The construction of new big office buildings in Sofia is currently in a waiting policy situation. This is so, as the demand is towards offices in small centers of a mixed type – with residential zone and trade zone with shops. Currently the projects for new office buildings are postponed, until there are more positive prognosis for the real estate market. With an interim government and elections coming in May, the political situation in the country seems unstable and thus foreign investors will most probably arrange for temporal postponing until the situation gets clearer. The real estate brokers and property managers confirm that this might lead to delay in the sale or the rental of the new office premises in Sofia.
In 2013 two high-class office buildings will be completed along Bulgaria Blvd. – the office zone of Bulgaria Mall and Vertigo Business Center, which will form the area as one of the most prestige business and office locations in the capital Sofia. Three additional business centers of the same high class are expected to be completed in 2014. In the last few years, the projects for new Sofia office buildings are difficult to be completed. Currently, the office projects in Sofia with postponed construction feature area of almost 220 000 sq.m. At the same time the small companies are looking for smaller office centers and working premises with area varying between 80 and 200 sq.m. The main criteria for choosing a certain office are the good location and easy access, the attractive price and the presence of a parking.
The Sofia office market is developing well and today we can point out a few tendencies that characterize it. In the last couple of years in the city of Sofia have been constructed smaller, boutique-type office buildings for mixed usage. This means that these buildings offer residential zone and office zone. The main reason behind that is that the investors are trying to answer the demand of the buyers in the city of Sofia. In year 2012, the focus was on small to middle-sized office premises with coverage of 80 to 200 sq.m of area. Of course, there was also a demand for large offices with size exceeding 1 000 sq.m, mainly from certain companies from the IT sector and from companies that were looking to expand their business. In general however, the large office buildings in Sofia often remained with too many large offices that had no companies to rent them. At the same time the smaller offices were answering the needs of the small business. According to the experts, in the near future there will be a balance between the supply of office centers in Sofia and their demand.
In the last few years, many companies in Sofia decided to relocate their offices from the old buildings and locations into modern business centers due to the better working conditions and the reduced office rental levels in Sofia. For example, in year 2012, the offices in business centers of class A and B have reduced their selling prices with almost 7.5 %, compared to year 2011 and their rental prices with almost 16 %. In the end of last year, the average price of the office premises in Sofia was 5.80 Euro per sq.m. Currently, the office market in Sofia city is stable and no major changes are expected. The investment in Sofia offices is attractive and the companies are improving their offices and looking for more and better extras and facilities.
Once you have registered your company in Bulgaria and you are planning to open your own office in Sofia, you will face the challenge to get the right one for your needs. You can run a foreign company, an outsourcing company or another type of company, but definitely you will need a good office. The small companies and businesses, which do not know the Bulgarian market well, will most probably be afraid to proceed and open an office in Sofia straight away. Most probably they will start with securing a virtual office before they open an office in Sofia or another major city in the country. The services of the virtual offices are perfect for the aim of the small foreign companies to get an idea about the market, the current business situation, to arrange some meetings, even to make interviews with future employees. This is a great option for these companies that allows them to be flexible, to know the market and morals and ultimately to decide whether to step on the market or not.
Those companies that have already done their research and have decided to be presented on the Bulgarian market are trying to rent offices. The location and type of the offices are usually directly related to the activity of the newly registered company. These could be a large office of the “open space” type, set in a modern business building in the business zone of Sofia, but it can also be a representative office in the center. The options are varied according to the demand and the business needs. In the capital Sofia, there are many and varied options for renting an office or buying an office. The office rental prices are stable and significant changes are not expected. The managers of registered companies are able to choose between offices in the center of the capital along “Vitosha” Blvd., “Dondukov” Blvd. and “G.S. Rakovski” Street, next to all administrative and government buildings, as well as a number of bank offices. The offices in the center and those in the top neighborhood “Lozenets” are usually scattered in different buildings or gathered in several major business centers. The second most logical option to rent an office in the Business Park, which is located in the “Mladost” District next to the ring road. There are focused most of the offices of the large corporations in Bulgaria.
Besides these major office locations in the capital were built many other business complexes along “Bulgaria” Blvd. and “Tsarigradsko Schousse” Blvd. near the big shopping center “The Mall”. In general, during the last years, the demand of the new companies in Bulgaria is for first-class offices with parking and other amenities. There are many companies that are already established on the Bulgarian market, which also looking for new offices. They are usually from branches which are not so much affected by the crisis, namely telecommunications and information technology, insurance and financial services sector, energy, pharmaceuticals, service centers and call centers. These companies come from office buildings with lower quality and level of service, and a worse location that the options available now.
You have already registered a company in Bulgaria and plan to start making business in Sofia before you expand and head towards the rest of the big cities in the country. However, finding the right office might not always be an easy task. It turns out however, that despite the crises, many new offices in Sofia are completed and opening soon with almost 80 or 90 per cent of them being already rented. In other words, despite the bad news and the financial situations, the office market in Sofia is doing just fine. This is so, as there are plenty of international companies registered in Bulgaria, which are looking for prestige office address. These companies are looking for the right infrastructure, but also for suitable atmosphere and for well-trained and highly motivated professionals.
The completed office buildings in Sofia, which are of the highest class are not that many, however. There are many offices of the lower class, but they do not meet the requirements of the big companies for one reason or another. Business class A buildings enjoy prime location and are about five in total in Sofia. The rental levels there vary from 11 to 15 Euro per sq.m. The rental levels of the buildings of the lower class are lower. Besides the location and the rental price, the companies are also interested in the monthly bills they are expected to pay for electricity, management and other costs. It is believed that the office environment is becoming quite important for the companies. That is why many companies express the desire to relocate, as they aim at improving the working conditions and to get a better business address. These companies are also looking for office buildings that have certain zones for extra activities of the employees like a fitness center, zones for socializing, etc. Managers are aware that they have to create a different working atmosphere and to encourage their employees to communicate more among each other and to work with pleasure.
According to the reports that cover the first half of year 2012, several of the big companies moved their headquarters to other office buildings. Among these financial institutions could be pointed out “Postbank”, “Alfa Bank” and ” Texim Bank”. During this period of the year have been completed around 80,000 sq.m of new and modern offices. According to the same reports, the offices with prestigious and convenient location in Sofia and high quality of the construction could be rented at 9 to 12 Euro per sq.m for the areas outside the city center and at 12 to 15 Euros per sq. m for the central part of the city. The experts on the office market predict good future for the office sector in Sofia and the country in general. During the next year will be completed many quality office projects of class A, as well as new ones will be started. They will wait for their new tenants – prosperous big companies that want to hire local professionals.
Now that year 2013 is ahead of us, many are wondering what to expect from the office market in the next twelve months. According to the research, the main driving force will most probably be the foreign companies which work in the production and services sphere, as well as the outsourcing companies. These will most probably be registered companies in Bulgaria, which will pay taxes here and will hire local employees. The big international companies are focused on the optimization of their expenses and that is why they will keep on searching for other ways and countries to make business. These will be destinations, where the political situation is stable, the tax levels are low and the sums for salaries are affordable for them to cover.
This tendency has already started in Bulgaria and will be valid for the next year as well. Bulgaria, and especially its capital Sofia, as well as other of the major cities like Plovdiv, Varna and Bourgas, will put efforts into creating corporate business centers, which will be modern, with the required facilities and prestige city address. These business centers will be of the highest class A and will answer the requirements of the international companies that plan to operate here. These will be IT and HR companies, accounting companies, logistic companies, express services, call centers and companies that offer different administrative activities and services. Besides the already existing outsourcing companies, there will be new ones that will emerge on the market and this will lead to demand for new working places in modern offices. Big investments are also expected in the industrial sector, which will be stirred by companies that want to relocate their production to Bulgaria and reduce their expenses made in the process of production.
The rented offices in Sofia during the first nine months of 2012 amounted to 71 150 sq.m, which is with 50 % more if compared to the same period the previous year and with almost 18 % more when compared to year 2010. In year 2012 the tendency of the big companies to expand their business to Bulgaria continued. Companies like Coca-Cola Enterprise and Ingram Micro are just two of the companies that set the example. The bank sector was also busy moving offices. Two of the bank institutions, Alpha Bank and Post Bank moved to new head offices in modern office buildings of their own. In general, the companies are looking for office buildings of the high class, with the required facilities. Some of the companies are searching for top locations in the city center, others are looking for the business zones along “Bulgaria” Blvd. and “Tsarigradsko Schousse”, while others are considering the new office building “Sofia Airport Center”. The rental levels are varying between 9 and 15 Euro per sq.m., depending on the location and the class of the office building. According to the statements of the experts and their prognoses, the offices that will come into operation in year 2013 will amount to almost 28 000 sq.m.
Bulgaria, and especially its capital Sofia, is among the tempting destinations for the big companies that want to outsource their business in order to reduce the expenses and increase their profit. The process of outsourcing is not new and the general idea is for the big companies to move to emerging countries with stable economy. Since Bulgaria has very solid economy factors, the country faces an increased market share of the outsourcing companies. All of these outsourcing companies are focused on cost efficiency and the minimum risk, aiming at knowledgeable, highly-educated people who can work for them for a salary much lower than they could expect from the workers in the well developed economies. It seems that people living in the capital Sofia, as well as those in the other big cities of the country answer to all these criteria.
Companies that want to outsource their business to Bulgaria are pleased to find out that here they can count on professional services such as fast company formation, audit and accounting when needed, tax advises, payroll administrations, as well as human resources, regular office services, virtual offices, etc. By using these services in Sofia and other big cities of the country, big companies get increased flexibility in making business, planning strategies and arranging the costs. They also get the chance to make changes in the capacity of work. Thanks to that flexibility, these companies are ready to respond to the main changes on the market.
Of course, there is much more to the outsourcing process than that. Most of the companies, both small and big enterprises, move their business practices to Bulgaria as they have fewer expenses for people and equipment. People in Bulgaria are not only eager to work, but they are also well-educated and they make efforts to improve and add to their knowledge through various professional trainings, computer and language courses. The good education of the people in Bulgaria is a national policy. Thus, the companies that decide to outsource their business to Sofia and register a company here according to the Bulgarian company formation regulations will eventually become more competitive on the market and will allow them to enjoy a better market value.
The outsourcing companies are now able to try the local market at first by using a virtual office. Once they figure out how the business here works, they are welcome to rent one of the available Sofia offices in the big business centers. Another option for them is to buy such an office. However, if they do not plan to work in the country for long years and if they do not know how much they will expand, a better way is to rent an office in Sofia and move to a bigger one if needed. The business centers that are available in the capital are numerous, all of them being very modern and equipped with all necessary facilities for a smooth working process.
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.
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.
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