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.
In the last few years it is the technology sector that runs the office market in Sofia city. The main clients that are renting the class A offices in Sofia are the companies from the outsourcing and the IT sector, as well as international companies for shared services. These companies participated in 45 % of the signed deals for rental of office premises in Sofia in 2015.
There is a serious demand for good offices with central location and proper facilities. At the same time however Sofia has only 12 % offices of class A and B that are still available. At the same time, the office buildings that have been put into usage since the beginning of 2016 are around 13 500 sq.m. The expectations are for another 50 000 sq.m of offices to be released in Sofia city in 2016, while in 2017 the number of newly built Sofia offices is expected to be around 110 000 sq.m.
In an attempt to minimize the migration crisis effects on Europe, the MEPs have agreed to replace the border agency of the union known as Frontex with a newly formed agency for European border and coast guard, which will have more power. The Schengen zone, which allows passport-free travel, has been blamed for allowing terrorists and various economic migrants to enter and travel free across the European continent.
The formation of the new agency received a positive vote, which means that the border controls in EU will be re-introduced, despite the fact that the Schengen agreement is seen as one of the success stories of the European Union.
The yet to be formed European Border and Coast Guard Regulation Agency will make sure that the external borders of the EU are better managed and safer. The national authorities will still take care of their borders, yet the external borders will be covered by the new agency as well. These new rules are to be applied to all Schengen zone members, but will also cover the territories of Bulgaria and Romania, Croatia and Cyprus, as well as the members of the European Free Trade Association – Iceland and Norway, Liechtenstein and Switzerland.
The new European Border and Coast Guard Regulation Agency will have border guards nominated by the member states. It will also return migrants to their country of origin. Without such effective control on the external borders, the rules of Schengen will not survive.
More than 20 % of all deals for renting office premises in Sofia are done for offices that are located in business centers that are still under construction. This became a reality since there is a lack of proper office premises available for rent on the market. The rental levels of offices of class A are ranging between 12 and 14 Euro/sq.m.
The companies that drive the market are coming from the IT and the outsourcing sphere, as well as from the sphere of shared services. The prognosis are for an increased supply of offices in the years ahead. The office space in Sofia that is planned to be completed in 2016 is around 80 000 sq.m, while the planned office premises in Sofia, Plovdiv and Bourgas cities for 2017 are around 240 000 sq.m.
The quality office projects of class A in Sofia is well distinguished from the offices of the lower class B. These new office projects are the ones that are in the focus of the foreign investors.
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