Demand for ESG offices in Bulgaria is growing, but supply is lagging behind

The demand for high-end office buildings in Bulgaria is growing, and this trend will continue this year. The focus is on the sustainable standards of the properties with a view to providing a healthy environment for employees. This becomes clear from a new report by the consulting company Colliers.

Most often, the demand comes from large international corporations in the technology sector, where the labor market is thin, every employee is a very valuable asset, and employers seek to invest in a pleasant working environment. There is also interest from global corporations from other fields with a presence in Bulgaria, whose parent companies insist on meeting certain ESG standards at all their locations.

There's no point in fooling ourselves, they (international companies) are the engine of this thing. They are driving this search for a better-quality environment," Nikolay Georgiev, Manager of Valuations and Consulting Services at Colliers, told Economic.bg.

In most cases, the large international companies in question are looking for high quality, which is not always related to a green certificate.

This certificate validates the quality of the environment. It is very important, but sometimes it is insufficient," Georgiev said.

The definition of a quality environment includes high ceilings, brighter rooms, high air quality, and green spaces. This has been a trend since the pandemic when there was rapid digitalization and optimization of office space.

If before the pandemic it was normal for an office to have space for all employees, now the goal is to have a workspace for 60-70% of them. Usually, these companies are also highly digitalized - they have their own desk booking systems or integrate other solutions.

About 60-70 desks for 100 employees, focusing on higher-quality office space - more areas for recreation, for collaboration, for having a pleasant time at work - other areas besides your desk. So that people can feel better in the office," adds Georgiev.

In this regard, employers are going even further and offering remote work options for their employees. In addition to their main offices, several companies also have remote offices at a seaside resort or mountain resort.

This is more of an exception, but they offer a flexible working option to their employees who are already looking for it. The labor market is very hot and active, and employers are forced to start offering such things," Georgiev adds.

Buildings with a certificate

According to public records, there are few office buildings in Sofia with a green certificate. New ones are being built, but not at the pace they were before the pandemic.

There aren't many new projects. Some were frozen and they didn't start afterwards," Georgiev explains.

He points to a sense of caution after the shock of the pandemic as the main reason for this. That sense of caution discouraged investors.

The built-up areas are at a fairly good level, office demand continues and at the same time the supply of quality areas is lagging behind," commented Georgiev.

This whole situation is also leading to an increase in rents – in the last year and a half, 16 euros/sq m for class A property has already become the standard.

As for financing such projects, banks have certain responsibilities to do so and to promote this type of financing. These projects also receive better conditions, and the expectations are that banks will refuse financing for insufficiently efficient construction projects to avoid lowering the quality of their portfolios.

Banks are very liquid, they have a lot of money to lend, but they are selective," explains Georgiev.

Translated by Tzvetozar Vincent Iolov