In Sofia, the retail market is returning to pre-pandemic levels, office rents are heavily influenced by inflation, and the high activity of retail and logistics companies leads to almost full utilization of the available space in the segment, with the share of unoccupied production and
logistics space falling below 1% of the total supply. The data are from Cushman&Wakefield Forton’s marketbeat reports for Q4 2022.
Total volume of leased space and completed owner-occupied premises in Sofia amounted to roughly 104,000 sqm, an unprecedented quarterly result. Many occupiers count on built-to-suit projects that are planned and implemented to meet their specific requirements. Active development locations are the state industrial zone to the west and the Sofia ring road area to the east. Projects within the city’s ring road are in great demand for e-commerce operations. Rental prices continue to rise, with prime logistics space in Sofia rented fat €4.75/sq.m for premises over 10,000 sq.m, and small to medium-sized being offered at €5/sq.m compared to 4.6 euros/sq.m in the previous quarter. The price growth is pushed by rising construction prices and operating expenses and is expected to continue. Among the key construction completions in Sofia are the second warehouse and logistics base of the organic food producer Smart Organic and the new Transpress logistics facility.
In Q4 2022, the rise in revenues and recovery in shopping centers footfall and revenue to pre-crisis levels continued. The segment was marked by the extremely rapid development of the retail parks. Again, there is an increase in rental prices, as in the shopping centers in Sofia they remain stable at 35 euros/sq.m, while in high street shops and retail parks prices report a 5% increase, reflecting the inflation and the associated increase in landlord costs.
According to Forton, the share of vacant office space continues to be high. The deals are formed mostly from renewals and relocations and have minimal net effect for the market. Space optimization remains the leading trend, since many companies still use their offices at partial capacity, due to the hybrid work model. The level of completed objects is low and no major new constructions are moving forward in the segment. According to the consulting company, the office completions in 2022 were reduced to 55,514 sqm over the year, since a
lot of projects were withdrawn in time and this will give more time for the available office space to be absorbed. By the end of 2022, the share of vacant offices in Sofia remains around 16%, and the space under construction is still under 200,000 sq.m. The high inflationary pressure increases the rents of class A and B offices in Sofia, with prime space in central areas being offered at 15.5-16 euros/sq.m, and main road location office reaching 14-15 euros/sq.m. m. Service charge rates vary in the range of 3.5-4 euros/sq.m.