Last week [Wk 40] PropTech Bulgaria’s Founder, Sylvia Pavlova MBA CMC, was a panelist at the Annual Conference of Construction & Investments organized by Manager Magazine in Sofia.  We share the trends in Commercial Real Estate in general, and Office space in particular which she outlined as part of her participation.

According to Savills’ latest research, take-up in the European office market reached 4.3M sqm in H1 2022 which is 11% above the 5-yrs’ H1 average rate thus far. When zooming in to the CSEE region, office sector’s share of the investment volume in H1 22 is 36%, followed by retail sector with a share of 32% of the investment volume.

When zooming further in and looking into the country dynamics, trends always differ under national peculiarities.

However, there are stable trends which we observe from 2020 onwards, and we believe will become even more self-evident and perceptible in 2023.

Trend 1 : ‘Mix-use’ is no longer Retail + Commercial, or Commercial + Retail. It’s Commercial + Retail + Residential

One of the major reasons is that the hybrid form of work demands for proximity of the workplace to employees’ place of residence. Another reason is to ease the eventual shock if all retail spaces (particularly shopping centers) are to be closed down again. Such an approch minimizes the property developers’ risks through securing the footfall in retail; and the occupancy of office space by people living nearby.

It is curious to see how is this trend being developed across different geographic markets.

Here comes the interesting part: when we see the number of PropTechs in each of these geographic regions which serve all three asset classes all at once: Commercial, Retail, and Residential.

The result is stunning: UAE & GCC – 7% of the PropTechs; Bulgaria – 4.73% of the PropTechs; Europe: 0.8% of the PropTechs.

This column diagram exhibits the result of our research of PropTech in different geographic regions. It is very interesting to note, that the rate of purely Commercial PropTech solutions in UAE [all numbers referring to UAE include also GCC PropTechs, and are based on 60 PropTechs, as of Oct. 22] is just 10.5% as compare to 17.76% in Europe [based on 4141 European-origin PropTechs, as of Oct. 22]. Bulgaria‘s result is 12.3% [based on 211 Bulgarian-origin PropTechs as of Oct.22].

Next, when we look at the more standard mix-use PropTechs, the ones which serve both Commercial + Residential, the results per regions are as follows,

UAE & GCC: 28.1% of all PropTechs there.

Europe: 17.21% of all European-origin PropTechs which is very close to the number of purely Commercial RE PropTechs.

Bulgaria: 12.3% of all Bulgarian-origin PropTechs. The same number as purely Commercial PropTechs.

Even here we see that close to one-third of UAE-origin PropTechs are mix-use from their inception.

Trend 2: Energy Tech solutions which upgrade the existing BMS systems in office buildings.

However, in Bulgaria only office class A use BMS systems. It is not that common with offices class B or C. At the same time Bulgaria is among the top 6 countries in Europe which generates the most Energy Tech PropTechs. As you can see on the figure on the right, 62.4%, or 131 ESCO PropTechs [ESCO = Energy Service companies] derive from the top 6 European countries, namely, France (28), Finland (23), Germany (22), Bulgaria (20), Sweden (20), the Netherlands (18) [all this data is based on 3617 European-origin PropTechs as of June 22].

The total number of Energy Tech solutions based on 3617 European-origin PropTechs is 210 PropTech companies. Twenty-five European countries has such solutions of their own origin.

Despite the fact that Energy Tech PropTechs are only 5.80% of all existing PropTechs of European origin, their business models vary hugely. We have detected at least 17 different business models. Some of these are: HVAC-related Energy Tech solutions; energy efficiency, indoor climate, occupancy data; serving uitility companies; utilities metering; leakage detection; energy monitoring; energy audits; power trading as a service; sustainable energy procurement; smart grid metering; waste water & energy tech, etc.

We consider that BMS systems are no longer sufficient on their own. It is mandatory to upgrade with a complimentary Energy Tech solution(s).