€ 600 Millions To Be Lost By Romanian Office-Building Developers Annually

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€ 600 Millions To Be Lost By Romanian Office-Building Developers Annually

Office buildings real estate development in RomaniaDozen articles used to reveal the huge demand of A-Class Building Spaces. Deficits of Hundreds of thousands or even millions squared meters were shown compared with Budapest, Warsaw and Prague in 2007.

Both Developers and the important Real Estate agencies understood the multinational companies’ need of more and more large, imposing office spaces. They used to talk about the hunger for this kind of spaces and about an important deficit: 1.000.000 A-Class squared meters spaces.

1.000.000 sqms office spaces deficit in 2007?

How comes that starting with the 1.000.000 sqms A-Class office spaces it ended with dozens of empty buildings or with a low percentage of occupancy? How comes that all those multinationals still don’t lease those buildings, despite the restraints, relocations and lower lease prices?

The “need” of spaces might was overrated is the most probable answer. Other answer might be that companies are more cautious in their office-space evaluations and more determined to keep the costs under control.

Almost all the offer was oriented to the luxury clients: large companies with hundreds of employees, with more than generous budgets and doing business with lot of optimism. The same time numerous projects were based on expensive and intensely speculated lands, on expensive construction works and were financed with easy loans but with high interest.

The office buildings developed between 2003 and 2008 failed partially to be what they pretended to be. The real-estate websites used to abound of ads of self-proclaiming “A-Class Office Spaces” who were in fact nothing else than flats and many office-buildings couldn’t obtain even a B-Class category.

Never mind the classification of the office spaces which is not to relevant, almost all the new office building developers persisted to offer just large and very large spaces to lease. Hundreds of phone calls made by our company looking for office spaces ended with the disarming words: “Sorry, we don’t have such small spaces!”

All office spaces smaller than 200-300 sqms were extremely rare and were the hazardous result of a smaller and incomplete floor. Hundreds of thousands of small companies used to raise to unprecedented rates the lease values of all apartments and virtually all small house or villa the same time. Villas’ apartments became the favorite office spaces for the lawyers, notaries, IT companies, accounting, advertising, PR, HR, construction, design companies… virtually all small companies in the country, even the developers. The most well established small companies used to lease a whole villa. For the real office buildings there was a war between banks, phone companies, multinationals and all multimillion-turnover companies.

Ironically the same period thousands of companies were started, and all companies with turnovers of several thousands Euros were totally neglected.

There must be noticed that still hundreds of thousands of companies still work in 1-2-3 bedroom apartments in block of flats. Theirs need of office spaces starts from 30 sqm each. A small firm that use to lease a 3 bedrooms apartment needs in fact about 60 sqms. Almost all companies now located in larger or smaller villas need about 80-150 sqms. Relatively few companies need spaces larger than 200 sqms.

A 2 bedrooms apartment is usually about 60-75 sqms, while the 3 rooms are no more than 50-60 sqm large. A company that pays a 500-600 Euros for a monthly lease of a 2 bedrooms apartment needs in fact about 50 sqms in an office building. The same company used to pay before the economical depression between 800 and 1200 Euros monthly. This means that even now those companies pay a monthly lease of 10-15 Euros/sqm and used to pay in the past up to 20-25 Euros/sqm.

To the sums above a company adds other costs: the monthly costs for heating, water, hot water, elevator maintenance, waste disposal, common spaces maintenance, the electricity bill, which represent at least another 100 Euros representing a 2-4 Euros/sqms. All those firms used to pay for alarm systems, intercoms, air-conditioning units, Internet wires, they pay for the electric installation maintenance and they even painted or repaired the spaces at their own expenses.

Euro 600 millions loss yearly

Even more, those companies have to stand for the infamous “apartment company” pejorative. 100.000 of those small companies, which pay now an average 500 Euros monthly for the lease, and maintenance of the apartments represent lost clients for the office buildings of more than 50.000.000 Euros monthly, which represents 600.000.000 Euros per year!

The sum of the above represents not a maximum, but a historical minimum. One should consider that those lost clients of the office-buildings used to pay more than this in a not distant past!

The refuse of the office-building promoters to develop office-spaces with base units starting from 30-50-80-100 sqms is hard to understand. The same time, the already developed buildings can be converted with an important effort and lost of spaces. Their only chance could be only the revival of the real-estate market.

About the Author:

Octavian este arhitect și membru fondator al Trilitica Frame Invest. Pagina sa personală este Octavian-Ungureanu.Ro