SOFIA, BULGARIA-New office stock is continually coming online in the local office market, boosting the vacancy in the area to about 21% and lowering lease rates. However, companies are still conducting lease transactions, and the pipeline of new product is slowing down, according to a second half 2010 report by Colliers International.
About one million square feet was added to the 12.6 million square feet of office here in the first half of 2010, according to the report. At least another seven million square feet is planned, but recent new buildings, including at the European Trade Center, are struggling to fill space.
There are transactions occurring, however, according to Anton Slavtchev, manager of offices and industrial services for the local office of Colliers. “The most active companies are mainly from the telecom, outsourcing and IT sectors. The majority of the current activity on the market is driven by relocations. Companies choose to optimize their office space, take advantage of the better market conditions or opt for a quality office in a better location or lease conditions, thus being able to reduce their operational costs,” he tells GlobeSt.com. Demand is expected to pick up in the second half, and unemployment is expected to hit about 8.7% by the end of the year, he says.
One hint of bad news – in the past two years, rents have fallen about 25%, from about $23.50 to about $16.60. “On paper, this appears to be a relatively moderate reduction, given the oversupply and the soft demand,” Slavtchev says. “Reality is that few, if any, leasing transactions are signed at asking rental rates.”
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