GDP KEEPS GROWING, HORMUZ EFFECT SHOWS IN INFLATION DATA
On the back of the 4th highest GDP growth in the EU in Q1 (3.1% y/y), Bulgaria’s economy continued to expand in the second quarter of 2026.
The most recent readings of production indices (Apr.) show solid and broad growth in the services sector – led by administrative and support activities, professional, scientific and technical activities. Meanwhile, the situation in the industrial sector (Apr. and May) was mixed – mining and manufacturing continued to struggle, while energy appeared to improve, and production in construction grew in high single-digits.
Domestic trade numbers (Apr.-May) were also mixed – wholesale volume thinned slightly while retail volume in stores grew in high single-digits (especially in non-food categories), and online retail volume expanded in high teens.
The fallout from the crisis in the strait of Hormuz showed clearly in inflation data. The annual rate of change of the HICP nearly doubled between March and June (from 2.8% to 5.3%). The cost of diesel shot up nearly 50% in this period and transportation prices increased in high teens. Prices in services increased at nearly twice the headline inflation rate.
SOFTER LEASING VOLUME
The mood of office landlords in Sofia was relatively subdued in Q2 2026. About 45% of them reported the same level of enquiries from prospective tenants, compared to the previous period, and a similar percentage reported that enquiries were fewer. Finally, just 9% saw more enquiries.
Actual leasing data only partially confirmed these observations. Gross leased office space in Q2 2026 amounted to 42,932 sq m, down 6.7% q/q and down 4.4% y/y. On a year-to-date basis, gross leased space was 88,948 sq m, down 7.6% from 96,300 sq m in the first half of 2025.
Nevertheless, the quarterly numbers contained some bright spots. The most important of these was that although contracted volume was down, the number of leases was up. As a result, the average space per contract in Q2 was just 630 sq m, compared to 1,046 sqm in Q1. Another way to look at this development is through the contract size bands. In each quarter going back to Q1 2024, there were two or more contracts in the 5,000 – 10,000 sq m and 10,000+ sq m ranges accounting for over 20% of total volume. In Q2 2026, there were no contracts of such sizes (the largest was for 3,300 sq m) and still total volume slipped by less than 10%.
Leasing activity was highest in the Main Road submarket. Some 21,000 sq m were contracted in office buildings along Sofia’s key boulevards – Tsarigradsko Shose, Bulgaria, and Nikola Vaptsarov. The Suburbs came second with about 13,100 sq m contracted in the airport area and along the southern ring road. The Broad Center and the CBD area were last with a combined 8,785 sq m.
Unlike previous quarters demand was significantly more diverse. While IT and Telecommunications firms took up the largest space, their relative share shrank from over 50% to less than 30%. The wholesale sector came second with 20%, followed by professional and scientific activities with 13%, administrative activities with 7% and others with about 30%.
SLIGHT UPTICK IN COMPLETIONS
The volume of new supply picked up a bit in Q2 2026 reaching 10,000 sq m. AYA office building was the key completion in the period. The build-to-suit project delivered some 8,700 sq m of Class A office space to the stock of the Main Road submarket. Park Lane Developments constructed AYA for the purposes of Management Financial Group, a global group of leading fintech and insurtech service providers.
The volume of ongoing office construction narrowed to 203,000 sq m by the end of June. Just over 40%, or some 85,000 sqm spread across 13 projects, were due for delivery in 2026. Should these projects be completed as expected, new supply would be the highest in five years, even if part of the volume ultimately ends up occupied for own use.
In Q2 2026, the office stock in Bulgaria’s capital reached 2,360,000 sq m. Total vacant space was essentially unchanged at 275,000 sq m. On a submarket level, vacant space decreased slightly in the Main Road and Suburbs and edged up in the CBD and Broad Center. Overall vacancy slipped to 11.64% from 11.83% in the previous quarter. The highest vacancy rate was recorded in the Suburbs at 15.3% and the lowest was in the Broad Center at 7.3%.
MAINLY NEUTRAL MARKET CONDITIONS
Despite the somewhat pessimistic sentiment of landlords in the flash survey, we did not observe price reductions in Q2 2026. Asking rents for Class A space in Sofia stayed predominantly in the 14 to 18 euro/sq m range. In the CBD area, prime asking rents were unchanged at about 20 euro/sq m. Stable pricing and incentives, in combination with relatively balanced supply and demand, shaped neutral market conditions in most office zones. Key exception was the CBD zone, where conditions leaned in favor of landlords.
ROUGHLY FLAT OFFICE INVESTMENT VOLUME
Several office buildings changed hands between April and June. Office investment volume in Q2 2026 amounted to 40 million euros, up from 38.7 million in Q1 2026.
In the largest transaction, Kambanite Green Offices (KGO), located along the southern ring road of Sofia, was acquired by E-Card Ltd. The local technology company developing solutions for the iGaming industry paid an estimated 17 million euros for the facility.
Thanks to the acquisition of office buildings for own use, which is an established trend on the Sofia market, in Q2 2026, some 7,100 sq m of vacant space were taken. As a result, the Gross take-up (including bought office space) in the quarter amounted to 50,063 sq m. On a year-to-date basis, gross take-up stood at 96,075 sq m.
