The office market in Sofia faces a significant slowdown, due to the economic uncertainty and weakening business activity caused by COVID-19, according to the latest market report of Forton, a strategic partner of Cushman & Wakefield for Bulgaria and Macedonia.
Leasing volume amounted to 26,665 sqm in the first quarter of 2020, which is 22% down compared to the same period of 2019, and below the 5-year average. The market was dominated by renewals with more than 40% share of the total take-up. Together with the lack of pre-leases, this indicates that occupiers are reconsidering their business and tend to postpone their expansion plans. Net absorption dropped to an outstanding low level of 7,088 sqm in Q1, which may be attributed to delayed expansions and finishing works in the rented premises.
The completion of Building 3 of Garitage park and the refurbishment of a small office project added 23,900 sqm to the Class A and B office supply in Sofia at the beginning of 2020. With these new deliveries, the total stock exceeded 2 million sqm. Both projects opened with a large share of pre-let space as a result of the active demand in the last years. Although the average vacancy rate remains around 10%, a slight increase is expected in the coming quarters due to the stagnant demand. For the time being, around 390,000 sqm is under construction. However, some of these projects may be postponed. New developments are unlikely to be started in the short term.
Asking rents in Sofia stood at €15/sqm/month for Class A offices in CBD and €12-14/sqm/month alongside main roads. However, the looming recession and tightening office market will put prices under pressure in the coming year.
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