The office market in Sofia stood firm in the second quarter. Project completions and somewhat slower take-up pushed the overall vacancy rate in Sofia to 16.6%, a tad higher from 16.1% previously. Renewals dominated lease activity with IT and BPO players accounting for the bulk of the deals. Space optimization was a clear trend on the market, reflecting the prevalence of hybrid work models. Most companies either renewed existing contracts or relocated to smaller premises, according to the latest report of commercial real estate constant Cushman & Wakefield Forton.

“The situation was stable and predictable over the past three months, albeit at lower levels of lease activity and lengthier deal times. Widely adopted hybrid work models affect the market and suppress volume compared to prior periods. On the positive side, companies that in recent years had fully switched to home office appear to be heading back to office buildings. For now, it is just a trickle, but the flow could grow stronger in the coming quarters,” says Yavor Kostov, Managing Partner at Cushman & Wakefield Forton.

MORE OFFICE BUILDINGS ADDED COWORKING AND FLEXIBLE SERVICED AREAS TO THE MIX

Another trend noted on the market was that expanding businesses migrated from co-working spaces towards regular offices, either in the same building or same city area. As a result, aiming to offer greater flexibility to tenants and attract growing companies, more and more office buildings sought to add serviced and co-working office space to their mix.

“We further observed new businesses entering the Bulgarian market, as well as greater activity in the startup segment. Co-working and serviced offices are a good fit for such a profile, which is why interest in this product is growing steadily. In recent months flexible office space in Sofia exceeded 60,000 sqm and further openings are on their way,” says Yoanna Dimitrova, Deputy Head of Office Space at Cushman&Wakefield Forton.

RENTS UNCHANGED AFTER AN UPTICK AT THE START OF THE YEAR

The office pipeline stood at 190,000 sqm, roughly unchanged from previous quarters, according to Cushman & Wakefield Forton. There were no large office building starts, while completed projects in recent months were relatively small. During the second quarter, completed office space amounted to 11,000 sqm. The total office stock edged up from 2,267 mln. sqm to 2,279 mln. sqm, while take-up narrowed to 34,000 sqm from 41,000 the year before.

After an uptick at the start of 2023, in the second quarter rents remained unchanged. Class A properties in the CBD area were offered at EUR 16 per sqm, while similar properties along the main roads had a price tag of between EUR 12 and 15 per sqm.