Sofia office building segment going green

By SeeNews team

 

Galina Dimitrova

Galina Dimitrova, Country Manager, Danos

Q: How much time do you think it will take for the Sofia office market to absorb the current surplus stock and for vacancy rates to return to the pre-crisis levels?

A: The office stock in Sofia is continuously growing. Danos, an alliance member of BNP Paribas Real Estate, has registered total office stock of 1,350,000 square metres (sq m) within Sofia which is exactly double compared to 2007. What is interesting is that the bulk of this supply came onto the market within the past two years.

The bullish supply combined with a sluggish demand led to a vacancy rate of 29%. Furthermore, there is still a latent pipeline which, when eventually completed, will increase the vacancy rates.

Q: What is your outlook for Class A office space rent levels in Sofia for the remainder of 2011 and for 2012?

A: During the first half of 2011 the rental levels within the office segment experienced a further decrease of 4.0% as compared to 2010 or approximately 1.0 euro per sq m on a monthly basis. Most of the dynamics within the office segment are generated by relocations, i.e. companies that are already present on the market and opt to improve their office and otherwise environment.

With this said, the well thought-out and planned projects will attract these tenants by not only providing a better environment, but also better lease terms.

Our projections are that we will see a more stable environment within 2012 as regarding office rental levels.

Q: What are the new locations for contemporary office space that are emerging in Sofia?

A: Close to 60% of the office stock is still located within the periphery of Sofia. The locations along major roads and junctions have always been preferred by developers and tenants. The area along Tsarigradsko Shausse has experienced rapid development for example, with three major projects located along it and several more in the pipeline.

New office projects are being developed along Todor Alexandrov Boulevard due to its proximity to the downtown. The area along Bulgaria Boulevard, which is already an established address for office users, is continuing to expand as well.

Q: The market oversupply in Sofia has intensified the competition for office tenants. What tenant inducements (grace periods, covering of relocation expenses, etc) have now become part of the standard offer?

A: The office market is tenant-driven and tenants are the active parties within the process, that is to say that they have plenty of options as regarding location, building specifications, etc. In order to attract the tenants the investors have to be ever more flexible, this includes offering flexible commercial terms, shorter rent periods, relocation packages, etc.

Q: How interested are office tenants in Bulgaria becoming in the green profile of the premises they are leasing? What is your outlook for the demand for green office space?

A: The “going green” process is underway and particularly so within the office segment. Not only is it of vital necessity for the environment we live in today, but more importantly what we make of it tomorrow.

Many multinationals now have a greenonly policy, that is to say that it is a must for them
to relocate to a green building.

The office market in Sofia is catching onto this momentum and a great example of this is that half of the new projects being delivered there are sustainable.