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The share of vacant office space is decreasing

Aug 12, 2024 10:21 548

Available class A and B offices in Sofia amount to over 2,416,200 sq.m. by the end of the first half of 2024, according to the latest Colliers report. Compared to the previous six months, there was an increase of just over 1%, as 5 new buildings received permission to occupy and added over 28,500 sq.m. modern areas to market. The projects under active construction have a total size of almost 300,000 square meters, with 30% of them having signed preliminary lease or purchase contracts, according to Colliers' analysis.

The gross utilized areas for the first half of the year are over 75,200 sq.m., and the net – 32,500 sq.m. The main driver of the demand for modern office space continues to be the IT industry. During the period under review, it occupied almost a third of the utilized square footage (32%), followed by companies in the field of trade (13%) and financial services (12%). Almost half of the leased space during the period under review (44%) was due to relocations, mainly from class B to class A offices. Contract renewals account for 34% of all transactions, extensions of already occupied areas – 13%, and the remaining 9% are due to companies new to the market.

The share of unoccupied areas is decreasing. Towards the end of 2023 and towards the middle of 2024, it is 14.5% for class A offices and 14.3% - for class B. One third of the vacant areas is concentrated in 10 buildings.

Offer rent levels remain unchanged. For class A offices they are between EUR 14.0 and EUR 16.0, and for class B – between EUR 9.0 and EUR 11.0 (per square meter per month without VAT). Until the end of the year, rental levels in quality projects will remain under upward pressure, due to the small amount of space available in them and the increased interest. This is especially true for premium buildings under construction that offer modern technology, flexible work solutions and a variety of amenities to their tenants.

The trend of increased interest from users of traditional offices to shared office spaces that offer flexible solutions continues. The development of the hybrid work model is transforming the expectations of tenants and increasing the demand for high-tech and high-quality environments. More and more companies are expected to orient permanently to this model of work. In accordance with this, investors in the larger projects are increasingly starting to offer the so-called flex offices and co-working spaces (in many of the buildings directly, without an external operator) to their tenants to meet their needs. Colliers expects this sub-segment to grow further in the future as a result of stable demand.

The office segment in Europe is preparing to meet the Paris Agreement in terms of energy consumption and the need for buildings to move closer to the goal of zero emissions. This trend is starting in the local market, but it is expected to become more and more noticeable, especially among international companies. The growing importance of ESG criteria in choosing an office location has a growing influence on all market participants. This will motivate landlords to increase their investments in modernizing or repositioning their projects, with a view to remaining competitive.

You can see detailed statistics on average property prices in Bulgaria by cities and neighborhoods HERE