Financial Crisis Could Postpone Several Office Building Projects

Despite the uncertainties surrounding the financial world in the past six months, the rent for office space in Romania has not changed at all. This segment of the real estate market remains the least affected by the global economic crisis and the outlook continues to be optimistic. Compared to the previous year, changes in the rent for Class A and Class B office space remained contained to +10-15%, with a stable outlook for the next six months, according to EuroMetropola. The real estate agency issued a press release indicating that the practice of pre-leasing new buildings about one year before finalization has protected the office space segment for the entire duration of 2008, as well as for a part of 2009, considering that most lease contracts are signed for three-to-five years. However, if the financial market does not stabilize in 2009, the construction projects that are still in an early phase may not materialize at all. Very expensive financing and very substantial collateral required by banks could bear a strong impact on the supply of office space due next year. Indefinite postponement or a construction slowdown will immediately trigger an increase in the rent for the office spaces that cumulatively meet the following conditions: easy access, exceptional amenities and high quality of execution. A practice that already exists on the office space segment and is likely to gain momentum in 2009 is not to start construction works before a significant number of pre-lease contracts has been signed. The analysis made by CB Richard Ellis Eurisko indicates that the average rent for Class A office space in Bucharest is 22-24 EUR/ square meter/ month. Downtown Bucharest gives the high of 25-30 EUR/ sq.m./ month, while the northern area settles for 18-20 EUR/ sq.m./ month. Pipera and West Bucharest go for 15-17 EUR/ sq.m./ month. In the first nine months of the year, the rent for office space in Sofia, Bulgaria, remained the same as in 2007, while Zagreb and Prague became more expensive. Budapest, Warsaw and Bucharest also reported stagnation.