The office market is picking up
The total rental volume in the first quarter of 2022 in Bucharest was almost 65,000 m², similar to the same period last year, but 10,000 m² more than in the first quarter of 2020, according to research data from Crosspoint Real Estate.
However, tenant interest remains subdued compared to the years before the COVID-19 pandemic, when the volume of leases exceeded 70,000 m² in 2018 and 80,000 m² in 2019.
According to Google Mobility Report, workplace traffic in Bucharest – in mid-May 2022 – was 23% lower than in the pre-pandemic period. Although footfall gradually increased by -62% in April 2020, it remained below the level recorded in January-February 2020. This drop is mainly due to office workers who are still working from home or choose the hybrid model. “Because we are at the start of the summer vacation period, we will probably have a clearer view of the evolution of office work in September-October this year. The transition to a flexible working mode was imminent and the pandemic has only accelerated this trend,” says Ilinca Timofte, Head of Research, Crosspoint Real Estate. According to research conducted by our company – based on a survey of 800 employees in Bucharest and major regional cities – at the end of 2019, more than 65% of Romanian employees did not have the possibility of working flexibly.
More passengers using public transport; road traffic returns to its 2019 level
According to data from Metrorex, metro traffic has been on the rise since the start of the year, with more than 12 million trips in March, only 2 million less than the monthly average recorded before the pandemic. As indicated by Google Mobility Report, the presence of passengers at public transport stations in Bucharest is also increasing, although it is still lower than that recorded at the beginning of 2020. Moreover, according to TomTom traffic reports, the car traffic in Bucharest in May of this exceeded, in rush hour, the levels recorded in the same period of 2019.
New trends in the office market
“As we all anticipated, the office market will now take a different course, and the most significant changes compared to the pre-pandemic period are hybrid working and the adaptation of multinational companies to this new reality by reducing the office space they previously occupied, combined with a shortening of the duration of leases, but also the fact that the gap between the demand for offices and transactions has increased by 30%. they will conclude their previously established plans, focusing on their existing projects and ongoing developments,” says Simona Urse, Associate Director, Office Agency, Crosspoint Real Estate.
From this year, with the end of pandemic-related restrictions after a two-year period totally different from pre-pandemic life, other trends are emerging in the office market:
– Heavy occupants have returned to the office, most in a hybrid configuration – 2-3 days in the office, 2-3 days working from home – a configuration that will most likely become permanent.
– Employees have reassessed their priorities, they don’t like to spend more time stuck in traffic, on the way to work.
– Especially since the beginning of the year, the increase in demand from potential tenants subsequently led to increased interest from potential buyers.
– Much of the new demand comes from relocation projects, some due to the current geopolitical situation.
– Shortening of the duration of leases from 5 years, the norm before the pandemic, to 3 years.
– HR departments are looking for new ways to bring employees back to the office.
– Some companies are now ready to give up their currently occupied office space, even if it is a current lease contract, in order to find a space more suitable for their employees.
– Increase in rents – impacted by inflation and adjusted according to the HICP (Harmonized Index of Consumer Prices) – most rents from existing contracts, including rental charges, have or will increase by around 5 %
– While until now net effective rents have been reduced during the pandemic by various landlord incentives, these rents have now started to increase as a result of contracts.
“Profile studies show that around 45% of employees have already returned to the office, and the percentage is increasing month by month, but we are certainly talking about a gradual return. It is true that about 60% of employees prefer the hybrid working mode, and the reasons are easy to understand: independence, flexibility of working hours, reduction of time spent in traffic jams. But, on the other hand, the need for a feeling of belonging to a team, socializing and teamwork is very high, all considerably impaired in the absence of physical contact with teammates”, explains Florina Grosu , partner, Office Agency, Crosspoint Immobilier.