May 4 (SeeNews) - The office market in Bulgarian capital Sofia is facing a significant slowdown due to economic uncertainty and weakening business activity caused by the coronavirus pandemic, Forton, a strategic partner of Cushman&Wakefield for Bulgaria and Macedonia, said.
Leasing volume in the capital amounted to 26,665 sq m in the first quarter of 2020, marking a 22% decrease compared to the same period of last year, and below the five-year average, Forton said in first quarter 2020 office market report published last week.
The office market during the first quarter was dominated by renewals with more than 40% share of the total take-up. Together with the lack of pre-leases, this indicates that occupiers are reconsidering their business and tend to postpone their expansion plans, Forton noted.
"Net absorption dropped to outstanding low level of 7,088 sqm in the first quarter, which may be attributed to delayed expansions and finishing works in the rented premises," Forton said.
The total stock in Sofia exceeded 2.0 million sq m during the January-March period after the completion of Building 3 of Garitage park and the refurbishment of a small office project, which added 23,900 sq m to the Class A and B office supply in the capital combined.
"Although the average vacancy rate remains around 10%, slight increase is expected in the coming quarters due to the stagnant demand," Forton also said.
For the time being, around 390,000 sq m of office space in Sofia is under construction. However, some of the projects may be postponed due to the crisis, Forton said, adding that new developments are unlikely to be started in the short term.
The looming recession and tightening office market will also put rent prices under pressure in the coming year, Forton concluded.