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SOFIA (Bulgaria), November 1 (SeeNews) - Bulgaria's IT and business process outsourcing (BPO) companies remain the main drivers of office demand both in the country's capital and secondary cities in the third quarter of 2019, Forton, a strategic partner of Cushman&Wakefield for Bulgaria and Macedonia, said.
"With 41,900 sq m let out in the third quarter, the Sofia office market remains in line with the long-term trend. Total leasing activity for the nine-month period reached 108,600 sq m, which also gravitates around the five-year average," Forton said in its latest report published on its website earlier this week.
According to Forton, IT and BPO are the fastest growing sector in the country with 52% share of the total take up volume, while pharma and financial companies lag behind.
According to the 2019 Annual Industry Report of Bulgaria's Association for Innovation, Business Excellence, Services and Technology (AIBEST), published last month, the outsourcing sector is expected to generate 9.2% of Bulgaria's GDP in 2022, up from 5.2% in 2018, if the current revenue growth rate is maintained.
"The completion of three mid-scale office buildings added roughly 38,000 sq.m to the Class A stock in Sofia in the third quarter. With this contribution the new supply for the nine months reached 145,000 sq.m and the modern office space in the capital city surpassed 1,963,000 sq.m.", Forton said adding that despite the rapid increase in supply of office space, the market is still capable of absorbing the new deliveries.
Currently, some 383,000 sq m of office space is under construction in Sofia and a significant amount of space in planning phase.
Vacancy rate in the capital slightly decreased to 9.1% in the third quarter, with higher levels in the suburban areas. The modern office stock in the city center remains almost fully occupied.
Vacancy rate in Sofia reached 9.9% at the end of the first half of 2019.
Together with Sofia, the secondary cities become increasingly attractive for expansions, especially for IT and BPO companies, Forton noted, giving as an example the office buildings of software company Fadata in Burgas, KBC Group in Varna and Sutherland in Plovdiv, which were completed in the third quarter.
With the completion of modern office buildings, the occupiers’ interest in the regional cities is expected to increase. Sofia office market will keep good supply-demand balance with stable rents and moderate vacancy in the short term, Forton said in its outlook for Bulgaria's office market.