Office take-up in Bucharest amounted to 132,000 sqm in H1
2014, up by 12% year-on-year, according to the latest survey of The Advisers/
Knight Frank. Pre- leases and relocations each accounted for 29% of leasing
deals, while renewals represented another 20%. Notably, firm expansions and new
market entries are on the rise- representing 22% of activity- supported by
strengthening economic conditions. The
Romanian economy powered ahead in 2013, with GDP growth exceeding expectations,
reaching 3.5%. Growth of approximately 2.5% is forecast for 2014. Business sentiment
continues to improve, with more international firms considering Bucharest as a
major outsourcing location in Central and Eastern Europe.
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| Green Court Bucharest- building A |
Occupiers in the IT & C sector were the most active
players in the first half of 2014, with telecommunication providers Vodafone
and Orange signing the two largest deals. Vodafone agreed to prelease 16,000
sqm in the Bucharest One project with the option to further expand, while
Orange leased 13,700 sqm in Phase one of Skanska’s Green Court, delivered by
OCTAGON CONTRACTING & ENGINEERING in 2013. OCTAGON also built the
superstructure of the second building of Green Court office complex, located in
northern Bucharest on Gara Herastrau Street.
Another A class office development built by OCTAGON, which was fully leased, is the
first building of Hermes Business Campus, stretching over 37,000 sqm and rising
eight floors above the ground. The building also has 4 basements, one ground
floor and one technical floor. OCTAGON has just finished building the
infrastructure of the second building of the project and is now working on the
structure.
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| Hermes Business Campus- building B |
Bucharest has recently seen a rise in development activity,
with a total of nine new and refurbished schemes completed in H 1 2014,
providing 120,000 sqm of class A space. The development pipeline has also
expanded and currently stands at 200,000 sqm; of this, 55,000 sqm is expected
to cover over H2 2014.
Despite the increase in new supply, the average vacancy rate
for class A and B stock fell by 6 percentage points year-on-year to 17.4%. This
is largely on the back of significant lettings at completed buildings,
including the recently delivered Floreasca Park, which was fully leased by The
Advisers/ Knight Frank.
Over H 1 2014, headline rents across all major submarkets
remained stable. While headline prime office rents are expected to remain in
the range of 18- 18.5 US per sqm per month, over the second half of the year,
incentives are likely to harden slightly.
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| Hermes Business Campus- foundation works on building C |
Investment market
The first half of 2014 saw a marked increase in property
investment activity, with total volumes reaching a remarkable 460 million USD.
Investment volumes in 2014 already exceed those of 2013 and, with several prime
assets on the market, further major
transactions are expected to be completed in the second half of the year. 2014
is on the track to surpass the total amount transacted over the last two years,
potentially breaking 2010’s record of 543 million USD.
While transaction activity was dominated by domestic
restructuring deals, investment demand remains robust, with both domestic and
international effort focused on office and retail assets in Bucharest.
While transaction activity was dominated by domestic
restructuring deals, investment demand remains robust, with both domestic and
international interest largely focused on office and retail assets in
Bucharest.
The largest deal in H 1 2014 saw investment fund Globalworth
purchase the Upground complex in Pipera from Deutsche Bank’s RREEF for some 200
million Euro. The deal included the sale of a residential compound, as well as
both BOC and BOB towers, for 110 million and 42 million Euro respectively.
While the current strong economic backdrop is attracting
greater investor interest, the limited availability of prime office stock
across major markets has proven to be a hindrance to activity. However, this is
set to change, as Bucharest’s stock of class A buildings continues to increase,
helping to improve office market conditions and offering a wide range of
opportunities to international investors.
As a result, prime office yields in Bucharest have seen
moderate compression over the last twelve months, hardening by 25 bps to stand
at 8.00%. Sustained investment demand over the second half of the year is
likely to drive prime yields below 8.00%.
OCTAGON CONTRACTING & ENGINEERING
More information HERE
Tel: (+4) 021 232 39 20
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