The crisis has changed many rules in the office market. Still, probably the most significant impact has had on the spaces in the villa. If, in the segment of office buildings, there were substantial increases in the vacancy rate, from 2-3% before the crisis to 18-20% today, the office market in villas has had a different evolution. The vacancy rate was reduced from 26-29% in the central areas before the crisis to 15-18% in Q2-2011 and from 32-35% in the semi-central regions, before the crisis, to 22-26% in Q2-2011.
While the vacancy rate for office buildings increased by over 500%, the vacancy rate for villas decreased by up to 30-33%, compared to the beginning of 2008, according to a market study of the consulting company ESOP. This trend occurred in the context of a significant change in the preferences of medium-sized companies. Before the crisis, these companies focused on space’s image and representativeness, preferring office buildings centrally positioned, with open spaces. In the last 2 years, under the pressure of the need to reduce costs, the priority criterion became the low level of rent and the flexibility of contractual terms, factors that led to a migration of medium-sized companies to villas, registering a decrease in office stock in villas to each of the 3 budget categories.
Villas – the rescue solution in crisis, for medium-sized companies
The diversity of solutions in the market was particularly useful during the crisis. Some companies still targeted the spaces in office buildings, especially the companies with needs of over 600-800 sqm. For companies with between 10 and 60 employees, the villas were more of an oxygen bubble than necessary in such times.
What makes villas a preferred solution in times of crisis? The budget, the flexibility of the contractual conditions, the maintenance expenses, and the parking places without additional costs, considers Mirela Raicu, partner at ESOP Consulting.
Currently, medium-sized companies, looking for areas between 200–600 square meters, want as flexible contract periods as possible, 1, 2, or 3 years, but with the possibility of unilateral termination after the first 12 months in case of adverse developments in their turnover. They also want low maintenance costs. The villas have one of the most efficient levels, ranging between 1.4 and 1.8 Eu / sqm (compared to office buildings, where maintenance costs are between 2.2 – 3, 5 Eu / mp). And last but not least, they want a budget as low as possible allocated to rent and parking spaces that they can easily find on the street near the headquarters without having to pay their rent.
“The villa market is quite atomized and much harder to analyze. The market study from which the above conclusions can be deduced analyzes the information from the villa portfolio managed by ESOP, probably the largest database of an office real estate broker for medium-sized companies, comprising a total number of 1,433 villas, totaling an area of 487,000 sqm. ESOP has been systematically working on this market segment for medium-sized companies for 9 years and has created useful tools that can be used to know this market, less explored,” says Mirela Raicu, partner at ESOP Consulting.
ESOP predicts that after Romania’s exit from the crisis, an essential part of medium-sized companies will return to office buildings. That is why our opinion is that villa owners must use part of the income obtained from renting these spaces in times of crisis to invest in their renovation. In the medium and long term, it will remain a challenge to maintain the villas in competitive parameters with buildings of increasingly functional and modular offices.