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Bulgarian office property sector showing optimism

An increase in deals in the next few months is expected as tenants and lenders grab themselves the kind of offers that would have been unimaginable a couple of years ago, according to Anton Slavchev, manager of Colliers International office space and business parks department in Bulgaria.

Price ranges in Sofia have already registered a drop of €10 to €15 per square meter since the end of 2008 and this is encouraging tenants, he pointed out.

The reduction in value is attributed to several factors including a general decline in demand in light of the global economic downturn, and the larger supply on offer as a consequence of the ever increasing amount of completed construction on the market.

When the latter is combined with an already existing pool of offices that were made vacant by companies departing as a result of poor business performance, then a new range of opportunities are emerging.

According to Slavchev it is investors who are firmly in the driving seat. He said that the price range will vary as dictated by the investors. Entrepreneurs, meanwhile, will be led by two factors – the various phases of projects' completion and phases at which they fulfill their actual capacity.

'Investors have started realizing that it's not viable to have a building remaining vacant over the course of a year, so it's better to employ more flexible tactics to offset that loss,' Slavchev said.

'Currently, we are operating with 15 companies who have latent demand for about 40 000 square meters of office area. This passive demand will be realized at a future stage, in accordance to the companies' price-range expectations, and the availability of the product in the market,' he said.

Meanwhile the number of new residential real estate projects being started in the country has declined significantly. Sofia has seen a 32% year-on-year drop, according to figures from Acro Real Estate. Similarly, Varna and Bourgas have fallen 32% and 14% respectively.

And figures from the National Statistical Institute show that just 3,897 new housing units came onto the market in the first quarter of 2009 compared with 20,924 in 2008.

Arco Real Estate warned that this could create a vacuum with no finished new housing units appearing on the market in 2010.