The Pandemic changed the paradigm of real estate investments in the area of commercial (office) buildings, where there was a speculative effervescence, towards the residential area, where demand is still in surplus, with projects in development and sold event at design stage, in a market where the price of construction materials worldwide and in Romania has reached record levels , shows an analysis of the real estate consultancy 24REAL.
“Immediately after the lockdown, the office space rental market reacted emotionally: customers tried to conclude contractual agreements aimed at renting office space or to reduce rent costs, but after a few months the businesses stabilized, fear disappeared, and things gradually started to return to normal. A trend observed by us was that office space began to be sought in newer, more modern buildings, benefiting from the flexibility of the owners in terms of smaller contractual periods, but also with additional benefits when signing contracts – such as, for example, the arrangement of the premises or a period of free rent payment” , said Constantin Căpraru, managing partner 24REAL.
The residential market, however, has reacted at least strangely in the last year. “On the one hand, the apartment rental market has fallen to historic levels, the main cause being the closure of educational and university activity, as well as the possibility of working from home (WFH), while, on the other hand, the sales market has steadily increased month by month , both in terms of demand and the number of units sold and the asking price”, points out 24REAL consultants.
The return pf employees to offices will take the level of rentals and pre-leases to the office market close to 2019 levels
Despite a year marked by many uncertainties, the office rental market remains a very important segment of the real estate market, with a particular dynamic and changes that will mark the sector for very long periods.
If in 2020 customers acted emotionally first, especially after leaving the state of emergency, and sought to optimize costs and reduce the leased areas, towards the end of 2020 and the beginning of 2021, customers gradually began to resume their work in the office, so requests came from them to increase the leased areas. More specifically, since the beginning of this year, the spaces that were liberated with the onset of the pandemic have begun to take again.
“We have real estate investors who are looking more closely at the office market and want to make purchases here. Returning to the office, they argue, is a matter of time. In 2021 most rentals were for business development (larger office spaces or more commercial spaces) and consolidation (companies have office space in multiple locations and now want to concentrate all activity in one, larger space). There are also companies that will keep the hybrid working system, in which case they will give up some of the office space (especially through subletting – in the short term),” added Constantin Căpraru.
According to him, the return of employees to the office and the fact that the workspaces are starting to fill up again, will take the office market to a level of renting and pre-letting at the end of this year similar to that of 2019.
At the same time, there are certain sectors of activity and areas that expand and look for larger spaces (sometimes double), even if they will move to these spaces even in a year,” such as telecom, construction/development/design, distribution/production, electronics/electronics, online marketing, etc.
The price of building materials has exploded, as have prices in real estate: what happens in the residential market
Intense activity on construction sites in major cities, together with the situation created by the pandemic, has led to unexpected inflation of prices for construction materials, in some cases, for example, their value doubling in less than a year, as is the case with polystyrene insulation solutions.
“Despite the accelerated increase in prices of construction materials, which will also lead to an increase in house prices this year, and which will continue in 2022, we do not consider ourselves in a housing bubble, like the one in 2008, because today’s buyers are much more solvent. The real estate market has once again learned that quality products are marketable at all times. The pandemic has taught us that green space and terraces are more important than we ever thought, and customers are beginning to realize that they have to pay for them too, as comfort can sometimes require sacrifices,” explained Oscar Răceanu, Head of Residential Division 24REAL.
In the last six months, the residential sector has seen an accelerated increase in demand for land and houses in the surrounding areas of Bucharest, but also for land (ideally with permits) for residential real estate developments, especially in the northern area, where units are sold at prices and over 2,000 euro/sqm.
“As in many areas, there is not much predictability in terms of the price of real estate, but customers want to make real estate investments – because they are still some of the safest investments. Customers are interested in investing in properties that generate an annual return, a business model that is successfully used in other countries and that is rapidly developing in our country,” said representative 24REAL.
Translated from Romanian by Service For Life S.R.L.