RECORD LOW DEMAND FOR OFFICE SPACE AND NEGATIVE NET ABSORPTION FOR THE FIRST TIMEIN SOFIA
The stock of modern office spacein Sofia has reached 2.184 million. sq.m at the end ofQ3. The space under construction is 376,000 sq.m. of whichthere are signed pre-lease agreements for only 16%. A current trend among tenants is to try to sublet office space in order to optimize their expenses. This is due to work from home policies in place or decrease in revenues. Therefore, at this stage we are not expecting new office projects to start the construction process before the COVID-19 situation improves.
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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