Ice is melting

As spring comes closer ice is probably starting to melt on the office market recently described as ‘frozen’. Real estate agents comment that potential clients have become more active.  
They see the situation is changing after many occupants stopped their expansion plans waiting for the decisions of their headquarters and readjusting their budgets to the economic slowdown.
The trend is mostly seen in Sofia, the main office market in Bulgaria, although the office segment in Varna is advancing too - the third building of the business park has opened thus adding 16,000 sq m of grade-A offices to the outskirts of the city.
In Varna, developers will have to tackle the challenges of the market where available space increased from 6.1% to 17% of a total of 144,000 sq m of offices, Colliers International says. Eighty per cent of the units at the business park need tenants. Several new projects are to spring up in the city center, but it isn’t clear yet how clients will respond to rents of EUR 15 – 20 per sq m per month.
Similarly, increased supply is offering more favorable conditions for potential tenants in Sofia. An office building on the main boulevard close to the airport where units (grade-A) were priced EUR 18 per sq m per month, is now offering asking rental prices of EUR 12 per sq m. Rents at the new business park are still holding up – EUR 16-16.5 (grade-A offices) and about EUR 13 per sq m (grade-B).
Many owners of properties near Business Park Sofia and Mladost neighborhood (where the highest price levels reach EUR 15-16 per sq m) still refuse to go back to more stable levels of EUR 10-12 per sq m (as the rents in buildings on the outskirts). These prices, however, are no indicators at all –for example, there are various discounts offered in large buildings - free of charge rental terms or terms of lower rents. Incentives are getting more, thus decreasing rents which shows landlords are under pressure.
By the end of 2010 the market is expected to welcome over 140,000 sq m of office space located near the airport, along Tsarigradsko shose Blvd. and Dragan Tsankov Blvd.