How Sofia’s Office Market is responding to the pandemic and what should we expect? Why could be the right time to rent an office?

As you know the pandemic has changed not only the Real Estate sector but the world as a whole. While businesses have collapsed, completely new has taken over and others are struggling to adjust. The rise of giants such as Zoom which have more than doubled their revenue compared to the second quarter of 2019 have started to not only to change the way we interact in our daily lives but in our businesses as well. Tech giants such as Microsoft have promised that they will allow a majority of their employees to work from home until at least January 2021 and Twitter is now letting employees work from home indefinitely.

Okay, but what has all of this do with the office scene in Sofia?

The Bulgarian office space market has seen a steady increase in volume for the last years. Many companies from around the world have started moving at least part of their business here mainly because of the widespread fast-speed internet, lower labor cost compared to that of other EU countries and of course, the ever-growing IT sector. This lead to a massive increase in the construction of newer and more-advanced business towers.

However, similar trends as the ones described at the beginning of the article are seen here as well. Many large office tenants are, at least for the moment, letting and encouraging employees to work from home.

What the pandemic has done here mirrors what is happening all over the world. At the end of 2019, in our observations, almost 94% of all office spaces in Sofia were occupied. When the pandemic struck, the tenants were still paying rent, but spacious offices have become ghost areas as workers stay away. Enormous office buildings with thousands of working spaces – empty.

This lead to two tendencies – tenants have begun renegotiating their contracts, some of them have even left the traditional office space entirely, while landlords are trying to keep the money flow as it is.

Since the Real Estate sector, such as any other, has its booms and its busts, now could be the right time to rent. Or at least – negotiate such a price so that you could start at a lower rent that gradually increases over time. For the first time in a while, tenants are in the position to place their demands on the table freely.

And the other thing – office space as a concept became to evolve. The so-called shared office spaces have become more and more popular and, until that time, the niche market of smaller, smarter office buildings has become trendy. Why? Because in 99% of times you get the same commodities you do in a larger business tower, with fewer people as a whole in the buildings and the smart systems integrated, programmed in such a way that can minimize the chance of large groups of people to be at the same place at the same time.

To summarize, the pandemic has caused an unprecedented shift in the market. From potential tenants looking for months in search of suitable office space and an almost zero chance of negotiation with the landlords when it came to pricing, to a market where the client is more in position to, at least to a certain degree, dictate the rules. On the other hand, the search for smaller centrally positioned office buildings with good transport connections is on the rise.

The authors:

Toma Kadiiski ‭+359 878 501 433‬
Kaloyan Trifonov ‭+359 877 954 321‬

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