Office Space Rents in Bucharest - Among the Highest Increases in Europe

Bucharest has experienced one of the most significant increases in office space rents in Europe over the past 12 months (June 2023 compared to June 2022), according to a press release from Cushman & Wakefield Echinox. According to data released by the real estate consultancy company, office rents in Bucharest have increased by up to 15.8%, reaching a benchmark level of 22 euros/sqm/month in the CBD area (Victoriei Square - Aviatorilor), and this upward trend has also been observed in other submarkets within the city. At the same time, the average increase in rental costs across Europe was only 5.6% during the analyzed period, driven by inflation and construction costs. Only in Dusseldorf (Germany) - 26.8% and Rotterdam (Netherlands) - 22.4%, the rate of increase in office space rents was higher than that in Bucharest.

Focusing on Central and Eastern Europe - Prague, Sofia, Budapest, Warsaw, Bratislava, Bucharest - Bucharest's office rents have increased the most. In this context, Prague experienced an increase of 5.6%, Sofia 6.7%, Budapest and Warsaw 2%, and Bratislava 2.9%, according to specialists.

Mădălina Cojocaru, Partner Office Agency Cushman & Wakefield Echinox, stated: "Office rents in Bucharest continued to rise in the second quarter of 2023, a trajectory that began in the first part of the previous year, reaching a seven-year high. The increase in inflation, construction costs, and uncertainties related to the approval of new projects in Bucharest have driven this trend in a market where benchmark rents remained consistently between 18.50 and 19.00 euros/sqm/month from 2015 to 2022. Inflationary pressure will continue to be felt in the market, even though this year prices have somewhat moderated their growth. With sustained demand and limited supply, especially starting in 2024, we can expect the upward trend in rents to continue."

Construction projects in Bucharest currently amount to only 112,000 square meters of leasable space, while around 300,000 square meters are in various planning and authorization stages. However, the development of these projects depends on resolving urban planning issues at the municipal level. Projects like U-Center II, ARC Project, Promenada Offices, or AFI Loft are among those expected to be completed by 2025.

In the first half of the year, the supply of office space increased by 70,000 square meters, with the completion of the second building of the @EXPO project (28,000 square meters) in the Expoziţiei area, One Cotroceni Park II (34,500 square meters) in the Center-West area, and Muse (7,500 square meters) in Expoziţiei. The office stock in Bucharest thus reached 3.38 million square meters, placing the capital fourth in Central and Eastern Europe after Warsaw (6.25 million square meters), Budapest (4.33 million square meters), and Prague (3.85 million square meters).

Regarding transaction activity, in the first semester of 2023, companies contracted over 190,000 square meters in total, a 21% increase compared to the same period of the previous year. Of this, 50% represents new demand, excluding renegotiation and renewal contracts. Moreover, if this level is maintained in the second semester, there is a possibility that 2023 could be a record year in terms of office space demand in Bucharest, potentially surpassing the threshold of 390,000 square meters reached in 2019. Four transactions were for spaces over 10,000 square meters, with several large tenants consolidating their presence in Romania. Additionally, 2023 marked a 16% increase in the average size of a transaction (1,500 square meters) compared to the 2021-2022 average.