Market stabilizes

In the end of 2008, the simultaneous completion of several office buildings in Sofia’s peripheral areas has put rents under pressure and lead to rising vacancies in the segment. Yet, it has not been reflected in the actual rates as demand remained high and a weak take-up registered in the first half of 2008 - 52,000 sq m, less than a third of the amount absorbed in 2007 according to Colliers International - suggests there are business needs, which have not been met.
Some suburban buildings, which have been on the market for some time without finding tenants, have slashed the asking rents.
A report of Forton International consultants for the third quarter of 2008 shows that the completion of Sofia Business Center, located near Business Park Sofia in Mladost neighborhood, and several smaller deliveries have resulted in stabilization of prices. Expecting new space to come on the market, companies have put on hold their relocation plans awaiting better offer. Others adopt a wait-and-see policy until they find out where their business is heading in 2009. Krasimir Dimitrov, Managing Partner at Source Real Estate, reckons this trend has a dual effect because some Bulgarian companies that looked at purchasing offices before have instead chosen to rent, an option that gives them more flexibility and does not require significant capital commitments. This strengthened demand in the second half of 2008.
Other cities with smaller markets have not registered sharp fluctuations. Rents in central locations in Varna reach a maximum of EUR 18 per sq m per month in top locations (compared to EUR 25-30 in Sofia), which drops down to 12 euro for peripheral areas. Rapid growth in supply, however, is threatening to cool down prices in about 2 years.