This is the highest request on the office leasing segment registered in the last seven quarters, according to the most recent report of DTZ Echinox where it is also specified that 55% of the office spaces to be completed in 2014 are already preleased.

Total office stock in Bucharest reached 2.07 million in the end of the quarter, and there are 102,000 sq. m estimated for completion by the end of the year, in buildings such as Green Gate, AFI Business Park II & III, City Offices, Green Court or Ethos House. In the first quarter there were delivered 23,400 sq. m by the completion of the projects Metropolis II (reconversion of Starlight hotel) and Hermes Business Campus phase I, situated in central Bucharest and Pipera respectively. Therefore in total in 2014 it is estimated the delivery of 125,000 sq. m, with 5% growth compared to 2013, 55% of this area being preleased.

Nearly 25% of the total office volume scheduled for delivery in 2014 is generated by the reconversion of spaces with a different initial destination. Soravia has reconverted the Starlight hotel to Metropolis II, an office project delivered in 1Q with a total rentable area of 5,300 sq. m. Globalworth is carrying the reconversion process of City Mall to mixed use retail and office, with a rentable office are of 21,000 sq.m.

The total transaction activity in 1Q was 60,500 sq. m, with approx. 12,000 sq. m being represented by extensions and renegotiations of leases, mostly (65%) in the central business district of Bucharest.

New requests registered this quarter (48,500 sq. m) represent the highest level from the last seven quarters and represents 80% of the total transaction activity, with 16% higher than in the similar period of 2013. More than half of the request was represented by preleases, 35% relocations and 14% expansions.

The office vacancy rate remained unchanged around 16.7%. Currently in Bucharest there are vacant 345,000 sq m A and B class offices, with nearly 130,000 sq. m in Pipera. The fewest available spaces are in Central and Western part of the city, with 8 pct. and respectively 5 pct vacancy rates.

The general office vacancy rate will gradually drop, sustained by extensions, new tenants entering the market and relocations from C class buildings to A and B class spaces. This quarter only, 14% of the total request was generated by companies relocating from C class buildings to A and B class. The decrease of the vacancy rate will also be supported by the fact that from the total of deliveries announced for this year, only 45% of the spaces are still available.

Prime rents remained stable in 1Q 2014, situating at around EUR 18/sq. m/month and will maintain at this level by the half of the year. The third quarter could register a slight increase of the prime rents, determined by the low vacancy in the central business district, of 8% and by the shortage in office construction activity in this area.

For the semi-central areas the rents vary between EUR 12 and EUR 15/sq. m/month, reaching values of EUR 9-11/ sq. m/month in business areas in peripheral Bucharest. The net effective rents continue to be 10-20 pct. lower, due to incentive packages offered by the landlords to the tenants following negotiations. The incentives include months free of rent and in most cases the contribution to the owner to the space fit-out budget.

„In the first quarter the office market registered the highest space demand in the last year and a half. The relocation transactions continue to be dominant, representing 85% of the total request, in the context that most of the preleases are in fact relocations. Compared to the same period of last year a remarkable growth of the interest of tenants to sign preleases can be and we anticipate this trend will maintain in the following quarters. Regarding the business districts of Bucharest, the Centre North with Barbu Vacarescu Floreasca remains the most active, both in terms of request and the new spaces volume”, said Madalina Cojocaru, head of office department, DTZ Echinox.

Northern Central area (Barbu Vacarescu – Floreasca) remains though the “hottest” area of Bucharest, The largest office transactions in the last two year were registered in this area (Oracle – 20,000 sq. m; Raiffeisen – 23,000 sq. m; Vodafone – 16,000 sq.m), which demonstrated that the area continues to be attractive for large corporations. From the total of the deliveries announced for 2014 and 2015, more than 100,000 sq. m are in construction in Central-Northern Bucharest.  (source: wall-street.ro)