site.btaOffice Space Demand in Sofia Recovers, Rents Expected to Rise

The demand for office space in Sofia recovered in 2024, and as a result of this and the limited supply, rents for quality office space are expected to increase in 2025, indicates the latest report by Colliers, a professional services and investment management company in the field of real estate.

The report shows that eight buildings were put into operation in 2024, bringing class A and B office space in Sofia to over 2,466,300 sq m, which represents an increase of more than 3% year-on-year. Projects under active construction are expected to add another 280.2 sq m to the market. Some of them are for own use, and preliminary lease agreements have already been signed for over 20%.

Market activity increased in 2024. Gross take-up for the second half of the year reached 116,800 sq m, and  exceeded 192,000 sq m for the whole year.

These are higher values ​​compared to the previous year 2023, a signal of a recovery in demand in the context of the prevailing hybrid work model, the report noted.

About 42% of gross take-up during the year is a result of relocation to a better quality space or consolidation of the company's operations in one place. About 38% of demand is due to renewal and renegotiation of leases, 14% is for the purpose of expanding the occupied areas, and the remaining 6% is due to new companies on the market. Net take-up in the second half of 2024 is over 42,300 sq m, for the whole year that number is 74,800 sq m. m, and for 2023 - 76,000 sq. m.

In 2024, companies from the IT sector occupied the largest share of the occupied areas - 28%, followed by companies operating in the energy sector (13%) and those offering professional services (11%). The rest of the demand is from companies offering financial services, retail, online entertainment, manufacturing, pharmacy and others. Colliers recorded a slight decline to 12.6% of vacant class A offices and 14% decline in class B offices. 

Rentals on offer remained stable over the past year. Class A offices were rented at EUR 14 and EUR 16, and class B offices were rented at between EUR 9 and 11 EUR per square meter per month excluding VAT. Colliers expects these prices to increase in higher-quality projects, especially in buildings that are under active construction. This upward pressure will persist through the end of the year, mainly due to the limited supply of such space and the increased interest. This applies most to prime projects under construction, which attract tenants with modern technologies, flexible working solutions and a variety of amenities. In Central and Eastern Europe, there is already evidence that sustainable buildings with a green certificate have higher rents and occupancy than others.

Requirements for ESG components (environmental factors, social factors, and governance factors) of office space users’ projects will increase, with this trend being mainly driven by international companies. A clear segmentation of the market is emerging between modern and high-quality projects that meet sustainability standards and outdated buildings that fail to offer the desired characteristics. In Europe, the office segment is actively adapting to the requirements of the Paris Agreement, aimed at reducing energy consumption and achieving zero carbon emissions. Although this process is in its early stages at the local level, it is expected to become increasingly tangible. The growing importance of ESG criteria is already having a significant impact on market participants, motivating landlords to invest in modernization or repositioning of their projects in order to remain competitive.

The hybrid work model remains predominant for most office users and according to Colliers’ forecast this will remain the case this year. The main emphasis continues to be on the quality of the leased spaces and the creation of a favorable working environment for employees. There is an emerging trend of an increasing number of employees returning to working from the office.

Shared workspaces (flex offices and co-working) continue to develop, with the growth rate expected to accelerate in 2025 due to increased corporate demand for such areas as a complement to traditional office solutions. Investors in larger projects are increasingly integrating shared workspaces directly into their buildings, without the involvement of external operators, to meet tenant requirements, the report states.