JLL gave a retrospective of what the last 12 months have meant for the Romanian real estate market, focusing on how the health crisis has reshaped the business approach of those in this industry and to what extent what we expected to happen in March 2020 really happened.
If we look beyond the last 12 months, we can see that what took place in the real estate market after the outbreak of the pandemic was only an acceleration of some phenomena that were already manifesting in the economy and in this industry.
The change in the way of working and, implicitly, in the employers’ needs, had already started before the pandemic, and this topic was already on the table of many managers and companies.
At the same time, we see a concern on behalf of the actors involved in real estate -consultants, architects, agents, engineers, developers, tenants, banks, and investors - for sustainable buildings and measures to reduce pollution.
"The new way of working will entail the need to adjust the current office space. The residential market will grow to provide occupants a more comfortable alternative, possibly taking into account the requirements of working from home. The industrial and logistics development market will have to accommodate the growth generated by online commerce ", said Cezar Florea, Head of Project & Development Services JLL Romania.
All these developing areas generate many opportunities for those who operate in this market.
As we expected, although there was a moderate pessimism at the beginning of the pandemic, the construction activity did not suffer declines, proving resilience in the face of uncertainty, until the end of 2020. This year began with some decline in construction activity, but our estimates for the rest of the year remain optimistic, foreshadowing the whole year 2021 with a slight increase.
Office market, under pressure
The vacancy rate for office space has risen relatively steadily, the postponement of the expansion projects by most customers contributing to this.
Estimates for 2021 and 2022 are that this rate will increase even further because projects that already have pre-leased spaces cannot be postponed and it might take longer to fill vacant spaces in the absence of an increase in net demand.
The demand will come mainly from tenants whose contracts expire during this period, and who have seized the opportunity to secure advantageous contracts for the coming years.
At the same time, many other companies have preferred to extend their current contracts by one or more years, whether they keep the same space or not. Pending the end of the pandemic, they are taking the time to analyse new forms of work and adjust their own policies. It is not a simple thing, especially for those who have a large staff and with various needs and possibilities of working from home that need to be mapped to maintain the optimal level of productivity.
Another phenomenon that manifests itself on the office market is the appearance of spaces subleased by companies. At this moment, the total area available for sublease is the largest that has ever existed on the Romanian market, approximately 70,000 sqm.
“Inevitably, these spaces, many of them properly arranged for class A offices, including furnished ones, put a lot of pressure on the owners who still have unoccupied spaces in their portfolio. Not only the rent level is the problem, but also the flexibility of the contractual terms offered by these spaces, many companies, especially those that open new offices in the country, but also those based on temporary projects finding these spaces ideal, in competition with co-working spaces ", said Marius Șcuta, Head of Office Department & Tenant Representation JLL Romania.