The biggest lease deals in Sofia's office market

Polygraphia Office Center

The biggest lease deals in Sofia's office market

New offices, new opportunities

Polygraphia Office Center

This article is part of the Special Issue of KInsights dedicated to the most important developments in the real estate sector of Bulgaria. You can buy it here.

1. Bulgarian unicorn Payhawk goes to Polygraphia Office Center

Payhawk, the young Bulgarian company with a valuation of more than 1 billion dollars, has rented an office in Polygraphia Office Center this year. The building is located near Borisova Gradina Park and Eagles' Bridge. The office area is over 3,000 square meters and will ensure the future development of the fintech company, which plans to triple its team. Now it has hired over 100 people in Bulgaria and wants to reach 300 staff by the end of the year. Later, the plans are for an increase to 400. Payhawk also has offices in London, Berlin, and Barcelona. With staff in them included, Payhawk's employees total nearly 200 people now.

As a young company in the stage of rapid development and growing its team, Payhawk seems to bet on the traditional office model - a workplace in the office for everyone (10 square meters on average per person).

Payhawk has so far refused to comment on its future work model. "We will talk about this in the autumn," Payhawk CEO Hristo Borisov told Capital Weekly. The concept for the new office is expected to be clarified and realized by then.

The lease deal was announced on the LinkedIn profile of Lion's Head Investments, the owners of Polygraphia Office Center, and later by real estate advisory company Avalant which is Payhawk's leasing consultant. According to the Property Registry, the lease deal was registered on June 24. Its subject is the two top floors and the terrace of the building.

The announced rental price is 15 euros per square meter - the current maximum level for an office building in central Sofia. It is supposed to be the nominal one. The real one is probably lower if we include the grace period, rebates and finishing works that will be carried out by the building owners.

Payhawk was founded in 2018 by Hristo Borisov and Boyko Karadjov and has developed a platform for managing corporate expenses and also issues corporate debit cards. It operates in 27 European markets. It reached a 1 billion dollar valuation after adding 100 million dollars in funding in February to its already impressive 112 million dollars round announced in November 2021.

"We were choosing between 35 class A buildings in Sofia - existing or in advanced construction, for the future Payhawk office. The sought area was about 3.5 thousand square meters," explained Hristo Andonov, a partner in Avalant, Payhawk's consulting company. Then the choice was narowed to three or four buildings.

He explained that Polygraphia Office Center prevailed mainly because of its proximity to Borisova Gradina Park and the nearby metro station Sofia University. Another main advantage of the building is the size of the floor plate - almost 2000 sq. m, which allows a large part of the team to be situated in one place, as well as the large terrace on the top floor.

"Payhawk were mostly interested in areas with a concentration of amenities and proximity to the metro. These locations are in high demand and landlords are often in a strong negotiating position. On the other hand, our client is very recognizable and has great growth potential, which makes it desirable for office buildings," said Hristo Andonov.

2. Coca-Cola enters Garitage Park

At the beginning of the year, the residential and office complex Garitage Park announced a lease agreement with Coca-Cola Europacific Partners Bulgaria which has over 1,000 employees. It has leased 9,300 square meters of office space in the fourth and newest office building in the Garitage complex. This is the biggest lease deal for 2021. The term of the contract is 10 years. The company will occupy three floors of the building out of a total of six in January 2023.

Garitage Park Building D is a building with 19,600 sq. m of gross floor area, which entered service in the second quarter of 2021. The current and future tenants (Coca-Cola) ensure 77% occupancy of the building. The average occupancy rate for the four office buildings in the project is over 90%, according to information from Garitage Park. Coca-Cola Europacific Partners Bulgaria is the second largest tenant in the complex after VM Ware with over 27,000 sq.m.

The Avalant consulting agency confirmed that the deal is the largest in the office leasing segment in 2021. The second largest deal is for 6,000 sq.m. in Sofia Office Center from Chaos Group, and the third is for 3,300 sq.m. in NV Tower, leased by GlobalFoundries.

Average rental rates in the Business Park Sofia area, where Garitage Park is located, are nearly 12 euros per square meter, according to data from Avalant.

Coca-Cola Europacific Partners Bulgaria (CCEP) is one of the five companies with which Coca-Cola Corp. is presented in Bulgaria. CCEP is a bottling company that distributes and sells to 13 countries in Western Europe as well as countries in the Pacific. According to CCEP estimates, it has 600 million users and 1.75 million professional clients. It is listed on the stock exchanges in Amsterdam, New York, London and Spain.

CCEP has had an office in Sofia since 2013 and opened a second one in Varna in 2019. The total number of employees that work there is just over 1,000. The rental deal with Garitage Park is related to the relocation of the Sofia office from Serdika Offices (the office building next to Mall Serdika).

CCEP said they wanted to move their employees to a larger and more flexible space in Sofia. Tamzin Hoborow, vice president of CCEP's Center for Shared Services, promises an "engaging, innovative and sustainable office environment" in the official press release, but for now, the company refuses to give details and information about their new working model. The new office is expected to be ready for use by the end of 2022.

3. PPD remains the largest tenant in Megapark

Sofia office complex Megapark announced the signing of a "new 10-year strategic contract" with its largest tenant - Pharmaceutical Product Development (PPD). It is a global research company for clinical development and analytical services.

The lease deal is for 9,000 square meters of office space. For comparison, the 2021's record deal - for the relocation of Coca-Cola Europacific Partners Bulgaria to Garitage Park - was for 9.3 thousand square meters. "The signing of a new 10-year contract with a tenant with high demands on the office environment is a high mark both for Megapark as an office complex and for the management team of Lion's Head," says Elitsa Tsenova, Director of Investments and Asset Managemen at Lion's Head and manager of Megapark. Lion's Head owns Megapark and also Polygraphia Office Center in Sofia. It is a company investing in office buildings in Central and Eastern Europe.

Until now, PPD occupied a similar area in the office complex on Tsarigradsko Shose Blvd., next to The Mall. The company, which is a global provider of clinical research services for the biopharmaceutical and biotechnology industry, has been operating in Bulgaria since 2008. According to PPD's annual report for 2020, its revenues in the country were 84.5 million levs, and the profit was 4.69 million levs. Its employees have steadily grown over the years, reaching almost 1,500 at the end of 2021. PPD has been in Megapark since its opening in 2010 and, according to experts, the company is one of the largest tenants of office space in Sofia.

Retaining a key tenant is a success for Megapark considering the current office market in Sofia, which is mainly driven by relocations of companies to new and better buildings. In addition, the supply of newly built areas is high and the share of vacant spaces is also high in the Tsarigradsko Shose Blvd. area. One of the reasons is that while twenty bus lines use the boulevard, there are just two subway stations along its entire length. The project for an extension of Sofias metro's third line envisages a metro station in front of Megapark that is possible to be ready in 2026.

Coca Cola goes to Garitage

This article is part of the Special Issue of KInsights dedicated to the most important developments in the real estate sector of Bulgaria. You can buy it here.
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