Colliers International Office Rent Levels In Bulgaria To Stabilise In 2010

Research from Colliers International, or what is described as the "Top 15 survey", shows that office rental levels in Sofia will be "stabilised" in 2010, a company media statement announced on April 27 2010.

The survey shows data collected by the end of March, while the Top 15 pertains to existing, large multi-tenant office projects in Sofia, encompassing a total of 300 000 sq m of office space, or what is a third of the total office space in the capital city.

According to the report, demand was largely insubstantial in the first quarter of 2010 but price levels were not considerably affected by the lack of interest due to the lack of new supply.

New major office buildings were not flogged onto the market in the first quarter of 2010, which according to Colliers, "did not affect the Top-15 Stock".

"The Top 15 Rental Index shows that rental levels are starting to stabilise, as the first quarter in 2010 indicated a 1.1 euro sq m/month decline in asking rents following a general stabilisation of suburban rents in the second half of 2009," the report said.

"As Top 15 projects are adjusting prices and conditions, they consolidate occupancy. In reality, landlords offer rental reductions as a last resort, and prefer to entice tenants with step-rents, rent-free periods, free moving and other incentives".

Rents had decreased by 22.5 per cent by the end of 2009, as opposed to levels of summer 2008, according to Elta Consult, former partner of CB Richard Ellis.

But whereas Colliers believe rents will stabilise, there are indications that Bulgaria might not be just out of the crisis yet.

According to different studies, 2010 will see the further decline of prices of both office space and real estate.

About 70 000 sq m of office space was complete and made available in 2009, making a total of about 1.17 million sq m on the market. Additionally, about 150 000 sq m of office space were under construction and were expected to be available by the end of June 2010 alone. For the moment, only about a quarter of them, 20-25 per cent, have been rented out to tenants, while the others remain vacant.

According to MBL, about 72 000 sq m of office space were rented out in 2009 nationwide, making it the lowest rate in five years, since total completed office space amounted to 165 000 sq m. Furthermore, about 375 000 sq m of new office space is expected to be made available on the market in 2010.

Currently, office space Class A in Sofia city centre varies between 11.5 and 15.5 euro a sq m, whereas elsewhere in the capital, the average is between nine and 13 euro sq m.