Sofia Office Market Sees Signs of Recovery

The fabled green shoots of recovery appear to be emerging on the office market in Sofia. Photo by Sofia Photo Agency

After a period of relatively low activity, the Bulgarian capital Sofia is seeing signs of recovery in the office market, according to a survey by Colliers International.

The net absorption for the first half of 2010 has marked a 27% increase compared to the previous six months, the most active companies being mainly from the telecom, outsourcing and IT sectors, shows data of Colliers International.

The vacancy level has reached 21% of the total stock and was higher in Class A than Class B buildings - a testament to the price sensitivity of the market.

"Key parameters on the Sofia office real estate market remain the rental levels, location and functionality of the buildings", comments Anton Slavchev, Manager, Office Department at Colliers International.

According to him, more transactions on attractive rental levels and conditions should be expected in the coming months, the major driver of demand being the effect of further consolidation and global mergers and acquisitions and the fact that companies can currently get very favorable leasing conditions.

Office real estate markets around the world took another step towards returning to normal in the past six months. According to the Colliers' Global Office Real Estate Review for the first six months of 2010, most markets show increasing signs that the worst of the global crisis is over.

Leasing activity is up significantly compared to the previous six months. In particular, Asia Pacific, Latin America and Canada all post healthy growth rates and show signs of future expansion.

The outlook for the balance of 2010 and into 2011 is for continued signs of growth, and a general sentiment that "the worst appears to be over".

Right before its accession to the European Union in 2007 Bulgaria emerged as the new shining star for investors in office facilities development. Three and a half years later, the country is going through its first recession in more than a decade and the office market has been hit by a period of relatively low activity.

The market remains focused exclusively in the capital Sofia, which is at a stage when any client might be able to find suitable premises or expect those to appear at a suitable time.

Assessed in comparison with other countries in the region of Eastern and Southeastern Europe, Bulgaria's office market is keeping its edge.

Yields have been rapidly declining in the old hotspots of Central and Eastern Europe for the last few years and investors have been pushed further east to countries, including Bulgaria.

What the country offers them are lower prices, higher returns and relative security.

Bulgaria's capital Sofia made recently its way into the top ten office markets in Europe and the Middle East in terms of construction volume to be built by 2012.

Sofia ranked next to Paris, Brussels and St Petersburg since in each of these cities some 600-700 thousand square meters of office properties are being built.

Approximately 200,000 sq.m. new office space is expected to be completed until the end of the year, shows a research by Forton, a property advisory company.

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