ECONOMY: the expansion goes ahead

The main economic indicators suggest that Bulgaria’s economy continued to widen at the start of 2025. In January and February, production in the all-important service sector was up, retail sales in constant prices edged higher, and foreign investment increased. The economy was driven primarily by household spending and investments, while industrial production and exports underperformed.

GDP is expected to rise in Q1 2025, but likely at a slower pace compared to 3.4% y/y in Q4 2024 (6th highest in the EU), partly due to somewhat softer consumer confidence. Still, the economic sentiment is firmly in positive territory, suggesting continued expansion.

SUPPLY and DEMAND: tenants have the upper hand

Overall leasing activity in Q1 2025 was higher compared to Q1 2024 and ahead of the 5-year average. Gross take-up amounted to nearly 46,000 sm. While the relative share of renewals remained unchanged at about 50%, that of expansions doubled to nearly 12%. IT, Financial Services, and Professional Services enterprises drove demand for extra space. Net absorption in the quarter stood at just over 14,000 sm, roughly where it was a year ago.

Two office projects were completed in the quarter. The smaller was a pure office facility of just 2,000 sm, while the larger (the Onyx building) was a mixed-use development combining residential, retail and some 5,200 sm of office space under one roof. With no new starts in Q1 2025, total office space under construction stood just shy of 200K sm.

The office market in Sofia in Q1 2025 mostly favored the tenants. Some building owners reported multiple relocation viewings by prospective new tenants, which ultimately ended with renewals at the old locations. At the end of the period, overall vacancy narrowed to 14.6% – the lowest in the past 14 quarters (but still significantly higher versus the pre-Covid 19 years).

PRICING: generally stable

Class A office rents remained unchanged at 19 euro/psm for prime space in the CBD area. The interval of asking rents in the preferred main road locations expanded slightly to between 14 and 18 euro/psm, depending on tenant preferences and the availability in the specific area.