employees there will be several modern office space options such as instant offices, the growing number of business hubs and offices in small or medium-size centres that will free up and will feature rents more accessible than in previous years.
The large transactions that took place in 2015 and as a result of which tenants freed up significant office space areas include the Sky Tower (10,400 square metres), Green Court Bucharest (6,300 square metres), Hermes Business Park (22,000 square metres), Oregon Park (20,000 square metres), Hermes Business Park (5,500 square metres) transactions.
At least three large pre-leases are announced for 2016: two large players from the banking domain and one from the IT&C domain that want to consolidate their offices and are looking for solutions for surface areas of over 15,000 square metres.
According to the report, in the next 2-3 years the offices located in apartments in Bucharest’s Unirii and Victoriei areas will lose their former attractiveness for the office space market and will return to the residential market either for rent or for sale.
In what concerns villas, those unconsolidated and not renovated will probably be put up for sale and will return to the residential market. The only exception will consist of well-renovated historical villas situated in premium areas.