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BULGARIA
Office Market
Snapshot
First Quarter | 2019

Market Indicators

Prime Rents: Slightly increased in the last quarter, forecasted to

remain stable

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.

Overview

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.

Occupier focus

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.

Investment focus

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%.

Outlook

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. 

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