Who Will be the Winners of the Office Market

Despite the high vacancy rate on all office segments (class A ~ 8-10%, class B and C ~ 12-14%, villas 25-30%), only 30% of owners are aware of the new market conditions and act accordingly. They make efforts to adapt their offers to follow the new realities of the market and not be left with empty buildings waiting for times that are announced to be even harder.

Customers, aware of the new reality

Most clients know the new realities of the office market: oversupply, declining demand. Compared to 2008, there is a decrease in demand of 10-15% in the SME segment and 25-30% in the corporate sector. Starting from this reality, but at the same time constrained by more precarious and unpredictable economic conditions, the clients have significantly reduced their budgets, being convinced that they will find solutions in the market with the owners.

“The relocation budgets of the companies have been reduced in direct proportion to the reduction of the profit in these months. In the case of SMEs but also of medium-sized companies and co-owned companies, the budgets decreased on average by 25-30% for an area of ​​100-150 sqm. The most common budgets do not exceed 1800-2000 EUR. In the case of medium framing, the most sought after spaces are in class C and B buildings and villas, 200-300 sqm, the average budgets being located between 8-12 EUR / sqm. In the case of large companies, on the corporate segment, class C and B buildings are preferred, the average required surfaces are 800-1200 sqm, and the average budgets are between 10-12 EUR / sqm” according to a study carried out by the real estate company ESOP.

Only 30% of owners are aware of the new market conditions and act accordingly. However, in the circumstances in which negotiations are practically reached, it is found that some owners do not have enough openness regarding the financial conditions and the rental terms. It is tough to accept a totally different reality after a period of accelerated rent growth that culminated in 2008.

“Many landlords remain rigid, hoping for better times. But the time when customers stood in line at buildings is long gone. In our opinion, any serious client who arrives in a negotiation and makes a proposal from the market should not get out of hand, “says Irina Petrescu, ESOP partner.

Not many owners think so, and that is why we face an unprecedented degree of vacancy: (class A ~ 8-10%, class B and C ~ 12-14%, villas 25-30%), vacancy rate that will increase against the background of the delivery/release of new spaces and the decrease of the demand in the second part of the year.

Who are the landlords who rent during this period?

Although the number of transactions has decreased a lot compared to last year, about 20-30%, there are still transactions on the office market because there are owners who understand that this time is precious, that the future is uncertain and that by the end of 2010 we cannot expect an improvement in the market.

The profile of the owners who make transactions on the office market

It is about Romanians as well as foreigners; 40% are first-time landlords who have not had time to live in the “golden age of rents” and remain stuck in outdated realities. The remaining 20% ​​are owners with experience on the market, but who understood that the time for change has come and have adapted their way of working.

“If we refer to the degree of vacancy, 80% of the most flexible owners are those who stay with unoccupied spaces for 4-6 months; they once understood the hard lesson of the market and are now most willing to find solutions with customers. The remaining 20% ​​are those who have recently removed their spaces for rent, but are well acquainted in reality, informed, open to the suggestions of consultants and clients and who have managed to rent the buildings in record time for these times “, it is shown in an ESOP study.

Depending on the type of property, we might expect large developers, especially large-scale buildings, to be the first to align with the market. 60% of them are insufficiently informed and unrealistic, preferring to stay empty. At the same time, the average developers have been much more dynamic, adapting their offer as they go. A surprise also came from the villas’ area, the owners being often simple people, who make efforts during this period to make their offer as attractive as possible, both in terms of price and rental conditions. Even if only 30% of the owners have adapted to the new market conditions, the viable demands existing in the market are enough.

“They have the chance to take advantage of this period trying to capture potential customers from the market, even if they get a profit 15-25% lower than estimated, they make efforts to rent their buildings and prepare for even tougher times which is announced in the second half of 2009 and 2010 “, says Irina Petrescu from ESOP.

Maria Neda

PR & Media Coordinator, PR & Media Consultant, with background as a journalist in the economic press and experience as a consultant in Urban Development.

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