Prices for offices to rent: Much lower than the officially announced ones…

      Sometimes I laugh. Some other times I wonder. How is it possible that so many serious companies continue presenting market prices at high levels, while all of us know that the reality is completely different? Aren't they feeling uncomfortable to present rental prices (still) at the levels of 17 – 22 euro / sq.m., while since the beginning of the year the only contracts we heard in the market were at the price range of 8 – 14 euro / sq.m? (I am happy to accept any exception that will confirm this rule too).

The real situation of the market today
      Despite statistics and whatever else you want to tell to me, I insist. Today the prices to rent A Class office space are at the range of 10 – 14 euro / sq.m. All the rest are the "initial prices of the owners", before the negotiation and the offer of the potential tenants. This stands for both large and smaller surfaces, but you can imagine that when we talk for some thousands of sq.m., the tenant is really waiting his terms to be established and respected. The service charges are also seriously negotiated by both sides. The time when the owner was stating his terms and the discussion was about other details is considered today an "old history".

"Yes, but the owner does not negotiate for less"
      Indeed. It is fully respectable when someone considers that he should rent at a high price. There are many office buildings which really deserve to be rented for a different price range than the one of the market today. But unfortunately there are not many clients nowadays willing to pay big prices. So, we see finished projects staying empty for several months already, or being rented for much lower prices than the ones appearing at their owners' budget.
      I know plenty of owners who are major funds, serious developers, companies with history, track records etc. They have very good assets in their hands, they collaborate with big names of companies, trying to rent at the prices they used to achieve in the past. No result…

Even at Piata Victoriei or Dorobanti – Capitale area…
      I know quite well, as I was searching for my own office. (I shared with you last week some of my stories for this… quest). I didn't really see things moving when the owners insisted on prices over 12 – 13 euro / sq.m., even when we talk about top locations, projects etc. I was searching (and I finally found) 250 sq.m., a surface which is not really big. Still I managed to obtain several interesting offers. (Needless to say that for 2 of my clients, for which I rented over 2.000 sq.m., I obtained final prices which made them very happy, while in the same time the owners of the projects were happy too, as they saw a serious – real client sealing the deal, not just talking…).
      From villas, to A Class Office Buildings, from apartment buildings (which were built with the expectation to be rented to foreigners for 20 – 25 euro / sq.m. and now they search companies to replace the… "extincted" high profile tenants) to whatever else is available for rent… the situation is the same. No matter what the area is, the prices are low and they don't raise not even when we talk for A Class construction, top location etc. "Do we have many transactions like this?" you might ask me… No, the owners of top properties are on hold, renting surfaces only when it is absolutely necessary (at the prices I told you before).

I am not happy with all these, but the worst didn't come yet…
      I am not happy with this situation. it is never nice to find out that a serious investor (because only someone serious can develop a real A Class office building) watches today his expectations being demolished, under the market's pressure. In some cases I have also offered consulting and found some solutions for some of my clients, but I did not achieve to become a… legend, by bringing tenants who would rent for the prices of 2008.
      "Ok, we know all these, we live them every day. What is it going to happen from now on?" Unfortunately the worst has not come yet. As Romanian market will continue sliding over the following months, the situation will remain the same, with a big possibility for things to get slightly worse. With banks remaining rough, more and more owners will be forced to accept lower prices. Not much lower than today though, we are not in a country which will collapse.

Tomorrow: "And what happened to all this demand for offices,
which was presented in several reports?"