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Sofia Ranks Next to Paris, Brussels in Office Construction Volume

Monday, Oct 18, 2010

Bulgaria's capital Sofia has made its way into the top ten office markets in Europe and the Middle East in terms of construction volume to be built by 2012, according to a survey by Colliers International.

Sofia ranks next to Paris, Brussels and St Petersburg since in each of these cities some 600-700 thousand square meters of office properties are being built.

The survey shows that Moscow is the leader in terms of office construction in the next two years, followed by Dubai and Abu Dhabi.

London ranked eleventh, while Glasgow was found to have the lowest development scale in Europe.

The vacancy rate of office space in Sofia is expected to rise up to 26-27% by the end of the year with the opening of new buildings, real estate consultancy Regent's Property Advisors forecasts.

Adding a significant amount of new offices to the market, the vacancy rate during the first half of the year reached levels of 22% of total stock, equaling to 253,000 sqm, data of the company shows.

The largest share of the empty offices still remains in the suburban areas of the city, but the most significant increase was felt in the center (CBD) in particular - Class A offices.

During the first half of 2010, the supply of office spaces continued to grow despite the stagnant economic conditions. Projects that were started in the boom period of 2007-2008 were successfully carried out in the last couple of months.

The newly added 142,500 sqm are just slightly less than the overall office areas that were added during the whole 2009. Total stock of office premises reached a little more than 1,150,000 sqm.

Rent levels in the first half of the year were slightly reduced reaching an average of EUR 12-13 for Class A offices, and EUR 7-8 for Class B offices.

Considering the already functional office space and the expected additional 106,000 sqm by the end of 2010, the rent levels are expected to continue to be under pressure, the analysis points out.

Approximately 200,000 sq.m. new office space is expected to be completed until the end of the year, shows a research by Forton, a property advisory company.

Right before its accession to the European Union in 2007 Bulgaria emerged as the new shining star for investors in office facilities development. Three and a half years later, the country is going through its first recession in more than a decade and the office market has been hit by a period of relatively low activity.

The market remains focused exclusively in the capital Sofia, which is at a stage when any client might be able to find suitable premises or expect those to appear at a suitable time.

Assessed in comparison with other countries in the region of Eastern and Southeastern Europe, Bulgaria's office market is keeping its edge.

Yields have been rapidly declining in the old hotspots of Central and Eastern Europe for the last few years and investors have been pushed further east to countries, including Bulgaria.

What the country offers them are lower prices, higher returns and relative security.

Source: novinite.com