Landlords offer free-rents periods to lure tenants

The strategy of retail property owners has been adopted by office space landlords, who now offer competitive tenant incentives, such as more favorable lease terms or even rent-free periods, in an effort to lure tenants to relocate, a recent Colliers International study found.
“Landlords are now more willing to offer tenant incentives, such as free fit-outs in order to avoid overhead expenses on relocation. Also, lease terms are shorter, lower rents for the first years or rent-free months are efficient methods to stimulate relocation”, said Maria Florea, senior broker at Colliers’ Office.

In the first half of the year, prime office rents fell 15-20%. A company that plans to relocate office in the central area of the Bucharest pays an average rent of €20/sqm/month, versus €22-25/sqm/month last year.

“For a relocation in a central office building, a company benefits apart from a better location, of lower rent which would generate up to €60,000 in saving to its operating expenses”, Colliers said.

“The advantage of a lower rent can be wiped out by the relocation costs. So, the tenant’s decision to invest in fit-outs can lift markedly the relocation budget”.

“In semi-central areas, a tenant will pay around €16-18/sqm/month compared to €18-20/sqm/month, thus saving around €24,000 per year. For an office building at the outskirts of Bucharest a tenant will pay €12-14/sqm/year versus €14-16/sqm/year, bringing about a €24,000 in savings annually”, real estate consultant said.

Incentives such as rent-free periods are often practiced in the cities outside Bucharest, where landlords offer the possibility of not paying rent for up to one year, or contribute to space fit-out, according to Jones Lang LaSalle.

Modern office supply in Bucharest has increased by 260,000 sqm to 1.4 million sqm, according to Jones Lang LaSalle estimates.

Furthermore, the average take-up rate increased in the nine months through September this year to 12.9%, and 6% respectively for prime office spaces and to over 18% for Class B offices, generally located at the Capital’s outskirts.

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