CUSHMAN & WAKEFILED FORTON: LIMITED SUPPLY KEEPS OFFICE SPACE VACANCY RATE STABLE
THE OFFICE MARKET IN SOFIA SHOWS A GOOD FIRST QUARTER WITH ALMOST 42,000 SQM RENTED AREAS
With nearly 42,000 sqm of leased office space in the first quarter of 2023, the comemrcial real estate market in Sofia recorded rental activity exceeding the 5-year average for this period of the year, according to the latest report from the commercial property consultant Cushman & Wakefield Forton.
The share of vacant office space in the capital remained stable around the levels of last year and amounted to 16.1%. This is partly due to the limited supply and low take-up of vacant space. The space under construction in Sofia remain below 200,000 sqm and the deadlines for commissioning many projects are extended due to limited market realization.
“During the first quarter of the year, we observed a stable performance of the office market in Sofia, but renewals and relocations still form the predominant part of the rental activity”, commented Yavor Kostov, Managing Partner at Cushman & Wakefield Forton. According to him, the transactions in the first quarter of the year mainly reflect the desire of tenants to consolidate areas or move to newer or higher class office buildings.
According to the consultants from Cushman & Wakefield Forton, the commercial real estate market in Sofia is moving at two speeds, with the projects in the prime segment performing distinctly better in terms of occupancy and rental levels compared to the rest of the market. The hybrid work model is permanently imposed and breaks the connection between business growth and the rentings of new premises, especially for the companies in the IT and BPO segment. However, there are still tenants who are expanding and this maintains a good level of demand for office space.
THE SUPPLY OF FLEXIBLE OFFICE SPACES IN SOFIA EXCEEDS 61,000 SQM IN THE BEGINNING 2023
The growing demand for flexible offices is another trend for the period. The demand for this type of solution from corporate customers with growing businesses or flexible working models is stable with a tendency to grow. As of the beginning of 2023, the supply of co-working and serviced office space in Sofia surpassed 61,000 sqm with another 11,500 sqm under development.
As of the beginning of 2023, the premium locations in central Sofia commanded a rent of 16 euro/sqm, while rents for class A offices along the main roads reached 15 euro/sqm. The slight increase is a continuation of the trend from the end of the previous year, mainly due to the indexation of contracts and inflationary pressure. Class B office rents also increased slightly, reaching 9-10 euro/sqm.
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