Office Market Trends in 2011

2011, the year that brought players back to the negotiating table on the office market

The year 2011 can probably be considered for the office market the year that brought the players back to the negotiating table. The year that, despite a timid increase in completed transactions (estimated to be at 5-8% compared to 2010), is the year that marked the resumption of critical constructive directions.

The main trends in the office market in 2011

Thus, in 2011 the share of relocation transactions increased, reducing those for renegotiation/renewal of contracts. According to the data of the consulting company ESOP, specialized in the office space segment, 72% of the transactions made in the last year were relocation transactions in a new headquarters (compared to 60% in 2010), while the share of relocation/renewal transactions contracts decreased in 2011 to 14%, compared to 22% in 2010.

“These developments are based on a resumption of movement in the market. If in 2010, the focus was on reducing costs and preserving the state of affairs, without plans to expand or upgrade the image in the near and medium-term, in 2011, companies began to show needs for expansion or higher image space. “(Alexandru Petrescu, Managing Partner within ESOP).

• There was an increase of approx. 18% of the average traded area, from 1,040 sqm in 2010, to approx. 1,227 sqm in 2011.
• The process of setting up new companies, whether local or subsidiaries of foreign companies, was resumed in the market, practically reopening a vital channel to supply the demand.
• The profile of the space sought by the tenants has slightly changed. If, in 2010, the determining criterion in choosing the location was the rent (implicitly its lowest level), the preferences of tenants in 2011 moved to the spaces that offered a quality/price ratio as advantageous as possible, according to ESOP.

In the context of the increasing demand for such spaces, in 2011, we witnessed a reduction of the stock of spaces with advantageous quality/price ratio, significantly more accentuated in the second part of the year, and especially in the segment of spaces in villas. The villas suitable for offices have become increasingly rare in the market, which has led to an increase in the average trading price by approx. 11.38%, from 8.52 EU / sqm in 2010, to 9.49 Eu / sqm in 2011.

The offer of office space

In 2011, approx. 130,000 sqm, representing less than half of the spaces delivered in 2010 (270,000 sqm). Among the essential projects delivered were:

For 2012, relatively few projects were announced, namely 10 buildings with probable completion next year. Of these, Unicredit / Bog’Art BC (15,000 sqm) will serve as accommodation space for Unicredit, practically not entering the commercial circuit of office spaces. An important project with delivery in the middle of next year will be AFI Cotroceni, with an area of ​​10,769 sqm. The rest of the buildings are of medium size, under 3,000 sqm. In this context, it is expected that for 2012 the real tradable spaces in the market will be few, despite the large stock existing in the market.

Rent level

2011 was a year of relative price stabilization, according to ESOP representatives. Although in the semi-central areas or low-quality office spaces, the rents registered price reductions again, on the whole, at the level of the market, the rent was maintained at a relatively constant level. Most of the office space stock was in the price range of 11-15 Eu / sqm, more precisely approx. 43% of spaces during the 4th quarter.

The occupancy rate of buildings has increased. Thus, the vacant spaces in the office buildings decreased from 20-23% in 2010 to 17-18% in 2011, a large share being due to the spaces in semi-central areas. In real terms, in the central regions, the vacancies are approx. 10-12% will continue to decrease in 2012, given that we will not witness significant deliveries of space.

Expectations for 2012

“For 2012, if there will be no major and unforeseen turbulence in the local or international economic system, we believe that we will see a similar trading rate with 2011, additionally registering an increase in pre-lease transactions for viable projects announced to be completed in 2012-2013” (Alexandru Petrescu, Managing Partner ESOP).

In the segment of office spaces in villas, it is possible that the trading of spaces in villas will have a smaller scale, given that the genuinely viable spaces for customer expectations will be few. It is possible that on time, the price of such properties will be slightly higher, by 10-15%.

Given that more villa owners will understand the need to invest in raising the quality of space, where the location is central, close to the subway, it is possible to witness a resumption of the pace of trading spaces in the villa.