Category: Serviced Offices

The second quarter of 2013 showed good results on the office market in Sofia. The good tendencies on Sofia business market from the first quarter of the year remained and many companies decided to invest in Sofia or to outsource their business here. At the same time the new construction processes slowed down, resulting in reduction of the vacant office premises in Sofia. The reports concerning the office situation in Sofia at the moment have no connections with the political situation in the country, as companies are planning their activities for several months before they decide to act. The business climate is favorable and the investors feel save as the country is financially stable.

The companies from the sectors outsourcing of business processes and information technologies, remain the main tenants on the office market in Sofia. In the first quarter of the year were completed several projects for offices for sale and rental. The total number of the sq.m that were completed was 19300, where 17200 sq.m. were built for own purposes. When companies were not able to find larger offices in the office buildings in Sofia they initially pointed out, they were interested to see other, alternative options as well.

Since the end of last year there is a tendency among the companies which are looking for an office in Sofia. Both the local and the international companies, as wel as the companies that want to outsource their business that are in search to buy or to rent an office are now showing more interest in the area outside the center of Sofia. A few years ago an office with a very central address was something that all companies required. Today, many of them are in search of Sofia office in the good business centers outside the downtown of Sofia. There are many reasons why is that happening.

According to the real estate agents, who are dealing with finding suitable offices for top companies, the business centers in Sofia are now more appealing thanks to their modern infrastructure and the facilities that they can provide. Most of the new office buildings are of class A, have perfectly maintained common parts that are regularly cleaned. Moreover, the parking in or around these new office centers in Sofia is easy, which is opposite to the parking problem in the center of Sofia. Thanks to the new lines of the metro in Sofia, great part of the new office buildings are now not difficult to reach with public transport as well.

Sofia offices rental market suffered a short period of stress. This is the conclusion made by the leading Bulgarian newspaper Capital Daily, after it made an analysis on the connection between the political situation in Bulgaria in time of elections and the Sofia offices rental processes. According to the professionals that are working in this sphere of business, the hiring of office space decreased dramatically after the political storms in Bulgaria in the period February – May 2013. This is so, as the business companies felt insecure not only about the current situation, but also about the future of the country and whether there will be a favorable economic situation after the elections.

Earlier this year, the real estate agencies registered a growth in the rental of offices, but after the government collapsed, the renting of offices was almost frozen due to the uncertainty and the unpredictable situation. However, there are still companies that are looking for larger offices in Sofia. These are companies that have not changed their business plans and are not afraid of the changes. Such business companies in Sofia exist and they still want to seek and rent an appropriate office in Sofia.

The general situation on the office premises market in Europe for the first three months of the year is predicting difficult moments for this segment of the real estate properties. In the first quarter of the year, the rental levels of the offices in Europe in general has dropped to its lowest level since 2009. At the same time, the interest towards the offices in Sofia remains stable and several new Sofia business buildings with rental offices are about to open. The reason behind that is the interest of the international companies which are looking to open their offices in Sofia and to outsource their business in the capital of Bulgaria. This is so, as the country offers good office buildings with offices premises of class A, located in the central areas of Sofia city and the presence of many young professionals.

Even so, the tendencies are for more empty office premises throughout Europe, since many companies are still suffering from the financial crises and are trying to optimize the office area they use. According to the prognosis, at the end of 2014 there will be many new offices in Europe and in our case – including Sofia city. Most of the new office projects and business premises are situated in Western Europe and in Central Europe. They will offer all facilities and extras required, but will come at reasonable rental levels, in order to be afforded by the companies. This tendency in Sofia office market and European office market is expected remain until the end of the year due to the ongoing recession.

In the last couple of years became clear that the business buildings and office centers in Sofia have been planned carefully, so that to attract the interest of the investors. The good location, the perfect infrastructure and the extras planned in the Sofia offices of class A evoked the interest of the local and foreign companies, who either invested into or rented their office premises in Sofia. This however is not the situation with the tallest business building in Europe – The Shard in London. Recently completed, the new business building that imposed too many expectations has two downfalls – bad location and high rental levels.

The new office building is 310 m high and has 72 floors, but has no many tenants and owners of offices. Currently, the only two tenants are the restaurant on the 32nd floor and the gallery that occupies the last five floors, wherefrom are revealed spectacular views towards the city of London. At the same time however, not a single office from all 26 office floors has been sold. The reasons for that are the high rental level and the economic stagnation, which is valid for the UK just as for the rest of the world. The experts however blame the bad location of The Shard building in London, as it is placed on the southern bank of Thames river, while the rest of the financial institutions are placed on the opposite bank. Thus, careful location planning is important for all office buildings in Sofia and in London alike.

The construction of new office premises in Europe is among the investments of highest priority on the property market on the continent. This was shown from an analysis of the company Patrizia Immobilien, cited by the news web portal investor.bg. It is believed that by year 2017, there will be 11 million sq.m. of new offices in the European countries. This will happen regardless of the high levels of unused office premises in many parts of the old continent in the last few years. The city that is most active when it comes to construction of office premises is Warsaw, where are expected to be constructed 900 000 sq.m. of brand new office buildings. Serious construction of office centers is to be seen in the city of Sofia as well, even though the levels of construction are not that high.

The key investors are focusing on relatively low-risk markets such as London. To get more profit however, they can focus on markets with a higher risk like the ones in Dublin, Athens and Madrid, which are currently experiencing economic difficulties. The European cities that have highest percentage of unused office premises include also Barcelona and Budapest. More stable are the office markets in Germany and the four biggest cities there – Berlin, Munich, Frankfurt and Hamburg. In Sofia city, there is an interest towards the offices of class A, which have good location, easy access and many extras.

Almost 57 billion Euros were invested in the construction and organization of European offices during the year of 2012. The sum is reduced with 7 % according to the sum spent the previous year. Of course, the overall economic stagnation in all countries of the European Union lead to no rental growth in the prices, however the interest in relocation and opening of new offices of the local and international companies in all member states was serious. Such increase in the rental prices was seen in Munich and Dusseldorf, Lyon, Oslo and Moscow, however in Sofia the rental prices of the offices remained the same or slightly lower compared to the same period a year ago. A decline in the rental levels of the offices was seen in the cities of Madrid and Lisbon.

According to the prognosis, the rental values will remain the same in most of the European business markets. The interest will be towards the modern office buildings of the highest class, which also have very good locations. The rental levels of offices of class B will remain low and the interest towards them will not increase. Reductions in the rental levels of the offices are expected in cities that have been hit badly by the economic crises like the city of Madrid or face a large supply of office space such as the city of Warsaw.

At the end of April was made the first sod of the construction of the new metro line “Mladost 1” – Business Park Sofia. The Present Mr. Rosen Plevneliev, along with the mayor of Sofia, Mrs. Yordanka Fandakova were attending the ceremony and stated that the new metro line will be 3 km long and will have three stations, serving more than 45 000 people each day. The new line of the metro will be financed by the European Union with 110 million Euros and the “Transport” program, while the municipality will invest 10 million leva.

The new line of metro will make easier the transport towards the largest office zone in the capital Sofia, where are placed the offices and headquarters of many big international and local companies. There will be yet a second metro line that will be constructed from James Bouchier Blvd to Srebarna Str. and the new Paradise Center. This second line will be 1.2 km long and will have just one metro station. According to Sofia municipality, the metro station towards the airport will be completed in 2015. Thanks to that, local and foreign business travelers will be able to reach the airport and catch their flights more easily.

The first skyscraper in the city of Sofia will bear the name Capital Fort and will offer an intriguing mixture of offices of class A, trade zones and service centers. The offices will be modern and perfectly arranged, according to all the international regulations. The building will have a total area of 32 000 sq.m. and will be 126 m high. It will have twenty-four floors of offices that will be serviced by 12 modern elevators. The modern offices will come of various sizes ranging from 80 sq.m. to 1200 sq.m. The lower building attached to the skyscraper will also offer offices of class A, according to all international standards. This lower building will have total area of 12 000 sq.m., height of 30 m and will feature six office floors, served by six elevators. The offices there will be of the open-space type and will spread over 400 to 1700 sq.m. of area.

The new office center Capital Fort will feature a two-level central lobby area with trade zones, bank offices, two conference rooms, as well as several dining places – two restaurants and three fast-food places, a pharmacy, a tour agency, a flower shop, a newspaper stand, a beauty salon and dry-cleaners. The central atrium will have four escalators that will offer fast and easy access to the offices and a pleasant environment for the visitors. The skyscraper will have several showrooms with separate entrances and second levels. In addition to the offices, there will also be a fitness center, a children’s playground area, and a winter’s garden. The underground garages will offer 670 parking lots, arranged in several zones.

The local and international companies that are operating in the capital Sofia are paying between 700 and 3000 Euros per month for their offices. Approximately 40 % of them are looking for office premises with size that varies from 150 sq.m. to 250 sq.m. At the same time 22 % of the companies required offices in Sofia that come with more than 500 sq.m. of area. There is almost no interest in the small Sofia offices with size between 30 sq.m. and 100 sq.m.

The rental sums that the companies were eager to pay for the offices they have rented in Sofia in the second half of 2012 were between 700 and 3000 Euros, which includes more than half of the companies in Sofia. They were followed by 25 % of smaller companies with a budget for office rental varying between 300 and 700 Euros. At the same time, approximately 10 % of the companies stated that they can afford to pay more than 3000 Euros for monthly rental of their office in Sofia. The interest towards the offices of class A remains high, since companies are looking for good location, easy access and extras such as parking zones. When looking to register a company and start a business in Sofia or to relocate, the companies are in demand for high-class offices.