Category: Serviced Offices

The market of Sofia offices is stable and is expected to remain so in the year ahead of us. The companies that are renting offices in Sofia have their preferences of the location and size, which depends on the sphere of work and the number of their employees. In general the companies that are opening offices in Sofia are looking for central location, in case they plan to employee several people only. These small companies are looking for offices with size between 250 and 300 sq.m. In general these are consulting companies, lawyers and notary offices.

The larger companies from the outsourcing sphere which are planning to open their offices in Sofia or to relocate to a new office thanks to their expansion include offices from the IT, pharmaceutical and telecommunication business. These companies are in search of large and spacious offices in Sofia outside the city center. At the same time there are a few office buildings in the center which do not catch the eye of the companies. This is so as they are located I areas with no parking zone and difficult access or because they come with high rental prices.

Many companies that already have offices in Sofia are planning to rent additional premises or to move to other business centers with more room and potential, as well as with better facilities. This is expected to be the trend of the Sofia office market in 2014. According to the real estate agents, the Bulgarian office market will be strongly influenced by the outsourcing processes and the fact that many companies are now moving their businesses from Asia into Europe.

Sofia office market is driven by those large international companies which are opening their offices in the Bulgarian capital and by the companies which are already on the market but wish to relocate due to the increase of the work load and the number of their employees. The situation on Sofia market could be explained like that – there are plenty of offices on offer, but the selection is limited. This is a problem that many large international companies are to be facing on the Sofia office rental market in the months to come. Why is this so? Many construction companies focused on residential projects rather than in the office projects during the crises, while at the same time many international companies started seeing Sofia as a great destination for outsourcing. That is why many of the available and completed office premises and the ones in the business centers near completion were rented. Actually the business centers with greatest occupancies are placed on some of the largest boulevards.

The expectation of the real estate companies is that the outsourcing companies coming to Bulgaria will focus on the areas near the metro stations in Sofia. This means that some locations that were not popular until now will become more appealing in the next two years to come. The business centers with the highest number of rented office premises include the Europеan Trade Center with 95%, Megapark with more than 80%, as well as Sopharma Business Towers, Litex Tower and Polygraphia Office Center, followed by Serdika Offices.

For two years in a row the Sofia office market is driven by the companies from the IT sphere and the outsourcing area. These are the main companies that show interest in the office premises in Sofia and have rented the largest number of offices in the first three quarters of year 2013. The country and especially its capital Sofia is attracting the attention of the international companies which are oriented towards customer support and business processes. These companies open offices in Sofia as they are tempted by the low levels of expenses for labor, taxes and rental prices. This is good for Bulgaria, since these companies are hiring local people and are offering good working conditions.

In the recent years however, the construction of offices of class A has decreased and the number of new luxurious offices that are completed has dropped. At the same time, this brought to an investment activity. The ten office projects of the highest class in Sofia are attracting the attention of the greatest number of the companies which are looking for an office to rent. That is why the available office premises in this ten office buildings in Sofia is decreasing and the available office premise there is just 12 %. Hopefully, the construction companies will take note of that and will start new business projects for construction of Sofia offices of the highest class.

The trend of activity on the office market in Sofia that was valid for the first six months of the year, continued during the third quarter of 2013 as well. At the end of September, the number of the deals and contracts that were signed reached the total number of all rental office deals for the previous year. The tendency with the rental of offices is for larger number of deals for a smaller amount of money. The total amount of the recently rented offices from class A and B in the third quarter of the year have reached 16 500 sq.m., which is a decrease of 15 % compared to the second quarter. The total amount of all Sofia office premises of class A and class B for the first nine months of 2013 reached almost 50 000 sq.m.

In the first six months of the year the number of the available office premises from class A in Sofia that correspond to the requirements and the international qualifications have dropped from 21% to 14%. As there is a significant interest towards this type of office premises, it is expected the number of the available office premises of class A to drop even further by the end of the year. The major international companies that are opening offices in Sofia show interest towards the areas around Bulgaria Blvd. and Tsarigradsko Schousse Blvd., Sofia Airport region and the ring road. The average rental levels in the office market segment remain stable and this tendency is expected to proceed.

During the first six months of year 2013, the office market in Sofia showed a slight increase and the total area of office premises that were offered almost reached 1 700 000 sq.m. The completed office buildings in Sofia during 2013 added approximately 35 000 sq.m more, most of which being placed in the outskirts of the Bulgarian capital. The greatest number of modern office premises of class A is to be found in the southeastern part of the capital, near the ring road, followed by the downtown and then by the central city zone. During the first six months of the year is registered an increased activity in the office rental practices. The office premises that have been rented cover approximately 76 000 sq.m, which is up with 45 % compared to the figures at the end of the previous year.

The office market in Sofia is driven by the new companies that are emerging on the market and the expansion of the activities of the existing companies which are already operating in Bulgaria. The most active are the companies from the spheres that were not that affected by the financial situation in the past few years including companies working in the spheres of trade, software production and pharmacy. The companies are mainly interested in large office premises with reasonable monthly rentals and functional distribution of the interior area. Great attention is also paid to the good transport connections. Currently, the city of Sofia features 18 projects of class A, which are completed and correspond to the requirements of the international qualifications for office buildings of the highest class A. The highest percentage of rented offices in these buildings, testify for potential shortage of that type of office space in the near future.

The office market in Sofia is driven by the foreign call centers that have relocated to the Bulgarian capital. These investors and owners of these call centers are interested in high-quality office buildings in good areas of the city with fast and easy access. The rental levels vary from 8 to 12 Euro/sq.m, mainly depending on the location and the number of the available amenities. The rental market of Sofia offices is powered by the interest of the different foreign companies as well as several large domestic companies. The key clients on the Sofia office market horizon are the business process outsourcing companies and the stable and well-developing IT companies. Even so, the interest towards available Sofia premises remains below the levels before the crises.

During the third quarter of 2013 in Sofia city were rented more than 20 000 sq.m of office premises, which marks an increase of 13% compared to the same period last year. Since there are a few office rental deals that are currently being arranged, it is possible that the total number of the rented office premises for 2013 to be more than 100 000 sq.m. More than 80% of all offices that have been rented were actually taken by companies which are increasing their business. The most serious rental deal for an office in Sofia during the last three months was the one with the technology company Comverse. This company rented an office of 2500 sq,m placed in Serdika Offices building. However, this is an exclusive deal, since most of the companies are renting office of 600 – 700 sq.m. of area.

The number of the available Sofia offices is decreasing but even so the available office premises in the Bulgarian capital are still around 15 %. That is why the rental levels remain stable and vary between 9 and 12 Euro/sq.m depending on the exact location and level of facilities in the office building. Sofia city has a quickly developing office market and the prognoses are that soon the percentage of the available office premises will drop, if the political and economic situation in the country remains stable.

The real estate specialists think that Bulgaria has released only half of its potential for new office premises. This, however, does not mean that there is room for any large office projects to be constructed in Sofia in the next few years. At the same time, the office market during the last two years in Sofia was driven by large international companies which are looking to outsource their business in Bulgaria and especially in Sofia. These companies are interested in modern office buildings in Sofia with good location, parking zone and easy access via the public transport system of the city. Offices in Sofia, which are placed in areas that are not appealing and with fast and convenient access, are not in the focus of the foreign companies that are outsourcing their business in the country.

For the first time in a period of more than 3 years will start the implementation of several new projects for business and office buildings in Sofia. The offices that have been rented out in the last three months have increased in number with 45%, due to the number of new foreign companies that emerged on the market. In the period between June and September the rental offices in Sofia were 20 000 sq.m. Most of the companies that decided to open new offices in Sofia city came from the outsourcing sector and the information technologies sector, which make 60% of the total coverage area of all rented office premises during the third quarter of 2013.

In the last three months the large international companies are moving to bigger offices due to the development of their business. The foreign companies are interested in the reasonable tax system and are attracted by the low wages and the low rental levels of the Sofia offices of class A. That is why during the third quarter of the year has started the construction of 15 000 sq.m of offices. Even so, by the end of next year 2014 will be completed only two large office projects in Sofia – the office area of Bulgaria Mall and Capital Fort. The interest is towards offices along Bulgaria Blvd. and the airport Sofia. The rental levels are expected to remain the same between 9 and 12 Euro/sq.m and 12.5 Euro/sq.m for the top center of Sofia. These levels will most probably remain the same until the end of this year and the beginning of next year.

The number of the completed office premises in Sofia for the first half of 2013 has dropped down with 63 %, compared to the same period a year earlier. During the six months’ time were put into operation approximately 30 000 sq.m. of office premises. The low levels of activity from the investors are due to the increase number of premises in the recent years and the decreased number of companies that are looking for offices for rent. At the second half of the year were released only three office buildings – one in the downtown Sofia and two in the central zone of the city.

This reduction in the construction of office buildings is a result of the increased supply of Sofia offices over the last several years and the slow economic recovery of the country. The real estate agents warn however that the limited construction of offices now and the required time for completion of new projects could lead to a vacuum in the office market in Sofia during the next couple of years. Currently in Sofia are being constructed 193 thousand sq.m of office area. The prognoses are that there will be a 10 % increase in the number of rented office premises in Sofia city, in case the political and the financial situation in the country remain stable. Real estate agents confirm, that there is interested towards the rental of the office premises and not towards more serious investments like purchase.

In November 2012 was established the Bulgarian Outsourcing Association with Stefan Bumov as its chairman. The association was formed with the aim to unify the interests of the companies that offer outsourcing services and to offer better conditions for the international companies that are willing to make investments in Bulgaria. The companies that could outsource their businesses to Bulgaria work in the spheres of IT services, pharmacy, telecommunications, insurance finance, and even tourism. All international companies that are willing to open offices in Sofia or to outsource part of their activities in the Bulgarian capital are in demand for modern offices and pleasant working environment. These companies require central location or location near public transport, easy access and good infrastructure, excellent facilities and many extras. When the working conditions are good, the companies are reducing their monthly expenses and are provoking the interest of the job applicants, while at the same time are keeping the current employees.

According to Chairman Stefan Bumov, Bulgaria is quite appealing to the outsourcing companies due to its strategic location, the proximity to large European countries and the educated professionals with knowledge of English and other foreign languages. Bulgaria further offers good microeconomic and political situation, which turns the country into a stable destination for the outsourcing companies.