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      Research

      Office trends Q1 2023 by C&W Forton

      ECONOMY: GDP growth is slowing down

      Softening domestic demand will undermine GDP growth in 2023 as inflation continues to erode purchasing power. Nonetheless analysts forecast a higher economic increase than the EU average after keeping pace with it at 3.4% in the previous year. The strength of the labor market will underpin consumption as employment and the unemployment rate posted their second-best year on record, in 2022. Meantime, inflation at the end of 2022 was among the lowest in the CEE region and is likely to come down at a slightly faster rate than in other peers.

      SUPPLY AND DEMAND: Low pipeline and stable vacancy rate

      The Sofia office market is moving at two speeds, with projects in prime segment performing distinctly better than the rest of the market. Leasing activity reached almost 42,000 sqm in the first quarter of 2023, surpassing the 5-year average for this period of the year. Even with the hybrid work model, some companies are increasing their spaces and this is driving up the share of expansions and preleases in overall demand. Despite this positive trend, renewals and relocations still form the prevailing part of leasing activity, which results in moderate net absorption – 10,848 sqm in the first quarter.

      Growing demand for coworking space is another noteworthy market trend. In order to respond to occupier preferences, increasing number of office buildings are incorporating flex office solutions. At the beginning of 2023, the supply of coworking and serviced office space in Sofia surpassed 61,000 sqm, with another 11,500 sqm under development. Unlike the coworking segment, the office pipeline is tightening, due to the anemic start of new projects. The vacancy rate for class A and B office buildings in Sofia is hovering around 16% and is expected to remain stable for the foreseeable future.


      Read the full report here.