The office market in Sofia has grown significantly in the first quarter of 2022, according to data from Cushman & Wakefield Forton. The signed contracts are for 44,032 square meters, and the market activity is significantly above the average for the last five years, the company reports. Most deals are for higher-end office buildings and new projects, mainly due to relocations and renewals, rather than expansions. This is why, despite the large volume of leasing transactions, net office absorption is generally low – 8,600 sq.m.
The properties on the main arteries of the city continue to attract most of the deals. Unoccupied areas are 16.4%, mainly due to the lack of completed new buildings. The areas under construction amount to 199,355 sq.m.
Most tenant companies are looking for flexible solutions and shared offices continue to gain popularity. As of Q1 2022, the supply in this segment exceeds 45,000 square meters and is expected to overpass 50,000 square meters by mid-year.
Rental prices remain stable – 15 euros / sq.m in the central areas and 12-14 euros / sq.m alongside main roads. Service charges are under pressure due to the growing operating costs and currently, they are in the range of 2.75 – 4 euros / sq.m.
High activity is also registered in industrial and logistics properties with 34,204 sq.m. leased areas in the first quarter. Expansion deals with retailers, logistics and distribution companies are the main drivers of the market. Most requests are for medium-sized logistics areas in the ring road area and the emerging industrial zones on the outskirts of Sofia. For the last quarter only one site was completed – DHL logistics center near Sofia Airport with an area of 5000 sq.m.
There is a decline in vacant space due to the moderate volume of new completions, together with stable demand from tenants. Currently, the unoccupied space rate in the segment is 2% compared to 4.1% at the end of last year. More than 420,000 square meters are under construction, mainly due to owner-occupied production and storage space expansions. In the short term, the market is expected to be complemented by new supply in the areas of the Ring Road and in the industrial zones in Elin Pelin and Bozhurishte.
There is a slight increase in prices, again due to rising operating costs together with the active demand. Rental levels in Sofia reach 4.4 euros / sq.m for med-sized units, while premies above 10,000 sq.m are rented at 4 euros / sq.m.
