Category: Serviced Offices

The outsourcing business processes companies and the IT companies working in the capital are the most active tenants on the Sofia rental market. Currently, they have taken one fourth of the total number of offices for rent in Sofia. The interest of these companies in towards modern office and business buildings of class A, which have parking zones and central location, that is serviced by the public transport and are easily accessible by car and on foot. Since the beginning of the year until the end of March the completed office premises reached total of 19 300 sq.m. Most of these office buildings were completed for the investors’ own needs. The rental premises in Sofi that have been rented for the first three months of the year reached 31 000 sq.m., which is a 23 % increase compared with the rented office premises in the previous three months.

The successful companies follow one basic tendency – they move to office buildings of a higher class, which have more facilities and extras and better location. That is why the number of the available offices in Sofia of class A is decreasing. The available offices in the business buildings of class A have dropped with almost 2 %. The available office premises in the ten best office centers in Sofia is just 17 %. The rental levels in these top office buildings vary from 9 to 12 Euro per sq.m.

The office market in Sofia is driven mainly by the international companies that have moved their business in the capital of Bulgaria. These companies are looking for high-quality office premises that are positioned in office and business centers of class A that are characterized with excellent characteristics, many facilities and good location that allows for an easy access. The top office buildings of the highest class in Sofia take not more than 20 % of the entire number of available office premises and their total sq.m. coverage is around 330 000 sq.m. However, these are the office premises that provoke the interest of the big companies and usually the 90 % of the office premises in the business buildings of class A are rented.

The new office centers that opened in 2012 are mainly concentrated in the eastern and southern areas of Sofia city, with the focus being set on Bulgaria Blvd. As we have pointed out in many of our previous articles, the office buildings that provoke the attention now are the office zone of Bulgaria Bvd. With its 30 000 sq.m. of rental premises, followed by Vrtigo Business Center with it 18 000 sq.m. of area. The zone along Bulgaria Blvd. is moder and easily accessible, close to the city center and near many facilities, which increases the interest of the companies that are looking to relocate or to settle their first office in Sofia. The prognosis in front of Sofia city office market is for a stable year ahead with 12 Euro per sq.m average price for the offices in the center of Sofia and 9 Euro/sq.m for the offices in the suburbs of the city.

The office market in Sofia city will be stirred next year with three new projects that will be completed and will enter their doors for new tenant companies. The three office buildings will add approximately 100 000 sq.m. more to the already existing office premises in the capital of Bulgaria. This new office area is above the annual percentage of the square meters of offices that were completed in the years before the crises, but at the same time is below the annual level of office demand in the period of the crises. In 2014 will be fully completed the administrative centers Capital Fort on Tsarigradsko Schousse Blvd, the Millennium Centre and the City Tower on Macedonia Square.

The supply of office space nowadays is approaching with slower steps if compared to the supply in the years before the crises, but still the number of offices provided is going up. According to the statistics, at the end of 2012 the office premises offered were 1.60 million sq.m, marking a 7 %year increase. The office premises that were completed were estimated to 108 000 sq.m., while the rented office premises for the same period were 85 000 sq.m. in total.

The main tenant on the office market remain the international companies, which are moving their offices on the territory of Bulgaria. In general these are companies from the IT sector and the pharmaceutical sector, which are looking for high-quality office premises in office buildings of class A that are easiy accessed via the public transport and feature parking zones. The real estate agents believe that the same parameters will form the office market search in 2013.

Sofia ranks third in the world as far as cheap offices are concerned. The average rental for an office in the center of Sofia was 14.75 Euro per sq.m a month in 2012. Lower rental levels of offices are available only in the town of Kito in Ecuador and in the city of Sandan in the South African Republic. The data was collected and analyzed by the consulting company “Cushman and Wakefield”. The lower rental levels of Sofia offices led to the decrease in their overall value. At the same time however the local and international business companies have a good choice of high-quality offices at reasonable and affordable prices. That fact made Sofia one of the preferred places for making business and investments in Eastern Europe. The country has attracted the interest of the companies in the outsourcing industry. This is so, as the country could offer excellent services and production and low expenses for rental, taxes and labor.

The only capitals that can rival Sofia in terms of affordable offices are the Riga with its 16 Euro/sq.m. and Tallin with its 17 Euro/sq.m. At the same time, the average rental price of the offices in Bucharest is 28 Euro/sq.m and 18 Euro/sq.m. in Belgrade. However, the cheap and good offices in Sofia are not the only thing that attracts the foreign companies. The country has highly qualified people, stable micro economy and political situation.

At the end of last year, the demand and the supply of offices in Sofia reached a certain balance level. This happens for a first time in the last four years. The new office buildings in Sofia that were completed and became available for exploitation were almost 140 000 sq.m, while the number of the rented Sofia offices reached 97 000 sq.m. making an increase of 10 %. The prognoses seem good, as in the last three months of 2012 the rented or purchased offices in Sofia city were more than 25 000 sq.m. Many of these new and modern offices in Sofia were taken by new companies on the Bulgarian market or by existing companies that are expanding their business.

The available office premises in Sofia’s best business centers are not many, as they are quickly invested into or rented. The office centers in Sofia that provoke the attention are the ones with top location and fast access, excellent quality of the construction and parking zones. The interest of the foreign companies is concentrated in the business buildings along “Tsarigradscko Schousse” Blvd. There are a few postponed projects for modern office buildings on Sofia’s boulevard “Todor Alexandrov”, which are also expected to provoke the attention while the construction starts.

The prognoses of all real estate agents are for stable office market in Sofia during year 2013, following the price levels from 2012. According to the experts, in the first six months of the year there will be no change in the rental levels of Sofia offices. At the same time, the total coverage area of the modern office buildings in Sofia in 2013 will increase, just as it did in the second half of the previous year. During 2013 two huge office centers are to be completed and open their doors to the companies and the investors. These are the Vertigo Business Center and the office zone of Bulgaria Mall, both placed along “Bulgaria” Blvd. In this way the upper part of the boulevard will provoke the interest of the large companies that plan to open their offices in Sofia. A year later, in 2014 will be completed three other major office centers. These are Millennium Centre, City Tower and Capital Fort, which will add another 100 000 sq.m. of office area in Sofia.

The new, modern and functional offices will most probably be invested into or rented by famous IT companies and outsourcing companies, which were the main driving force of Sofia office market in the second half of 2012. The main characteristic of these business centers is that they offer large office premises that could be rented by big companies or ones that expand their business. According to a recent research, the main factor that plays role in choosing one business center to the other is the location and the easy access by public transport and automobile.

During year 2012 have been granted 170 permissions for the construction of office and administrative buildings in Sofia. Even so, the number of the office centers has been reduced with as much as 23% compared to the previous year. Last year have been completed offices of class A and B with total office area of 122 000 sq.m., which is a 6 % increase in the existing office premises in the capital. At the same time, the business centers that were granted permission for usage and were completed and ready to be used were 70 % less than the business centers that opened doors in the previous year 2011. Besides the Business Center Sofia in Mladost District, the other main business locations include the area around the boulevards “Bulgaria”, “Cherni Vrah”, “Todor Alexandrov” and “Tsarigradsko Schousse”. The central area of Sofia city offers less new office buildings.

Among the largest office centers in Sofia are the Logistic and Administrative building on “Cvetan Lazarov” Blvd. with its 4500 sq.m, the auto center KIA Motors on “Tsarigradscko Schousse” Blvd. with its 3 000 sq.m., as well as the multi-functional complex San Stephano Plaza with its 2 030 sq.m. There are also many postponed projects for office buildings with total area of 220 000 sq.m, which make 15 % of the total office premises in Sofia that are to be constructed in the future. The main requirements of the clients who are looking for larger offices include energy-efficiency and lower monthly bills for electricity, attractive price, good location and easy approach. The most active companies on the market are the call centers, the companies from the IT sector, consulting companies, tour agencies, telecommunication companies, private schools.

The period before the investment in the Sofia offices is characterized by careful and slow period of consideration of all the characteristics, pros and cons of the property. This is so, as buying or renting one of the offices in Sofia is not that emotional as buying an apartment in Sofia. When offices are concerned, people tend to be more practical and to act wisely. Thus before making any steps towards the actual purchase, the investors in Sofia office premises are estimating the business building itself, its location and extras, the presence of public transport, security service, parking zone and maintenance. Without any doubt, the most important factor here is the price. In other words, if the price of the office is right the investors are likely to make one or several compromises.

The sale price levels of the offices from class A and B in 2012 have dropped with almost 7.5 % compared to the office prices in 2011. The rental levels of the offices have also dropped with 16 % or in other words at the end of 2012 the average rental price for office premises in Sofia was 5.80 Euro per square meter. The profitability from office space of class A and B was between 6 and 8 % in December 2012.

The decline in the rental and sale prices of Sofia offices will continue to slow down and will be at the rate of 5-8%. It is expected that companies will keep on moving from old to new office buildings in Sofia with better location and extras. The interest of the major investors and company rentals will be mainly concentrated on the energy-efficient commercial buildings whose first levels have retail premises. Currently, the Sofia office market in the country is stable and consistent and major changes are not expected.

The investors in Sofia offices often use credits to pay for and complete the deal. The process of selection and choosing the best office usually takes a period of up to five months and viewings of approximately 15 premises. Usually half of the bought office premises in Sofia are purchased for a company’s own usage. Sometimes offices in Sofia are also bought for investment reasons and for renting them out. In the last few years there is a tendency among the companies, which results in demand of newer and modern office centers and business buildings. The affordable prices in the Sofia office segment made man companies relocate in the past few years, while other companies managed to sign new contracts for the offices in Sofia they are using for lower rental prices.

At the same time, many investors are looking for office buildings in Sofia with larger office zones. This is especially valid for the companies that plan to increase and widen their spheres of activities. In order to present the Sofia office buildings in a better and more pleasing light, their owners are also willing to offer certain bonuses. For example, they offer completion of the interior or agree to accept one or two monthly payments less until the office is completed. Currently many companies are looking for offices that are situated in retail centers and small malls, which also offer cafes, shops, dining spots. The extras that the Sofia office buildings provide are also of great importance, for example maintenance, parking, security service, access to public transport.

Last year the construction of office buildings decreased due to the lower investment activity on that market in the country and in Europe in general. The building permission for the construction of administrative and office buildings in Sofia in 2012 were 170 in number with unfolded built-up area of almost 84 000 sq.m. This marks a drop with 23 % compared to the levels in 2011 and 58 % compared to the levels in 2008. In year 2012 the office centers in Sofia of class A and class B covered almost 122 000 sq.m. of area. That added to the total coverage of office premises in Sofia being 1 980 000 sq.m.

Among the bigger office buildings in the capital Sofia are the office center on “Tsar Boris III” Blvd. with 19 800 sq.m., the business center on “Vladimir Vazov” Blvd with 20 400 sq.m. and the center on “Todor Kableshkov Blvd with its 11 800 sq.m. The greatest number of the completed offices in Sofia are situated in already established business districts, such as the areas around Bulgaria Blvd., Todor Alexandrov Blvd., Tsarigradsko Schousse Blvd. and Cherni Vrah Blvd. In the central zone of Sofia are still offered modern and new office centers, but they are not many in number. The available office premises in Sofia city make almost 30 % of the existing office premises in the capital. In process of construction were almost 1 400 000 sq.m. of office premises as of December 2012. Currently, there is interest in the construction of smaller office buildings up to 7 000 sq.m.