The office market in Romania’s capital Bucharest is overflowing at least in the short term — although the sustainability of the work from home drive, prompted by the pandemic, may be overrated.
The latest market report from international real estate services company JLL shows that after 155,200 sqm of new offices were delivered in Bucharest in 2020, the pipeline for 2021, including properties already delivered during Q1, totals almost 256,000 sqm. This is a year-on-year increase of 65%.
The increase from last year to this year (around 100,000 sqm) may not mean much for the total stock of office spaces in Bucharest, of around 3mn, but in the context of high and rising vacancy rates this is still relevant.
The vacancy rate continued to increase in Q1, from around 11.3% during the previous quarter, to 13.4%. Considering that the vaccination campaign against COVID-19 is likely to take the whole year, the return of workers to offices is expected to be gradual. This, combined with significant new deliveries, will probably further increase the vacancy rate, JLL report concludes.
Meanwhile, JLL’s report highlights “a differentiated evolution of each market segment” in the first quarter of the year in terms of demand (traded volume), with the industrial and logistics segment still in focus. During the quarter new deliveries fell significantly for almost all asset classes. However, the forecast included in the report reveals expectations for a robust recovery in the volume of deliveries later in the year, including for retail and industrial space.
After 148,600 sqm of gross leasable area (GLA) were completed during 2020, JLL estimates that approximately 156,000 sqm of shopping centres and retail parks are awaiting delivery in 2021, including the already opened Sepsi Value Center in Sfantu Gheorghe.
The stock of GLA in Bucharest was 1.18mn sqm at the end of Q1.
In the industrial segment, developers are still working on projects of 690,000 sqm, after only 30,700 sqm of new industrial and logistics spaces were delivered during Q1 2021.
For comparison, in 2020 the deliveries of new projects were 590,000 sqm. By the end of the year, the total stock on this segment is expected to reach almost 5.8mn sqm.