Vacancy rates in Sofia's office space market on a five-year high, pressure on rental rates continue
The modern office space in Sofia reached 2.218 million sq. m. as of year-end, following the completion of 35,000 sq. m. in Q4. As a result the total of new deliveries in 2020- 66,000 sq. m. decreased threefold compared to the result in the previous year (180,000 sq. m.).
The total volume of office buildings under construction amounts to ca. 370,000 sq. m. of which approx. 220,000 sq. m. are scheduled for delivery by the end of 2021 and the rest are expected to be finished by the end of 2022.
At this stage we do not expect new office construction starts due to the pandemic.
Challenging times for the hospitality industry:
- The average hotel revenue in Bulgaria has decreased by 57% in March and 93% in May 2020, compared to the same moths in 2019;
- The number of operating accommodation places in Sofia in May 2020 was 40% less than in May 2019;
- Even though the Bulgarian summer hotels suffer from the limited number of international tourists, most of the Southern and Northern resorts are crowded with local visitors;
- The average hotel prices in most mid and high end hotels remain stable and even increased in June, July and August.
The office of the future will be more flexible
MBL’s office team together with Sterling Serviced Offices Group conducted a survey amongst 100 office occupiers in Sofia in attempt to understand the effect of Covid-19 on business operations during the lockdown and whether their vision for the office spaces had changed.
The Bulgarian office space market remains stable during state of emergency
MBL conducted a survey among 85 landlords in Sofia whereas overall results indicate that there is a level of comfort among experienced developers with sustainable office buildings.
Despite the covid-19 crisis only 4% of respondants will postpone paying loan principal and 65% specify that they do not expect to lower rents. This indicates both healthy levels of leverage and sustainable rental income based on strong tenant roaster.
73% of the participants have noted that the shortest rental agreement in their buildings will be 5 years while 22% have indicated that they will accept a 3-year agreement. As for the changes requested by tenants – 71 % asked for deferred rental payments.
The COVID-19 pandemic affects the way we use office buildings and will likely affect how we design them in the future. We have prepared this special report with focus on measures that landlords and occupiers should consider before employees return to their workplaces.
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