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.
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