Prime Rents: Slightly increased in the last quarter, forecasted to
Prime Yields: Unchanged at 7.75% at the beginning of 2019
Supply: Forecasted to grow significantly in a medium term
Demand: Remains strong in Sofia, emerges in regional cities
thanks to the expansion of IT and BPO business
Prime Office Rents – March 2019
LOCATION € € US$ GROWTH %
SQ.M SQ.M SQ.FT 1YR 5YR
MTH YR YR CAGR
Sofia 15.00 180 18.9 7.1 3.7
Plovdiv 9.00 108 11.3 12.5 10.4
Prime Office Yields – March 2019
LOGISTICS LOCATION CURRENT LAST LAST 10 YEAR
(FIGURES ARE NET, %) Q Q Y HIGH LOW
Sofia 7.75 7.75 7.75 11.00 7.75
Plovdiv 12.50 12.50 12.50 13.00 12.50
With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in
any transaction, such as financing, these are very much a guide only to indicate the approximate trend and
direction of prime initial yield levels and should not be used as a comparable for any particular property or
transaction without regard to the specifics of the property.
The office market in Sofia witnessed increasing development
activity coupled with a large portion of new completions at the
beginning of 2019. The latter resulted in slightly growing
vacancy rate, although tenants’ activity keeps the last year’s
pace and economic performance remains strong. Hi-tech and
outsourcing industry remain the largest source of demand.
The first quarter of 2019 registered 34,014 sqm take-up volume
which is in line with the long-term market performance. The
period was marked by several large leases in high-standard
office buildings alongside the main roads, as well as a series of
small-size contracts, mostly in the central Sofia area.
Expansions accounted for almost 30% of the total volume,
mirroring the strong performance of the IT and BPO sector. The
latter remained the most active source of inquiries, with more
than a half of the total leasing volume in the period.
The strong market performance in the last years resulted in
notable amount of new completions at the beginning of 2019,
mostly in the Class A segment. The new deliveries reached
64,000 sqm which is among the strongest quarterly results for
the last ten years. Most of the projects opened fully let with
Garitage Park – Building A and Gold Line among the examples.
Space Tower, an office building on a main road location which
is fully occupied by Experian, was also a notable contribution.
The tide of new completions resulted in higher net absorption
compared to the trend. The volume of 54,200 sqm in the first
quarter significantly exceeded the take up but it is not expected
to be a long-term tendency.
Unlike the prime end of the market, the Class B segment
registered increasing vacancy rate in the first quarter, due to the
occupiers’ migration to higher class offices. This resulted in
slight uplift of the unoccupied space to 9.8% of the total supply.
Stable occupiers’ activity underpins the asking headline rents in
Sofia at 15 €/sq.m in CBD and 14 €/sq.m in non-CBD areas.
The year began with moderate investment activity for the office
segment although the potential for notable acquisitions is still
present. Prime yields remained stable at 7.75%.
The increasing development activity remains an influential trend
on the Sofia office market with 427,000 sqm currently under
construction. Therefore, the vacancy rate is likely to grow further
although occupiers’ activity remains strong.