Looking at where demand came from, we note that IT&C made up around 37% of gross take-up, followed at a great distance by professional services / business services (not including financial services), with around 18% of leasing demand. That said, compared to past years (particularly the pre-pandemic period), we usually saw IT&C at a slightly higher share.

Turning to general comments, we acknowledge a growing trend of companies pivoting towards office work, meaning they want their employees to be in the office more than say, a couple of years ago. Will this mean a return to pre-pandemic levels? Unlikely, as hybrid work is here to stay, but the approach is much more nuanced and varies from company to company. The general trend, though, is that of a gradual return to office-based work. The stabilization of the market in this respect is also visible when looking at the supply of subleases, which has dwindled greatly compared to 2 years ago. Companies also seem to understand that if they want a higher office presence, they need to work a bit more in making sure that the office space is modern and welcoming.

Otherwise, 2024 continued more or less in the same vein of previous years, with tenants clearly showing a preference for newer and energy efficient buildings (or at least up to par with technical standards), in good locations – with good transport connectivity. These tend to have a much smaller vacancy rate than the overall market and tend to outperform older buildings in poor locations that have not aged that well.

Rents and vacancy

Rental levels have broadly stabilized, though we still note some upward pressures in central locations, including the CBD, where the limited availability of space makes it increasingly difficult for tenants to find a space. This has allowed landlords to set prices higher and this trend could continue in 2025 if market conditions allow it.

Amid a limited pipeline and in spite of a transactional activity that is not too special when it comes to new demand, unsurprisingly, the vacancy rate continued moving lower. It reached 13% (lowest level in over 4 years) at the end of 2024 versus 15.50% at the end of 2023.

Outlook

Given the sketchy internal climate (both from an economic standpoint as well as regarding the political situation) and external uncertainties amid soft economic growth in many Western countries and unclear policies of the new Trump administration in the US, we think that corporates will likely remain quite cautious going forward. Indeed, when looking at hiring indicators, we view something that supports this idea, while job creation, while still slightly positive on a net basis in Romania, has cooled significantly compared to previous years. This means that any expansions taken by companies will be fewer in number than in previous years (particularly the pre-pandemic period) and much less generalized.

As such, we look for new demand to take a bit of a downward shift in 2025, though due to the very limited vacancy and virtually no major pipeline, the vacancy rate is likely to continue moving south, assuming the economy steers clear of a recession – which is not a base case for any forecaster. It is worth pointing that a single mixed-use asset with an office component is set to come to the market – One United’s One Gallery, with c.6,500 sqm in GLA in office spaces which are already fully booked.

While we may sound a bit gloomy regarding the market in 2025, we emphasize that Romania’s long-term advantages are still intact. The economy boasts some of the most competitive gaps between labour costs and labour productivity a company can find in Europe, while as far as landlords are concerned, at just 3.4 million sqm of office spaces (or barely 1,500 sqm per 1,000 inhabitants in the Bucharest metropolitan area), the market is far from oversupplied. In fact, it looks undersupplied, particularly as less than half of this stock has been delivered in the last 10 years and hence, may be quite modern from a technical standpoint; a building’s age is not necessarily indicative of its energy efficiency or technical standards, we just wanted to make a point about the fact that a big chunk of the existing stock is quite old and hence, may not be what big international tenants want. This context should keep the landlords healthy from a financial standpoint and allow for new investments to flow in gradually as leasing demand will pick up over the medium term.