ECONOMY: Accelerating growth

In the first nine months of 2024, Bulgaria’s economy maintained its upward trajectory. Accelerating growth reflects solid domestic demand and improving investments, offsetting soft external demand. The leading indicators suggest that in the short-term the economy would stay on course. Economic sentiment is firmly in positive territory and rising. Consumer optimism is at its highest this century and confidence is above average across all parts of the economy, especially the all-important services sector.

SUPPLY and DEMAND: stable demand

The office market in Sofia ended the nine-months of 2024 with moderate rental activity of 130,655 sqm, slightly above the 5-year average. The lease type distribution did not break the recent years’ tradition and recorded high share of renewals – about 40% of the total volume. Expansions accounted for 10% of the total, with financial and services companies mostly calling for larger space. However, the IT and BPO industry remained main market driver, although most of them are still looking for space optimization, due to the hybrid work.

On the supply side, the recent quarters did not bring significant changes in the office stock. In the third quarter, there was only a mid-size delivery of Class A office building. The third quarter’s Net absorption, which reflects the difference between leased and vacated space, was 6,996 sqm, and in the nine months reached 45,283 sqm. For the moment, the vacancy rate remains stable at 15.3%. Construction pipeline is about 178,000 sqm, with prospects for notable increase in the coming quarters. This is mainly due to several new projects in planning phase, mostly near Paradise Center and Nikola Vaptsarov Blvd.

PRICING: increasing rents in CBD

Class A office rents in Sofia posted minor increase in Q3 and reached 18 euro/sqm for prime space in the CBD area, due to the limited supply. Asking rents in the preferred main road locations remained within 14 to 17 euro/sqm. The prime office yield in Sofia is stable at 7.75%.