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What occurs on the market for office space in 2019

31.03.2020

 

In the second quarter of 2019, the volume of office space increased. Currently, over 450 000 sq.m2 are build and designed for commissioning by the end of 2022. More than 400 000 sq. m2 are planned for construction but there are no building permits issued so the work is on halt.

According to data from the National Statistical Institute in the first quarter of 2019, there were 28 permits issued for the construction of office and administrative buildings in the country with a total gross floor area of 67 404 sq. m2. there is an increase of 8% compared to the same period of last year. Only for comparison, in 2017 and 2016, there was a decrease of 3% and 35%

In the second quarter of the year 23 000 sq. m. office space was introduced to the market and 27 000 sq.m2 was used, as a result, the share of vacant office space decreased to 9.1%. For the Period in consideration, the capital's free office space was 9.9%. For Class A buildings, the levels are below 9%. We expect the activity of the rental market to intensify in the third and fourth quarters, which are traditionally more dynamic.

The largest part of new projects is with a key location on boulevards with good transport links. The investors are highly focused around the business park area and will actively realize new Office projects in the upcoming years

One-third of the owners and investors in office buildings in Sofia are considering an investment in other cities.  The most serious interest is caused by Plovdiv and Varna providing suitable conditions for the tenant’s development.

 

The demand for office space during the period remained relatively stable. The most active on the rental market where the companies from the technology and outsourcing sector, with about 53% of the newly hired areas. They are looking for opportunities to expand or consolidate their business. These tenants have specific requirements for the office environment. They are familiar with the projects at a very early stage, conclude contracts for the renting of office premises before the permission to use. It is a sign that quality projects which perfectly match the perception of companies for an excellent working environment are quickly absorbed. This helps market predictability.

 

Average rents in the second quarter remained stable-in class A The offer levels ranged between 12 and 14 Euro per sq. m, and in-class B-between 8 and 11 Euro per sq. m. In the second half of 2019, the rental levels are expected to remain unchanged.

Few homeowners believe they could achieve rental levels above the market. Nearly 80% of them determine the market as stable. No changes in rents are expected by the end of the year.

At the beginning of 2019, the total volume of the shared office space in Sofia amounted to 33 000 sq. m. Or just under 2% of the total Class A and B offices offered. A relative share similar to other European markets. The estimated share of shared workspaces in the coming years will grow at a faster pace. More and more Offices have their areas for shared offices to provide maximum flexibility to their tenants. Their advantage is in the flexibility over the traditional office market, where tenants are bound by long-term contracts and employment of square meters. There is a close link between the prices of traditional office rents and the alternative offering of shared ones. Increasingly the serious entry of the coworking concept can be explained by the standard contracts for the tenants – with a 10-year term and finishing on their account.

 

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