Following the recent transformations for the safe return of companies to the office, the office market will have to continue to redefine itself in the next period, to provide spaces that promote innovation and collaboration in the new context, according to Colliers International consultants.
The office will remain the central element within companies, given that the need for intense collaboration and social interaction in the professional sphere is difficult to meet in a virtual environment, the effects of this period being expected to reflect on the way of working and on the workspace organizing.
Most office space owners rely on a stable market with stagnant rents, but 30% expect it could be necessary to decrease rents by the end of this year or in the first three months of the next year at the latest, according to a recent study of Colliers International, conducted among 60 office owners who have diversified portfolios of space, both in Bucharest and in regional cities.
Better commercial offers could prevent the increase of the vacancy rate among tenants who may face difficulties in the current context.
More than half of owners say that they have felt the effects of the Covid-19 epidemic and 39% expect the vacancy rate to rise to some extent over the next 12-15 months, while 35% are more optimistic and bet on stable occupancy rates.
Companies adopt a “wait & see” attitude to overcome the period of uncertainty
”Landlords and tenants need more time to understand the economic impact of Covid-19 before making a decision to renegotiate or renew the lease, whatever that may be. In addition, many companies depend on decisions made in the countries where their headquarter is located, some severely affected by Covid-19, which can have an impact on the immediate decision. On the other hand, due to social distancing and the new rules applicable in office spaces, tenants must carefully estimate the space required, increasing the average from 8 square meters to 15 square meters per employee, which seems to compensate for the impact generated by work from home. In this context, making a decision seems more difficult, and given the uncertainties that exist, it will probably lead to a postponement of the decision until the earliest autumn”, said Sebastian Dragomir, Partner & Head of Office Advisory at Colliers International Romania.
The volume of transactions in the office market at 50%
In the first three months of this year, the volume of transactions in the office market was half the level of over 100,000 square meters traded in the same period last year.
However, net demand rose slightly, from 25,000 square meters in the first quarter of 2019, to 27,000 square meters this year.
Delays in the delivery of new office spaces
Regarding the delivery of new office spaces, the initial plans for 2020 entailed the delivery of an area of little over 200,000 square meters, and Colliers International consultants estimate that most of these projects will be delivered this year or in the first months of the year 2021 at the latest.
In addition, more than 200,000 square meters could be delivered next year from the projects already started, while buildings that have not yet started construction, but were planned to be delivered next year, will most likely be postponed for the period 2022-2023.
Depending on how the demand will evolve, in 2022 and 2023, the owners could bring to the market another 200,000 square meters in each of the two years.