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Bulgaria Office market overview in Sofia

Office & mixed-use development
According to an MBL survey conducted during the first quarter of 2023 among 100 office occupiers, the demand for office space in the Bulgarian capital may be negatively affected and slow down over the next few years.

The class A and class B office space inventory in Sofia reached 2.5 mln sqm in Q2 2023, with five submarkets (CBD, Tsarigradsko Shose Blvd, Bulgaria Blvd, Business Park Sofia and Hladilnika) accounting for 60 pct of all existing space. Construction activity has increased by 20 pct on a year basis, amounting to 242,000 sqm at the end of Q2 2023. Nearly half of the construction activity is taking place in Tzarigradsko Shose Blvd and Hladilnika, holding 46 pct of the space currently under construction.

Demand
The office market in Sofia registered a positive net absorption for the period of 18,000 sqm for class A office space and a negative one of 3,200 sqm for class B, demonstrating that demand for class A offices clearly prevailed during Q2 2023.According to an MBL survey conducted during the first quarter of 2023 among 100 office occupiers, 65 pct of the respondents are planning to increase their headcount in the near future, while only 23 pct forecast an increase in their office space. These results and the fact that 84 pct of the surveyed are either applying a hybrid working model or working completely remote are showing that demand for office space may be negatively affected and slow down over the next few years. New lease acquisitions amounted to 27,000 sqm for the quarter.

Vacancy
Vacant space in class A and B office buildings at the end of Q2 in Sofia stood at 422,000 sqm which derives to a vacancy rate of 16.8 pct. Compared to the previous quarter, vacancy rate has decreased by 0.4 pct, and on an annual basis by 0.9 pct. Suburban submarkets continue to have the highest vacancy rate (18.8 pct on aggregate) as they also hold the largest portion of office space. The most significant increase in vacancy is observed in Midtown submarkets, where asking rents are usually higher than peripheral locations while most of the buildings in this area cannot offer the same conditions as modern offices in some suburban areas such as parking, modern HVAC systems, and other installations, which naturally shifts tenants’ interests.
Currently, the available office space that is actively marketed in both existing office buildings and projects under construction stands at approx. 560,000 sqm as of Q2 2023, marking an 11,000 sqm decrease compared to the previous quarter. At present, Tsarigradsko Shose Corridor accounts for 32 pct of all available space on the market, followed by Hladilnika and CBD with 11 pct share each.

Rental rates
During Q2 2023, rental rates did not experience significant changes. The asking rents for class A office space, with a few exceptions, are in the range of EUR 12.50-15.50 per sqm, depending mostly on location. In a couple of centrally located properties the asking level is more than EUR 16.0 per sqm. Class B rents also did not demonstrate any major shifts. They mostly range between EUR 8.5-10.5 per sqm.

Market outlook
The commercial real estate market has been gradually adapting to volatile economic conditions in the recent years, bringing high inflation, raised interest rates on loans, and slowing demand due to remote work practices. As the hybrid working model was imposed in the post pandemic office market, needs for abundant office space became obsolete and companies are already searching for solutions. Renting less space and subleasing are becoming common practice for classic offices, but on the other hand an opportunity for coworking and flex spaces has emerged to fill the gaps in tenants’ needs. The oversupply of office stock and the expensive cost of debt already result in raised cautiousness of investors which may limit the start of new projects and lead to moderate construction activity in the following years. As a rule, yields follow interest rates. As they are increasing, it is expected yields to be on the rise as well. Furthermore, shifts in demand will also grow risk in the sector which will have the same effect on yield levels.

Investment activity
Inflation is on a downward trend and central bankers are unlikely to continue pursuing aggressive monetary tightening for too long. At the same time, lending terms in Bulgaria are still pretty competitive despite headlines urging cautious economic optimism. However, after some encouraging signs of investment activity (ca. EUR 30 mln in total deal volume) in the first quarter, the second one failed to register any noteworthy investment deals. Modern assets with the right mix of construction quality, amenities and accessibility are likely to always enjoy higher occupancy, rental levels, and investment appetite, whereas assets of lower quality and inferior location may be compelled to reevaluate their asking terms. While not with immediate effect, increasing interest rates are likely to push yields higher as well. With global economies still fearing geopolitical and market uncertainties, there is more than one reason to expect a rise in transaction yields. MBL remains cautiously positive regarding the local office investment market, as the aforementioned fluctuations might as well attract new, yield-hungry investors filling the void and creating a healthier competitive environment for existing market players.

Latest news

Residential

Czech Republic YIT is going to Brno

schedule 13 November 2024
Opr./edited by JC

YIT continues to grow in line with its strategy in the CEE countries. The company is expanding its operations in the Czech Republic and establishes a joint venture with the Czech investor group RSJ Investments.

Investment & finance

Poland Vantage has EUR 100 mln to invest in Poland

schedule 13 November 2024
Opr./edited by ANZ

Hotels

Bulgaria The first Mercure in Bulgaria

schedule 13 November 2024
Opr./edited by ANZ

Mercure, a brand of the Accor Group, announces the opening of its first hotel in Bulgaria. The new property is located in one of Sofia's most prestigious districts, Manastirski Livadi, with easy access to the National History Museum and Vitosha National Park.

Warehouse & industrial

Poland All occupied at Hillwood in Łódź

schedule 13 November 2024
Opr./edited by ANZ

The two Łódź logistics centres - Hillwood Łódź Chocianowice and Hillwood Łódź Górna - have been fully leased. The latest agreement has been concluded at the second facility, with a client from the electronics industry.

Warehouse & industrial

Poland Orlen chooses P3 Piotrków park

schedule 13 November 2024
Opr./edited by ANZ

P3 Logistic Parks and Orlen have signed a lease agreement for nearly 24,000 sqm of space in the P3 Piotrków park. The facility will serve as a warehouse for supplying the corporation's fuel stations.

Warehouse & industrial

Poland Panattoni launches a BTS factory

schedule 12 November 2024
Opr./edited by JC

Panattoni has completed a BTS development in Świdnik. A new factory was built for Trilux, a German company operating in the professional lighting sector.

Office & mixed-use development

Poland Third quarter holds steady

schedule 12 November 2024
Opr./edited by JC

Cushman & Wakefield has summarised the Q3 of 2024 on the largest office markets in Poland. Office take-up in key regional cities remained on par with the figures recorded in the same period in 2023, signifying stability on the office rental market.

Warehouse & industrial

Czech Republic CTP builds for Redcare Pharmacy

schedule 12 November 2024
Opr./edited by ANZ

CTP has began the construction of a new distribution centre of more than 30,000 sqm at CTPark Blatnice in the Czech Republic for Redcare Pharmacy. The building is scheduled for completion in July 2025.

Warehouse & industrial

Poland DHL warehouse is fully automated

schedule 08 November 2024
Opr./edited by JC

DHL Supply Chain opened its first warehouse in Poland equipped with AutoStore. The robotised facility in Gorzów Wielkopolski marks the first deployment of the automated system by the company.

Warehouse & industrial

Poland Panattoni makes space for XBS

schedule 07 November 2024
Opr./edited by JC

Panattoni is constructing the third and final building in the Panattoni Park Warsaw West development. The 16,460 sqm facility is being built to meet the needs of XBS Logistics.

Investment & finance

Poland Green loan signed for Warsaw Spire

schedule 07 November 2024
Opr./edited by JC

Immofinanz signed a new five-year, EUR 180 mln green loan with Helaba, pbb Deutsche Pfandbriefbank and Berlin Hyp, secured by myhive Warsaw Spire. The office tower offers over 71,000 sqm of GLA and holds a BREEAM Excellent certification.

Warehouse & industrial

Germany Full occupancy at Niedersachsenpark Rieste

schedule 07 November 2024
Opr./edited by JC

Garbe Industrial Real Estate is leasing its last available plot in Niedersachsenpark Rieste to a provider of logistics services. The company plans to use an 11,500-sqm hall there to store and handle components for the process chain of a car manufacturer.

Office & mixed-use development

Romania Furniture retailers choose office buildings

schedule 06 November 2024
Opr./edited by ANZ

Insignis concept store, a furniture retailer, has rented space on the ground floor of The Bucharest Business Park. Three other companies that sell furniture have recently rented sales spaces in office buildings in the northern area of Bucharest, the total area exceeding 10,000 sqm.

Eurobuild CEE

Poland November issue of Eurobuild

schedule 05 November 2024
Eurobuild CEE

The new issue of Eurobuild is already here, with the first summaries of the passing year, numerous interviews and reports from market events: our annual warehouse and office conferences and from Expo Real 2024 in Munich.

Office & mixed-use development

Poland Warsaw office market back in the game

schedule 05 November 2024
Opr./edited by ANZ

According to a report 'Office Market in Warsaw in Q1-Q3 2024', published by Axi Immo, developer activity in the Warsaw office space market is progressively increasing. More than 70,000 sqm finished by the end of September 2024 and around 280,000 sqm under construction in the coming years, demonstrate that investors and developers are moving the industry forward.

Office & mixed-use development

Poland The Shire expands in Kraków

schedule 04 November 2024
Opr./edited by JC

GTC, in collaboration with The Shire Beyond Coworking, is opening a new coworking space in Kraków's Korona Office Complex.

Hotels

Czech Republic Juliš changes hands

schedule 04 November 2024
Opr./edited by JC

S Immo has successfully completed a sale of the Juliš Hotel in Prague, with a total leasable area of around 6,700 sqm.

Warehouse & industrial

Poland Panattoni gets millions from BNP Paribas

schedule 04 November 2024
Opr./edited by JC

Panattoni has been granted a loan for the development of a new distribution centre for a leading retailer. The EUR 36.5 mln loan was granted by BNP Paribas.

Office & mixed-use development

Poland Newly modernised Alfa attracts tenants

schedule 04 November 2024
Opr./edited by JC

Strabag PFS has moved into the Eurocentrum Alfa office building in Warsaw, owned by CPI Property Group Poland. The lease agreement is for over 1,000 sqm.

Office & mixed-use development

Poland Office pre-leases make a comeback in Warsaw

schedule 04 November 2024
Opr./edited by JC

According to “Office Occupier – Warsaw Office Market, Q1-Q3 2024”, a report published by Newmark Polska, in the Q3 of 2024, both leasing and development activity on the Warsaw office market remained largely consistent with the levels recorded in the previous quarter.

Latest in Office & mixed-use development

schedule 12 November 2024

Third quarter holds steady

Cushman & Wakefield has summarised the Q3 of 2024 on the largest office markets in Poland. Office take-up in key regional cities remained on par with the figures recorded in the same period in 2023, signifying stability on the office rental market.

schedule 06 November 2024

Furniture retailers choose office buildings

Insignis concept store, a furniture retailer, has rented space on the ground floor of The Bucharest Business Park. Three other companies that sell furniture have recently rented sales spaces in office buildings in the northern area of Bucharest, the total area exceeding 10,000 sqm.

schedule 05 November 2024

Warsaw office market back in the game

According to a report 'Office Market in Warsaw in Q1-Q3 2024', published by Axi Immo, developer activity in the Warsaw office space market is progressively increasing. More than 70,000 sqm finished by the end of September 2024 and around 280,000 sqm under construction in the coming years, demonstrate that investors and developers are moving the industry forward.

schedule 04 November 2024

The Shire expands in Kraków

GTC, in collaboration with The Shire Beyond Coworking, is opening a new coworking space in Kraków's Korona Office Complex.

schedule 04 November 2024

Newly modernised Alfa attracts tenants

Strabag PFS has moved into the Eurocentrum Alfa office building in Warsaw, owned by CPI Property Group Poland. The lease agreement is for over 1,000 sqm.

schedule 04 November 2024

Office pre-leases make a comeback in Warsaw

According to “Office Occupier – Warsaw Office Market, Q1-Q3 2024”, a report published by Newmark Polska, in the Q3 of 2024, both leasing and development activity on the Warsaw office market remained largely consistent with the levels recorded in the previous quarter.

schedule 31 October 2024

The largest office deal in Łódź

A pharmaceutical company has leased 6,000 sqm in the GTC-owned Sterlinga Business Center office building in Łódź. This is the largest office deal in Łódź in 2024.

schedule 30 October 2024

Warsaw office market stable

Cushman & Wakefield has summarised the situation on the Warsaw office market for Q3 2024. Office take-up, both in leasing volumes and transaction numbers, was comparable to that recorded in the same period in 2023. Meanwhile, muted development activity, falling vacancy rates and shrinking land availability are likely to encourage investors to launch redevelopment projects.

schedule 30 October 2024

BGK stays in Varso

Bank Gospodarstwa Krajowego has decided to extend its lease agreement for 13,600 sqm of office space in Varso Place. The company occupies five floors of the building.

schedule 24 October 2024

Silesia Star with a new tenant

L3Harris, a company focused on the production of electro-optics for industry, law enforcement, emergency services and the military, has a new office in the Silesia Star office building in Katowice.

schedule 23 October 2024

Sirius fully commercialised

Sirius Offices in Belgrade is fully leased. The office complex was built and remains owned by Erste Group Immorent, a subsidiary of Erste Group Bank.

schedule 23 October 2024

Ace of Space take off

Globalworth is launching a new brand of flexible offices, Ace of Space. Tailored to the needs of the company, space will be available to rent in Warsaw, Wrocław, Kraków, Katowice and Gdańsk.

schedule 22 October 2024

Grundmanna Office Park A is ready

Cavatina Holding has obtained an occupancy permit for the Grundmanna Office Park office building in Katowice. Building A will provide almost 21,000 sqm of office space and approx. 1,000 sqm of service areas. This is the developer's second investment in the city after Global Office Park. 

schedule 18 October 2024

HCLTech stays in building managed by EPP

HCLTech is staying at Krakow's O3 Business Campus for the next five years. The tenant occupies four floors with a total leasable area of over 7,000 sqm. 

schedule 18 October 2024

Lawyers remain at the top

Two law firms have decided to extend their existing leases in the Metropolitan Warszawa building. In total, Gide Loyrette Nouel and Norton Rose Fulbright will occupy more than 3,000 sqm of office space.

schedule 17 October 2024

Techstep takes second floor in Officyna 

Techstep Poland is moving its office to Officyna in Gdańsk. The company, which offers business mobility management solutions, has leased approx. 460 sqm in the office building.

schedule 15 October 2024

New neighbourhood in the heart of Lublin

A mixed-use complex on ul. Ewangelicka in Lublin has been granted a building permit. The size of the project developed by the KKL company is over 17,800 sqm.

schedule 14 October 2024

The Warsaw office market according to PINK

At the end of September 2024, the stock of modern office space in Warsaw amounted to just under 6.265 mln sqm - according to data collected by Polish Chamber of Commercial Real Estate.

schedule 11 October 2024

Business and entertainment on the 46th floor

Varso 46 is soon to open on the 46th floor of Varso Tower, providing event space with a view of the Warsaw panorama of Warsaw, including the neighbouring Palace of Culture and Science.

schedule 09 October 2024

State Street Bank stays in Alchemia

PHN has extended its lease agreement for over 10,500 sqm with State Street Bank, the key tenant of the Titanium tower in the Alchemia office complex in Gdańsk.

Edition 11 (293) November 2024

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