The office market in Sofia registered moderate leasing activity during the first quarter of 2024. The number of concluded transactions slipped by 10-15% compared to the same period in the prior two years, barely reaching 37,200 sqm. The bulk of the volume consisted of contract renewals and relocations from uncompetitive buildings or Class B facilities, according to the data of commercial real estate consulting firm Cushman&Wakefield Forton.

THE IT SECTOR REMAINED A LEADING TENANT OF OFFICE SPACE DURING THE FIRST QUARTER OF THE YEAR

“Slower growth in the IT and BPO sectors as well as continued reliance on hybrid work models were the main factors sustaining the space optimization trend on the market. Still, IT companies continued to be the main driver of the office rental market at the outset of 2024, as these accounted for nearly half of the total leased volume,” sums up Yoanna Dimitrova, Head of Office Space at Cushman&Wakefield Forton.

According to the consulting firm, the share of vacant office space in Sofia hovered between 15% and 16%, with near zero available space in the high-end of the market. This validated again the two-speed market mode of operation, where modern Class-A projects at prime locations stay within the focus of investors, while older buildings appear less competitive.

SHARED SERVICED OFFICES IN SOFIA EXCEEDED 67,000 SQM

Co-working space continued to increase, exceeding 67,000 sqm at the start of 2024. Most of the new space opened at established office buildings, which was also part of the established synergy between flexible and standard offices.

“The availability of flexible work space in an office project attracts newly established businesses with good growth prospects which would at a certain stage of development transform into independent office tenants,” notes Yoanna Dimitrova.
The total office stock Class A and B remained stable at a level of 2.245 million sqm in the first quarter of 2024. Projects under construction also stood unchanged at 200,000 sqm with no new starts in the period. This lack of dynamics reflected the slow absorption of available space as well as the uncertain economic environment.

The ascent of rent levels, which became noticeable in 2023, continued at the outset of the current year. Asking rents at Class A offices in the central business district of Sofia edged up to EUR 17.5 per sqm. Projects along the main boulevards also saw rents creep up to within EUR 15 – 17 per sqm.

The prime yield inched up to 8% and is likely to stay at this level over the next quarter, according to the projection of Cushman&Wakefield Forton.