CUSHMAN & WAKEFIELD FORTON: SLIGHT INCREASE IN OFFICE VACANCY AND DECREASE IN SPACE UNDER CONSTRUCTION
The share of vacant office space in Sofia is slightly growing in the second quarter of 2022. As of June it was 16.7% compared to 16.4% in the first quarter of the year. The reason is the completion of a medium-sized office project during the period, but the lack of serious volumes of new space under construction is expected to gradually rebalance the market. This is according to the report of the commercial real estate company Cushman & Wakefield Forton.
The data also show a decline in office space under construction in the capital – just over 175,000 sqm compared to almost 200,000 sqm in the previous quarter. The reason is the lack of newly launched projects on the market.
“In the recent months we have observed a stable performance of the office market in Sofia, driven by the gradual return of employees to the offices. The reason why we do not feel the effect of this process more noticeably is the hybrid model of work, which has permanently established itself as a practice, especially in the IT and BPO industry”, said Yavor Kostov, Managing Partner at Cushman & Wakefield Forton.
Tenants have had a consistent focus on shared offices as it presents an opportunity for dynamic business expansion and recruitment. The average occupancy rate of this type of premises according to C&W Forton is over 70%. New shared office space opened during the period includes MyFlex Coworking in Megapark. The new shared office space offers over 250 workspaces and is managed by Cushman&Wakefield Forton. With the new space in this segment, the total supply of shared office space in Sofia exceeds 50,000 sqm.
“The tenant profile has permanently changed compared to 2019. Their requirements for more flexibility in lease agreements are more and more evident, so office buildings that offer a combination of standard and flex offices will be preferred by companies,” commented Yordan Krastev, Manager Office Space at Cushman & Wakefield Forton.
Overall, the office market in Sofia is showing signs of a gradual recovery, with rental activity in the first half of 2022 remaining above the average levels for this period of the year, reaching 85 444 sqm. However, this volume is mainly driven by contract renewals and tenant relocations – in total around 70% of transactions. As these transactions made little or no contribution to market growth, net office absorption for the six months remained at a modest 13,387 sqm.
Most deals are in Class A buildings as a result of tenants’ desire to get a better working environment. Companies in the IT and BPO sectors remain major players in the market, accounting for more than half of deals in H1 2022.
Prime office rents in Sofia have remained stable for another quarter – EUR 15/sqm in the central part of the city and EUR 12-14/sqm along the main roads. Rising operating costs are putting pressure on landlords to increase the maintenance and service charge, with Sofia in the range of EUR 2.75-4/sqm.
CAN’T FIND WHAT YOU’RE LOOKING FOR?
Get in touch with one of our professionals.