Colliers: The office rental market is recovering, but it will be a few more years before it reaches pre-pandemic levels
Total demand for modern office space increased by 23 percent in 2021 to 263,000 square meters, according to Colliers data. At the same time, new demand reached 104,000 square meters, up 47 percent from the same period in 2020.
Clear signs of recovery in the office market can also be seen in Colliers’ activity, which was the most active Office leasing agency in Bucharest in 2021, by representing tenants in leases of over 43,000 square meters, a volume that places the real estate consulting company at the top nationally.
The fourth quarter was the first truly normal quarter in two years, Colliers consultants note, which points out that signs of future demand give confidence that the return to the office market may indeed begin in 2022, even if it will take a few more years to reach a pre-pandemic level.
“Compared to previous years, 2021 remains a relatively weak year, but the second half provided encouraging signals from both companies and signed contracts. Thus, the new demand in the fourth quarter was in line with the quarterly average recorded from 2015 to date. The total value of completed Colliers-mediated office rental transactions in 2021 exceeds 43,000 square meters, an obvious increase compared to 2020. It is also important to point out that the calculation methodology did not include areas returned to owners or other transactions in the process of completion”, states George Didoiu, Director of Tenant Services Office 360 at Colliers.
Colliers’ advisors draw attention that managers are still exploring the new post-pandemic work system, with the mix of office and remote work being decided by each company. They approach real estate needs with caution, and for some the hybrid work model generates new challenges related to the organization of the work environment in the future. But overall, there are some positive factors that suggest that the market’s recovery should be somewhat shorter this time around, including the fact that the Bucharest office market is noticeably more mature than a decade ago and benefits from an increased presence of large international companies. Otherwise, IT&C and service companies remain dominant in the leasing market in Bucharest.
“More and more of the conversations we’ve been having lately with the management of large companies are related to the productivity and social connection of employees and how to create a work environment that supports these principles. It becomes obvious that working from home for extended periods of time also involves negative aspects, especially in the long term. Demand has re-emerged from large international companies announcing that they want to open offices here, while many of the existing firms are starting to resume their expansion, and this new demand should compensate for any reduction that may result from the adoption of a hybrid working model. Of course, there were also companies that reduced their surface or tried to sublet their space, offering very attractive packages to those interested”, George Didoiu adds.
The stock of modern office space in Bucharest has reached 3.2 million square meters, with 250,000 square meters delivered in 2021. Colliers consultants consider that the reduced supply of modern offices in Bucharest per capita, of only about 1,300 square meters of office space per thousand inhabitants (even without taking into account the fact that the metropolitan area is probably larger than 2.4 million inhabitants), is a long-term isolating factor and rather expect the modern office stock to start growing again in a few years.