Sofia Office Market in 2016 is driven by the large rental deals. The average size of the rented offices exceeds 2000 sq.m compared to the office premises size of 1200 sq.m. in 2015. The negotiations of such large office rental deals in Sofia, however takes more time and efforts. The companies that are looking for such spacious office premises are operating in the IT and the outsourcing sphere. The main problem that they face is the insufficient number of suitable office premises.
According to the real estate agents, the office market in Sofia has approx. 3 % available office premises in the top 10 office buildings in Sofia, which is below the required market minimum. The great demand for offices of the highest class A and the insufficient supply resulted in an increase in the rental prices which now reached 13 Euro/sq.m. Looking to optimize their offices, many companies are now considering other models of working premise optimization such as activity based working and hot desking.
The Schengen passport free zone started in June 1985 when representatives of five European union countries gathered on a boat to sign a treaty that abolished the passport controls in their country. This Schengen agreement became a European Union law in 1997 and thus turned into a defining feature of the European Union itself. Today the Schengen Agreement covers 26 countries that are members’ states and one non-EU member – Switzerland. Bulgaria, even if a member state of the European Union, along with Romania, Croatia, Cyprus, Ireland and Britain remain outside of the Schengen zone and agreement. The treaty as it is now concerns 400 million people on an area of four million sq.km and has made the labor mobility and the trade between the European countries much easier.
Until several years ago, everyone loved Schengen. Today politicians talk about shutdown of the Schengen zone and reintroduction of border controls. The European Union have been under serious pressure in the recent years due to crises, migrants and terrorist attacks. The abolition of the border controls was supposed to be accompanied by stronger external borders and security policy, so that the European Union members should be aware of the people who enter the zone. Yet, Schengen was not prepared for the refuges, for the external crises and the home-grown jihadists. What is more, the Schengen area showed weakness in the very first sign of trouble and several countries already re-introduced their border controls. Talks started on forming a smaller Schengen zone between several countries as a plan to restore the order in the European Union.
Now, in order to save Schengen, the European Union should understand that a borderless area with no sharing of the burden between the countries is not possible. The saving of the Schengen zone depends on a common security and migration policy.
The holistic method of the investors and the companies, along with the desire of the young professionals to form strong connections and a great work team are now implemented in the search for office premises. The outsourcing and IT companies, as well as the companies working in the pharmaceutical sphere, which are among the main type of companies renting Sofia offices are using special software and applications that help them use their offices in a wise way and thus make most of the employees’ time while at work.
The various office projects in the capital are already in competition, as the investors are trying to offer the best conditions and to answer the needs of both the outsourcing companies and their employees. Currently, approximately 70 % of the deals signed are with companies from the outsourcing and the IT business.
Many Central European governments have acted by overselling the benefits of the European Union in their attempt for these countries to become members of that same union. The boom of the joining countries happened in 2004 and turned into bust as the financial crises of 2008 become a fact. The migrant crises however and the huge debt of Greece have shown the flows of the European union. Thus, several of the ex-Communist countries showed their resentment and were labelled as Eurosceptic. Hungary and Poland, Slovakia and the Czech Republic claim that the western European countries treat them as second hand members and thus they strongly resent the meddling in their domestic issues, as well as the attempts for imposing the European Union solutions against their will.
The four countries agree upon a EU based on cooperation between the capitals and some western European countries like Sweden, Denmark and the Netherlands find is useful and an opportunity for the east-west division between the European Countries to stop.
The office premises are not just working space, but places for communication and meetings. The new Sofia offices that are coming on the market are part of complexes and not single office buildings. The companies today are looking for a combination between all elements in the building, looking to answer the needs and the requirements of their employees. These requirements include ergonomics of the working space, zone for relaxation, places for meeting colleagues, etc.
The new Sofia office projects are at different stages of their construction, but in the next couple of years are expected to bring 400 thousand sq.m of new office premises. The main requirements of the new outsourcing companies moving their business to Bulgaria are associated with the maximum effective usage of those premises and the time of the employees. In other words, they are looking for a combination of an office, home and café zone.
In late July in the small spa town Baile Tusnad in the Transylvania mountains, many young Hungarians gathered to listen to the speech of their prime minister Viktor Orban. He has done that before, but this year in addition to backing Donald Trump as a president, we also talked about the immigration problem. He stated that the economic crises had turned into a political crisis, and that the migrants flow brought terrorist attacks to Europe.
Mr. Orban is known to be the most severe critic from the inside of the European states that have joined the union after 2004. He and some of the other country leaders are using the situation with the migrants and the Brexit vote to undermine the authority of the European Union and to push their conservative vision on the values of Europe. The split between the eastern and western countries in the union is not clear however. Estonia, Latvia and Lithuania are still enthusiastic about the European Union. Romania and Bulgaria do their best to join the Schengen passport free zone. Yet, Hungary and Poland, Slovakia and the Czech Republic are the so called Eastern Critics. According to the political risk consultants, the former communist EU members would not vote to leave, yet many of their citizens are disappointment by the membership.
The tendency towards the reduced number of available offices in Sofia is remaining strong, confirming the overall need of new and more spacious office premises in the Bulgarian capital. The office projects that are under construction and expected to be completed in 2017 are around 110 thousand sq.m. Motivated by the positive tendency on the market, the investors have started several new projects, thus adding another 90 000 sq.m of office premises on the market.
The high-quality office buildings in the periphery of the city and the popular business zones are attracting many new tenants. At the same time, the options for increasing the number of the offices in the central zones of the city are reduced. This means that the rental levels there are about to go up. The main companies looking for offices come from the IT and the outsourcing sector and the rental levels for the offices of class A they are paying for are between 12 and 13 Euro/sq.m.
Germany promised to help Bulgaria in getting enough support for the security of its borders. This happened after the meeting between the Bulgarian Prime Minister Boyko Borissov and the Chancellor Angela Merkel. The meeting was a result of a call by the Bulgarian Prime Minister for more solidarity concerning the refugee and the migrant crises. The talks were held in the end of August, when the Bulgarian Prime Minister was in Berlin to take part is series of meetings initiated by the German chancellor in connection with the future of the European Union.
Just before the meetings in Germany, Borrisov met with the Prime Minister of Turkey and agreed to present the Turkey’s messages about the visa liberalization. The Turkish citizens currently face Schengen visa requirements. The talks of the Bulgarian Prime Minister came only a week after Frontex, the European Union border agency deployed 100 staff to assist their colleagues in Bulgaria at the borders with Serbia and Turkey. The Prime Minister of Bulgaria insisted on getting equal solidarity as Greece and Italy in the protection of the external border. He further stated that Bulgaria is in need of technical support including patrol boats and helicopters.
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