“The office market is off to a very positive start in 2022, and our pipeline leaves us with high hopes for a strong year. Although it has been much more difficult to present precise and grounded expectations in recent years, it is even more difficult at present, given the various divergent themes that we now have.

On the one hand, in Romania, we see strong indications that, with few exceptions, most tenants are rather expanding, not shrinking their office space, even in the midst of transitioning to a hybrid working model. This could be due to a multitude of factors, but the most important could be the fact that human interaction is increasingly seen as a key factor in the success of teams, cohesion and collaboration. Therefore, it is important to note that the office of the future will be much more different from the offices of the past, with much more emphasis on flexibility, on spaces designed to improve collaboration, etc. Victor Cosconel, head of rental, office and industrial agencies, Colliers told The Diplomat-Bucharest.

How would you describe the evolution of the industrial market in the first half of 2022?

The general trend remains positive, with new deliveries and good demand, which means that the year is shaping up to be comparable to the last two years, which set records in terms of the volume of space rented. However, it could have been even better, but some projects that we know of have been postponed.

Despite the problems that industrial developers were facing, with both the shortage and the rising cost of building materials, we will see new inventory delivered. At the same time, while the availability of building materials is no longer an issue, there is some volatility and costs continue to rise, adding more pressure on developers’ margins. Naturally, we anticipate an upward trend in headline rents, so that developers can face the new economic reality.

Nevertheless, new projects are underway and we still expect the total modern stock of 6 million m² to be exceeded by the end of 2022.

What trends/opportunities have you identified in this post-pandemic and geopolitical context?

The initial reshoring/nearshoring trends continue, with Romania playing an important role in the new logistics setup, for many companies. We are only at the beginning, and it may not yet be visible, but we are already seeing statements from companies seeking to reduce their dependence on Asia, China, which should mean more investment in various other parts of the world, including the CEE.

Therefore, we believe that more production units and logistics centers will soon find their place, anywhere on the Timisoara – Craiova – Bucharest – Constanta route.

At the same time, due to the unfortunate situation in Ukraine, there are good opportunities for further relocations, in Moldova as well as in the north/north-west of Romania.

This, corroborated with (hopefully) a greater concentration of authorities to improve infrastructure and well-invested funds, could be a real opportunity to change the current situation, where industrial developments rarely take into account the region of Moldova. .

What about the office market? What are the current challenges for tenants and developers?

The office market is off to a very positive start in 2022, and our pipeline leaves us with high hopes for a strong year.

However, we are not completely blind to the challenges ahead:

• not many new deliveries to come, either due to construction costs and/or permit issues,
• high inflation significantly impacting the indexation of rents
• relatively low vacancy for certain areas where a “homeowners market” seems to be taking shape.

Additionally, ESG will increase the investments owners will have to make, which will add even more pressure to their financial performance. All of these factors will most likely confirm an upward trend in headline rents.

That said, we cannot ignore the other factors also at play, with a multitude of indicators hinting at the weakness of the global economy and if these trends continue, it is likely that the hiring intentions of multinationals in Romania will be affected. Although not our base case at this point, it seems to have gained traction in recent months.

What do you think the office sector in Romania will look like in the next 12 to 18 months?

Although it has been much more difficult to present precise and grounded expectations in recent years, it is even more difficult at present, given the various divergent themes that we now have. On the one hand, in Romania, we see strong indications that, with few exceptions, most tenants are rather expanding, not shrinking their office space, even in the midst of transitioning to a hybrid working model. This could be due to a multitude of factors, but the most important could be the fact that human interaction is increasingly seen as a key factor in the success of teams, cohesion and collaboration. Therefore, it is important to note that the office of the future will be much more different from the offices of the past, with much more emphasis on flexibility, on spaces designed to improve collaboration, etc.

As long as the global economy remains robust enough, the local office sector should also remain strong and, in this scenario, demand should reach respectable levels within two years (i.e. we could see pre-pandemic rental activity levels). The mismatch between this recovery in demand and a sluggish delivery pipeline could favor the development of a landlord market at least for certain sub-markets/building categories (notably well-located prime office buildings). Furthermore, we would expect ESG criteria to become all the more visible and since real estate is a key aspect, we are likely to see consequences on this front, such as good buildings commanding a higher rent premium compared to to other less prime buildings, as large blue chip companies will fight for a place in such a building.

What are your priorities for the second half of 2022 and for next year?

Our priorities are related to the continuation of the transformation, the increase and the consolidation of the team, around our values, honesty and care, and a new way of working.

We are also increasing our international cross-collaboration, aiming to make the most of the opportunities generated due to the economic and geopolitical context, especially in the CEE and/or EMEA regions.

Focus on hybrid workplace-centric leadership, office transformation and upcoming ESG initiatives, helping our partners navigate through the current ambiguity, using our expertise to remove complexity from their business.

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