If in 2008 the volume of leasing transactions reached nearly 230,000 sqm including leases signed before building completion, the rented office stock is likely to remain below 100,000 sqm. Furthermore, this nosedive is possible to gear lower revenues to brokers in the market, Horatiu Florescu, vicepresident at Colliers told Wall-Street.
In 2007, in Bucharest, the prime and secondary Class A rents reached 203,000 sqm, and in 2008, the generally headline rental levels rose to 230,000 sqm, 60% of the transaction volumes being brokered by the rental division of Colliers International. Of the entire traded surface on office leasing segment, Florescu holds a 48% market share.
“In 2008, we had a roughly 50% market share, or even higher if we exclude direct transactions between tenants and landlords. My incomes fell by nearly 10% from 2007”, said Horatiu Florescu (photo).
As of September last year, there was no new transaction, but only completion of contracts negotiated in spring-summer. If there hadn’t been crisis, Colliers VP says some 30,000sqm could have been under transaction, given the fact that 2008 was expected to be a prolific year for the office market.
Horatiu Florescu sealed the latter transaction in December 2008, for nearly 14,000sqm lease to a multinational company, which he describes as a complex deal. As for expectations for next year, Colliers’ VP expects around 100-110,000 sqm subject to leases. “It is natural in an ever-changing market the revenues of brokers to decline”. However, Florescu says the quality of services is paramount, especially now.
“In times of crisis, the agents must focus on their relations with the customers, and on their real needs. For goods agents, the hard times are seen as profit-making opportunities, but now only two in ten brokers actually know how to make a deal differently”, Florescu added.
As for this year’s investments, Florescu says it is not the best time to talk about the evolution of yields in a ‘transactionless’ market, but we will probably see companies trading their properties at distressed level. In this case, the buyers will be speculative funds, who will be willing to take higher risks, or private persons with enough cash.
“As soon as all the major transactions are consumed, we will be able to speak about a yield in Romania, taking into account the segments for these transactions. There is a new trend however: distressed asset”, said Horatiu Florescu.
In investment market, things might be set in motion in fall, when the buyers will start looking at projects delivered by then, namely between 2008 and 2009, or to those near to completion – second half of 2010.
For example, in Barbu Vacarescu there will be delivered projects such as The Lakeview, developed by AIG/Lincoln and Fabian Capital or Florescu Plaza project developed by Portland Trust. Florescu Plaza is already 95% rented by large-sized multinational companies, their lead-leasing broker being Colliers, as well as in The Lakeview project.
The deals concluded for this subzone are between 16.5-18 euros/sqm/month, most of the leases being pre-lets agreements signed years before completion.
“We expect pre-lets to remain popular and many people hope for large deals, profitable for tenants. If in 2007-2008, over 40% transactions were concluded with companies in IT and financial fields, ABN Amro and Raiffeisen Bank contracting 13,500sqm and 5,000 sqm respectively, this year, the banks will probably wait and sign for buildings with delivery date in 2010-2011”, Horatiu Florescu added.
According to Colliers’ estimations, at the beginning of this year, the total office stock in Bucharest reached 1.2 million sqm, and by yearend, it is likely to climb to 1,337 million sqm.
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