Demand for offices in Sofia is boosting a huge activity in office building and mixed-use projects, and growing land prices trigger the construction of higher and higher such buildings and office towers. The game of towers has generated a public debate on whether to designate zones where these buildings are to be concentrated.
Written by Yasen Georgiev and Dragomir Belchev, EPI – EECFA Bulgaria
In 2016 the Bulgarian economy registered a growth of 3.4%, driven mainly by increasing household consumption and export volumes. Forecast for 2017 and 2018 suggests that the country’s GDP will register a further expansion between 3% and 3.5%, reflecting the positive signs from the labor market and their implications on individual demand.
These trends support EECFA’s latest summer forecast for an increase in the overall construction market by more than 5% in 2017 and over 3% in 2018. Building construction is set to grow even at a higher pace, thus reaching an annual increase of around 8% for 2017-2019. Beside the accelerated growth of residential construction, it is the non-residential sub-sector that shows increased dynamics after a year of negative growth.
According to the EECFA 2017 Bulgaria summer report, office construction is expected to rise and reach an average growth of 4.7% over the 2017-2019 period. This forecast is supported not only by the announcement of a number of projects due to start in 2017-2018, but also by the increase in permitted floor spaces of office and administrative buildings in 2016 on an annual basis, as well as by the scale of started projects in Q12017 compared to Q12016.
In this regard, Sofia remains the most economically active city in the country. Despite the emerging demand for contemporary office space in secondary cities, in terms of floor space, 77% of all permitted office and administrative buildings in 2016 are located in the capital city, similarly to the share of started office and administrative buildings in Sofia, in a nationwide comparison accounting for 74%.
What stands behind is demand coming from outsourcing and IT companies that either seek to expand or to offer more appealing office facilities to their employees in order to keep and attract talented staff. This results in a considerable non-residential construction activity – both of office buildings and of mixed-use projects featuring offices premises.
Ultimately, rising land prices lead to the construction and announcement of ever higher buildings. In this regard, notable ongoing projects that are about to enter the Sofia market in 2017-2020 are Millenium Center (120 m, 25 000 sqm GLA), City Tower (74 m, 34 500 sqm GLA) and Sky Fort (202 m, 40 000 sqm GLA), which is Phase 2 of Sofia Capital City that includes Capital Fort (126 m, 44 000 sqm of GLA).
In the meantime, a dozen of smaller-sized office projects is in the pipeline in Sofia, featuring the expansion of existing office and administrative parks (Building 15 of Business Park Sofia, Phase 4 of Expo 2000 Office Park, Polygraphia Office Center, BSR Sofia One Building ІІ) or green-field investments (Building A Building B as part of Garitage Park, GrafiX Business Centre, GOLDLINE Office Building, Richhill Business, Rial Sight, Space Tower, Sofia Office Center 1, Advance Business Center, Fairplay Business Hub, etc).
This “game of towers” embraced by the above-mentioned big projects has been accompanied by announcements for investments in other office projects of similar size, located in different spots around Sofia. All this triggered an active public debate on determining special zones where such building construction has to be concentrated. Eventually, the Sofia City Hall will have to strike the balance between the increasing interest of investors in this non-residential construction segment and the lack of pre-determined zones for construction of new large-scale projects.