Envato Elements: elements-PPHTBNV.jpg

BULGARIA
Office Market
Snapshot
Second Quarter | 2019

Market Indicators

Prime Rents: Forecasted to remain stable in a short term

Prime Yields: Stable at 7.5% in the first half of 2019

Supply: Forecasted to grow significantly in a medium term

Demand: Remains strong in Sofia, emerges in regional cities

Prime Office Rents – March 2019

LOCATION                                          €                      US$   GROWTH %

                                                        SQ.M     SQ.M    SQ.FT       1YR    5YR

                                                            MTH       YR          YR          CAGR

Sofia                                                15.00       180        20.2        7.1      3.7

Plovdiv                                             9.00        108        12.1       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                                                   7.50       7.75       7.75    11.00    7.50

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

Sofia’s office market witnessed strong performance in the first

half of 2019 with supply and demand remaining relatively

balanced. Economic growth underpinned both occupier and

development activity which resulted in stable rents and

absorption rate. In line with the recent years, the leasing market

was dominated by tech and outsourcing industry.

Occupier focus

The total take-up in Sofia (leases signed during the period)

reached 66,783 sqm in the first half of 2019, approximately at

the five-year average. The market was driven mostly by

preleases but the second quarter was also marked by several

large renegotiations in the Class A segment. IT and BPO

companies remain main source of inquiries, aiming at expanding

or consolidating their business. Main road locations are

preferred, along with the area around Business Park Sofia

where a number of large office projects are under construction

or have been recently completed. Outside Sofia, Plovdiv and

Varna are in the occupiers’ focus offering attractive conditions

for opening of second or third location.

The delivery of two mid-size and a few smaller projects added

43,000 sqm to the office stock in Sofia in Q2. Since the

beginning of the year, almost 107,000 sqm offices Class A and

B have been completed ranking the period among the most

active historically. The office pipeline remains strong with more

than 404,000 sqm under construction and significant amount of

space in planning phase. Main roads and suburbs with good

transport access account for more than 90% of the ongoing

office developments in the capital city. The increasing supply

continues to gradually push up vacancies with rate reaching

9.9% on average in the second quarter. Traditionally, the share

of unoccupied space is higher for Class B office buildings, since

tenants migrate to better locations and working environment.

Class A vacancy remains below 9%.

Asking headline rents in Sofia are stable at 15 €/sqm in CBD

and 14 €/sqm in non-CBD areas. Rates are forecast to remain

unchanged in a short term.

Investment focus

After compression in the last two years, prime office yield stays

at 7.5-8% in the first half of 2019. High-standard buildings with

stable cash flows, as well as value-add properties are on the

investors’ radar.

Outlook

Increasing development will improve the availability of

investment grade product and growth of the liquidity is

anticipated in mid-to-long turn. 

Shopping Basket