Office rental levels in Bulgaria are starting to stabilize (BG)

According to Colliers International's experts, the office rental levels in Bulgaria are starting to stabilize. Colliers' Top-15 research, conducted by the end of March 2010, includes the 15 largest existing, multi-tenant office projects in Sofia. The projects have a combined size of almost 300,000 m², representing more than a third of the total speculative stock, and serving as an indicator of the developments in the market during the first quarter of 2010.

The first quarter saw a €1.1 m²/month drop in asking rents following a general stabilization of suburban rents in the second half of 2009. As Top-15 projects adjust prices and conditions, they consolidate occupancy. Landlords offer rental reductions as a last resort, and prefer to entice tenants with step-rents, rent-free periods, free moving and other incentives.

According to Colliers' research, the net Top-15 absorption in the first quarter of 2010 was little under 2,000 m². The number of pre-leases signed for Top-15 projects during this period of time indicates that the market is taking advantage of the attractive conditions offered at the moment, and higher absorption is foreseen in the coming quarter.

"After a period of relatively low activity, we are already seeing signs of recovery in the office market. We expect the market to start picking up in the second half of the year with more transactions at attractive rental levels and conditions taking place," said Anton Slavtchev, Manager Offices and Business Parks at Colliers International, Bulgaria. According to him, the effect of further consolidation and global mergers and acquisitions will be a major driver of demand on the Sofia office market in the coming months. In terms of segments, IT and Business Process Outsourcing will remain the most active ones and are also expected to drive demand going forward.

Colliers' research confirms the increased segmentation in the market and the classic real estate mantra that "location is essential". New market entries, with perceived unattractive location, struggle to attract tenants in a slow, demand-driven market; however, established projects continue to enjoy almost full occupancy.

Source: Colliers

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