During the second half of last year the supply of modern office premises in Sofia grew by over 12%. This gave grounds for the real estate agents specializing in the rental and sale of offices in commercial buildings, to make prognoses for an increased interest in quality commercial and business properties in year 2012. According to the expectations of the agents, the greatest will be the interest shown by companies that are working in the spheres of Internet technology and those working in the pharmaceutical sector. In other words, the companies will search for new and modern offices for their business will be mainly from those sectors that are not affected by the crisis. These companies are generally looking for offices with an area of 1000 sq.m, placed near the main boulevards.
Currently, the market shows that almost three quarters of the available office space in the capital Sofia are concentrated in the suburbs and only a quarter of them are located in the city center. In general, the number of the office buildings in the high Class A has increased significantly, but not all of them fully comply with all indicators of the class A offices. Since there is a demand for Class B offices as well, there is such supply on the market. Offices from Class B are in the focus of the smaller, often local companies. Another type of offices on the market, that face an increased interest are the virtual offices, which are preferred by the emerging local and foreign companies on the Bulgarian market, which wish to get an idea about the market.
The prognoses of the office realtors are for stability in the rental levels of the offices, as well as a steady demand for good offices in business buildings of Class A, which will be released on the market this year. The demand for this type of high quality offices will be strengthened by the fact that they meet the special requirements of the international companies, which intend to enter the Bulgarian market.
According to the prognosis of the realtors, the real estate market in 2012 will be more active if renting and purchasing of offices in the new and luxurious office buildings in the capital is concerned. Moreover, the professionals are optimistic that the city of Sofia will attract the solid investors from UK, USA and Greece, while there will also be an increased interest from established investors in Bulgaria. The analyses of the people who work in that sphere shows that these investors are willing to take higher risks, or wish to purchase office buildings under construction and to provide for their subsequent completion and rental.
The prognoses of the brokers, who are specialized in the rental and the sale of offices, are that in year 2012 this sector of the real estate market will not only reach the level of the previous year, but will surpass it. Among the most successful deals in Sofia in year 2011 were the sale of “Mall of Sofia” and “Business Centre Bells”, as well as the “European Trade Center”. It should also be mentioned that a large and modern office in the new office building “East Tower” was purchased for the outsorcing branch of the investment company “Bernard Investments” with headquarters in France.
The consulting firm Cushman & Wakefield published a report at the beginning of the year, which states that besides Bulgaria the other attractive markets for commercial real estate properties are the following countries – Hungary and the Czech Republic, Slovakia and Estonia, Croatia and Russia. The investments made in Eastern and Central Europe last year have reached 6 billion Euro and it is expected that a similar share of investments will be made this year. We should also mention the continued interest of the investors in the virtual offices, the use of which helps them find their way to enter the market before purchasing a real office.
It seems that the big companies are moving towards the end of Sofia, near the Ring Road. There are already several large business centers, except the Business Park, since there are serious plans for the construction of good and convenient road connections. Thanks to the good infrastructure, this area of the city is expected to attract more business companies and thus the new office area is expected to be near the new section between the big furniture store “Ikea” and the future “Sofia Ring Mall”, which is expected to become one of the largest entertainment and shopping centers in Sofia.
Besides the business companies that are now coming to the Bulgarian capital and are looking for offices in the high Class A, the region is also provoking the interest of many major retailers of furniture and equipment. Overall, the area between the Business Park and boulevard “Bulgaria” is formed as a new and modern office and shopping area, where except the buildings already familiar to us like the Business Park and the stores “Technopolis” and “Como”, and the Cinema Complex “Arena”, soon there will be many new office buildings and large stores. Before this happens however, the area presents a nice selection of completed office centers. There is a tendency these centers to be rented by the new international companies who are just entering the Bulgarian market before new business areas to be constructed.
Over the past few months the building companies in the capital were occupied mainly by finding new tenants for the existing office buildings and business centers they have built, rather than making new investments. In other words, the trend that is clearly seen is for a slow pace market when office construction is concerned and a focus on the newly established office areas in Sofia. However, the capital remains the main city for the large office projects and continues to be a preferred destination for the big foreign companies who now enter the Bulgarian market.
Currently, there is a significant number of the developers who do not release their new office buildings before finding tenants for them and signing a long-term contract. The new tenants are often companies that come from low-end office buildings in search of better conditions and companies working in an area unaffected by the crisis and consequently expanding its staff. These days the rental levels of Sofia offices from the middle and the high class is about 8-11 Euro per square meter as the rent levels of the top offices remain stable.
The office market in Sofia faces bold relocation of companies in search of a much better quality, but possibly at a reasonable price. Naturally, the offices of high quality and a central location keep the high interest of the companies, while the offices that offer not so good conditions remain empty for a longer period of time. In the end of the last year and in the beginning of this year, there is a high interest in the option of renting virtual offices, since this service is becoming more and more popular among people with flexible businesses.
This year started with more than twenty percent vacant office space in Sofia. According to the prognosis, many companies are about to change their contracts and many new companies are to come on the market in the coming months. These companies are expected to be from the IT sector and different outsourcing companies. The contracts that are expected to be changed were signed during the crisis, so tenants are expected to have many demands for amendments thereto. This will be so, because companies today can easily find a better alternative and modern office space. The virtual offices in Bulgaria are also attracting considerable attention, particularly because of the lower costs.
Currently, the vacant offices are about 330 000 sq m, which is more than during the previous years. The expectations are for around 60,000 sq m of these offices to be rented this year. At the same time are released new offers for high-end office buildings, but they are not as many as during the pre-crisis period. The transactions made are with companies that are moving into new, more spacious and modern business centers. The expectations are for reduced rental levels. The real estate agents expect a few big companies to enter the country and to provoke the office market.
Currently in the city of Sofia could be found more than 330 000 sq.m of offices available for rent. Among the office buildings there are some business centers which can not find long term tenants because of their poor location or lack of parking spaces. At the same time there is a strong interest in green offices and the high quality offices, which have provoked the interested of the international companies that have entered the Bulgarian business market. That is why the vacant offices of the highest class A are not many. This creates a niche for building of Class A office building projects, that are expected to be easily rented or purchased in the near future.
The available offices in Sofia are suitable for those companies who are looking for interesting design, guaranteed comfort and efficiency. Often, the companies have a choice of three or four locations to pick from that offer high quality office environment. The market for Sofia offices is quite active, where the demand is for ones in the city center and in the business districts. The location is the main criteria, followed by the quality and the type of the office. Since the companies’ budgets for the rent of offices is reduced, these companies are trying to optimize the area available and to use their resources in a rational way. Overall, the number of the transactions made is higher than the one in the previous two years. The interest in the virtual offices in Bulgaria remains stable.
The serious supply of office buildings in the city of Sofia in the last few years formed several different segments in that sphere of the real estate business. Several projects of office buildings of the highest quality are being preferred by the companies, while other projects are turning into outsiders. Those investors who have been smart enough to put their efforts on the planning and have carefully chosen the location of their office buildings, and have further insisted on the easy access, the good technical characteristics and the available parking options are now attracting the attention of the companies.
Currently, the companies can choose from more than 350 000 sq.m of available offices for rent or approximately thirty percent of all offices in Sofia. A great part of these offices are located in organized business centers in the outskirts of the capital. The prognoses are that the high-quality office buildings will get tenants in the next two years and will keep their popularity. At the same time, it is expected that the offices of the highest class when it comes to location and amenities will face an increase in the rental levels. Part of the business companies that are still hesitating whether to open offices in the country are currently using the option of the virtual offices in Bulgaria. Once they start to feel more secure they will most probably open offices in some of the high-class office buildings in Sofia.
The city of Sofia is among the European capitals with the greatest number of available offices of the highest class A. In the last year 2011, the rental levels of the offices have been stable. The same tendency could be seen at the office markets in Central and Western Europe, as well as in Russia. The office markets in Moscow and London have faced an increase in the rental levels of approximately ten per cent, while the office markets in Sofia, Athens and Dubai has underwent a decrease of eight per cent. The reasons for that for the city of Sofia is not the lack of interest but the increased number of offices available for rent. The tendencies for Sofia city are for a great number of the available offices and stable return levels of the investment.
Approximately 1.4 million square meters is the overall area of the offices in Sofia with more than 27 000 sq.m of new offices being completed in the last months of the previous year. The rental market is still in a slow phase and there are not many contracts sign. Those, which show interest in renting a new office, are usually companies that want to relocate and have access to better conditions and more extras in the office buildings of class A in Sofia. More than 150 000 sq.m of offices are to become completed and functional until the end of year 2012. The rental levels of the offices are expected to remain stable. The interest in the virtual offices in Bulgaria is also keeping its good levels and many companies are choosing that formula for making successful business in the country.
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