The office market in Sofia registered slightly less vacant space in the second quarter of the year as the vacancy rate slipped by 50 basis points to 15.3%, despite an uptick in supply from newly launched projects. Companies expanding their business activity and first-time market entries seeking office space increased their share in the total take up volume at the expense of firms seeking plain contract renewals. These are the key insights from the quarterly data of commercial real estate consulting firm Cushman&Wakefield Forton.

TAKE UP VOLUME EXCEEDED 37 000 SQM IN SOFIA IN THE SECOND QUARTER OF 2024

According to the consultants’ market numbers, in the April to June period some 37,088 sqm of office space were leased in Sofia, which is comparable with second quarter volumes observed over the past five years. Net absorption, an indicator that reflects the difference between newly leased and vacated office space, was quite decent at 23 106 sqm. The main reason for this respectable reading was the growing share of new lease and expansion contracts which more than compensated for the narrowing portion of renewals – down to 22% of the quarterly take up volume, compared to just over 40% in previous periods. Cumulative year-to-date statistics show that in the first six months of 2024 leasing activity amounted to 74 352 sqm and was broadly in line with the general market trajectory.

“Following what could be characterized as a quiet first quarter, we observe increasing activity on the office lease market in the spring months. There is interest both from new market entrants and established players from the retail and wholesale industries, seeking space in higher class office buildings. This partially compensates for the weakness in the IT sector, which is undergoing restructuring, and contributed to the improved office market indicators in recent months,” commented Yoanna Dimitrova, Head of Office Space at Cushman&Wakefield Forton.

NEW LEASES AND EXPANSIONS OFFSET FEWER RENEWALS IN THE PERIOD

The total stock of Class A & B office space in the second quarter of 2024 remained stable at a level of 2.259 million sqm. Two office buildings with a combined capacity of 8 000 sqm were completed in this period along the main boulevards. The volume of projects under construction remained under 200 000 sqm due to the slow absorption of available spaces.

Interest in coworking space continues to grow, mainly as part of the mix in existing office buildings. By mid-2024, the total volume of coworking space in Sofia reached 68 900 sqm with an additional 8 000 sqm in various development phases. To many a new companies this option is a convenient platform for market entry, while building operators perceive coworking as an incubator helping to attract tenants with future growth potential.

For now, rent levels remain stable. Class A office space in Sofia’s central business district is priced within EUR 17.5 to 18 per sqm.  Along the main boulevards, rents vary between EUR 15 and 17 per sqm in Class A buildings.

“The gap between higher and lower-class projects continues to widen. This trend is observed both in pricing and available space,” sums up Yoanna Dimitrova.

In the second quarter, the share of vacant space in Class A projects remained beneath that in lower grade office buildings – 14.6% in the former compared to 17% in the latter. Traditionally, the least amount of vacant space was registered in Sofia’s central district – a little over 12% of the stock. Meanwhile, due to greater supply, in some select peripheral areas and along the main boulevards the vacant space approached an average of 16%, according to the data of Cushman&Wakefield Forton.