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          Category: Research

          Research
          Research

          Office trends Q3 2022 by C&W Forton

          ECONOMY: GDP growth is slowing down

          The Bulgarian economy is facing a challenging time, as a result of the deteriorating external environment. The real GDP growth is expected to slow down to 2.8% in 2022, followed by anemic increase of 0.1% in 2023 in the light of the forecasted global recession. The economy is affected mostly by the deceleration of the private consumption, reflecting the negative effect of the growing inflation on the disposable household income. The latest projections of the Bulgarian Central Bank are for 14.9% annual inflation at the end of 2022 and slowdown to 4.1% at the end of 2023. A bright spot are public investments, which are expected to increase, primarily due to European funds.

          SUPPLY AND DEMAND: Leasing activity around the five-year average

          The leasing activity on the Sofia office market for the nine months remained around the five-year average, reaching 110,646 sqm. Lease renewals and relocations remained the main driver, since most tenants tend to change their office mostly when their contracts expire. During the period, expansions retained a small share of the market, accounting for 11% of the total take-up. Net absorption remained moderate, although on a positive territory – 20,537 sqm for the nine months. The figures reflect the wide spread of the hybrid work model and the attitude of many businesses to optimise their office space. However, the opposite trend is gaining strength, with an increasing number of companies that want their employees back in the office. The demand for serviced offices and coworking space is at its peak. Because of the inconsistent utilization of the workstations, increasing number of occupiers are looking for more flexibility related to lease term and occupied areas. As of the nine months, the overall supply in this segment in Sofia is exceeding 50,000 sqm and will grow further. During the third quarter, the vacancy rate remained stable at 16.6% for Class A and B offices, since the slow pace of office development limits the availability. The completion of two small office buildings added about 7,000 sqm to the market stock. Space under construction dropped to 167,300 sqm, the lowest level in five years.


          Read the full report here.

          Research
          Research

          Office trends Q2 2022 by C&W Forton

          ECONOMY: Modest growth expectations

          At the start of 2022, Bulgaria’s economy was in a good shape, despite mounting headwinds from the war in Ukraine. First quarter GDP increased 5% y-o-y, driven by strong domestic consumption and unemployment narrowed to 4.9%. Main threats to the economy are rising fuel and energy prices and related inflationary pressures. In line with the overall uncertainty, the latest economic projections for Bulgaria are worsening. Real GDP growth in 2022 is seen slowing down to 2.8% and inflation rising to near 13%.

          SUPPLY AND DEMAND: Hybrid work reshapes the market

          The office market in Sofia is still recovering, although the leasing activity in the first half of 2022 was above the five-year average, reaching 85,444 sqm. The hybrid work model gives comfort to many businesses to grow and hire staff without office expansions. The latest results in modest net absorption (occupied vs. vacated space) – 13,387 sqm for the half-year. Renewals and relocations continue to dominate the leasing market, with more than 70% of the take-up. The occupiers’ desire for better working conditions remains the main driver, so larger part of the transactions is in Class A offices and new buildings. IT and BPO companies keep the largest market share, with more than half of the total transaction volume in the first half of 2022.

          Increasing number of companies are looking for flexible office space, thus providing their business with rapid expansion solution. As of the mid-year the overall supply in this segment in Sofia is approximately 50,000 sqm. On the supply side, the slow pace of office development limits the availability and keeps the vacancy rate stable. The completion of a mid-size office project in the second quarter of 2022 slightly raised this indicator to 16.7%. However, with the decreasing pipeline and the lack of starting office developments significant change of the vacancy rate seems unlikely.

          Read the full report here.