Rental values for offices in the city centre and on boulevards slipped by two per cent year-on-year during the third quarter of 2011, while those for properties in other parts of Bulgaria’s capital dropped by 5.5 per cent, according to data from Forton International.

For Class B office space, tenants pay an average of seven or eight euro per sq m, while Class A properties command 12 euro on average per sq m. Most transactions on the market still involve rental contract re-negotiations where tenants manage to extract more favourable values.

During the third quarter of 2011, the number of signed rental agreements jumped by 64 per cent. The reason for that significant increase is thought to be the large number of expiring lease contracts. Part of them were renewed at lower rents and in some cases tenants opted to move house.

"Transactions are still being conducted but they are mainly the result of companies relocating. We expect this trend to continue and vacancies in Class A buildings to decline at the expense of office space in older, non-functional buildings. Still, the vacancy rate remains at 29 per cent ," Vladislav Kaizerov, office properties manager at Forton International, said.

In the July-September period, total office space in Sofia increased by 27 300 sq m, bringing the overall volume of completed office space to about 1395 000 sq m. The volume of newly added space in 2011 is relatively small because many of the sites that came out on the market in 2010 have yet to become fully functional premises, according to Forton data.

The company estimates that there are 560 000 sq m of office space under construction, with 88 000 of that expected to be ready by the end of 2011 and about 150 000 sq m released by the close of 2012. According to the consultancy firm, rental yields for prime office properties remain at 9.75 per cent.