08 Feb 2008 Anelia Zaharieva writes for PropertyWise “ THE MAGAZINE FOR PROPERTY INVESTORS IN BULGARIA”
 Supply of high-quality class A and B++ office space in 2007 was limited. Demand, by contrast, remained high, surpassing 2006's levels, said Krassimir Dimitrov, managing partner in Source Real Estate Advisers Ltd. (SREA). The office market in 2007 was dynamic, he added. Sale prices grew by 35 to 40 per cent. Demand outstripped supply by 60 to 70 per cent (80 per cent for administrative buildings). At the moment there is hardly any supply of office units in buildings due for completion at the end of the year, according to Dimitrov.
Around 85-90 per cent of office buyers are Bulgarian companies with profitable businesses, large resources and/or easy "loan access" who opt for purchasing an office as a safer and more secure alternative. Foreign entities, by contrast, are very circumspect and avoid investing in fixed assets like real estate. Most of them prefer renting. There are large distribution or retail companies, however, with stable profit growth and market share who would rather buy a plot and build a complex suiting their demands and needs.
Rents appreciated less than sales in 2007, registering a 25-30 per cent mark-up. SREA's executive differentiates clients into three types.
The first (more than 80 per cent of clients) are those seeking 120-200 sq m office units in class A and B administrative buildings. These are either companies that previously located their offices in residential buildings or foreign companies entering the country and looking for smaller offices. However, supply of such developments is squeezed and prices vary from 8-10 to 13-14 euro a sq m.
The second type of clients needs 300-600 sq m for setting up an office - medium-size Bulgarian companies (20 per cent) and foreign entities, which have already secured their positions on the local market (80 per cent of the demand). Price levels for these units are set at 11-16 euro a sq m.
The third group seeks larger office space - 1 -4 000 sq m. Around 90 per cent of these clients are foreign companies in the IT, communications or finance sector.
All the quoted sale and rent prices are without VAT, service and security charges, which in 95 per cent of Sofia's buildings are calculated at 1.5-2 euro a sq m excluding VAT. Krassimir Dimitrov forecasts that office rent supply will soar over the upcoming 2-3 years, thus tangibly outstripping demand. The office sale sector, by contrast, will see boosted demand, primarily for smaller units (150-200 sq m) located in the centre or along the main boulevards. |
