Sofia Office Vacancy Rate Could Reach 10 By Yearend Report

After a calm first half of the year, about 65 000 sq m of class A and B office space hit the market in Sofia in the third quarter of 2008, which could drive the office vacancy rate in the Bulgarian capital, financial news website investor.bg reported on December 12, quoting a survey by consultancy firm MBL.The overall amount of office space in Sofia now stands at 874 100 sq m, of which 81 per cent is outside the immediate city centre.Construction activity during the period was high despite the developing global financial crisis and there was no change in the amount of new office buildings being built in the third quarter. In July-September, several large-scale projects were initiated, combining for over 750 000 sq m of office space, of which 75 per cent were in the Sofia suburbs, and 21 per cent in the wide central area of Sofia and the rest in the Sofia city center.By the end of 2008, the total volume of office space in Sofia will reach 970 000 sq m, should all current construction be completed on schedule.The global financial crisis, however, did not completely bypass the sector as some large-scale projects have been delayed, others temporarily frozen and others still, scrapped altogether.Several reasons explain why a large share of the office space in the Bulgarian capital is left unoccupied - bad location, poor infrastructure, no connection with the urban transport, and the financial crisis itself, as companies don not have resources to employ new staff. This rings particularly true for office space in the suburbs of Sofia, where vacancies have more than doubled, reaching 9.2 per cent. In the wide central area, however, there were no changes observed, and the vacancies remain at 3.2 per cent, where as in the Sofia city centre proper, vacancies have shrunk from 1.8 per cent to 1.6 per cent.Overall, the vacancy rate for the city rose from 3.8 per cent at end-June to 6.5 per cent in September.The average monthly rent for class A offices in the suburbs of Sofia was around 15.5 euro a sq m, but with the vast supply of new offices from to constant construction, prices have fallen by 15 per cent in several districts. The average rent in the city centre proper however, has registered a significant increase, in some cases of up to 23 per cent, with the current prices going from 22 to 28 euro a sq m.The investment market at the moment has literary frozen still and transactions with offices in the third trimester were not registered at all, investor.bg said. Meanwhile, the banks have virtually frozen financing and refinancing, in expectation for a better outlook, which meant that deals could be done only by investors with a large amount of disposable capital ready for investment.