Sofia, Bulgaria – Real Estate Market Research H1 2018

Bulgarian investment market update

The total value of completed investment deals in the first half of 2018 was EUR 351 m. Just five of those transactions accounted for slightly above 80% of the total. 65% of the investment volume involved office buildings, followed by retail properties (23%) and development land (6%). The share of international buyers continued to prevail over locals. The volume of deals concerning income-generating properties considerably exceeded (73%) speculative (9%) and owner-occupied properties (18%). Yields remain stable in the range of 7.5-8%.

Selected investment transactions

• Q1 2018, DXC and Bulmag office buildings – 8,770 sqm – Wingholding
• Q2 2018, Mall Sofia (retail and offices) – 33,900 sqm – GTC
• Q2 2018, Millenium Center – 26,000 sqm – KBC
• Q3 2017 Serdika – 28,000 sqm – NEPI

Sofia office market update

• Sofia office market enjoys high tenant activity, stable rents and low vacancy rates, with annual take-up in 2017 reaching record high levels of 198,348 sq.m. Demand remains strong in Sofia, and emerges in regional cities thanks to the expansion of IT and BPO business
• The market is driven by expansions and business consolidations mainly in the IT and BPO sectors, which generated around 60% of the demand in the Class A segment, as well as by companies in the financial and pharmaceutical sectors
• The most preferred office locations continue to be along the main boulevards, and the CBD, where buildings enjoy occupancy levels of near 100%
• The strong market activity brought significant new supply with approx. 400,000 sqm expected to be delivered in the next 3-4 years. Pre-leasing however still remains high, at 30-40% of the take-up, which provides for good absorption of the new supply
• The prime rents remain stable in the range of €13-14 per sqm

Total Stock – 1.77 million sqm

Availability – 169,828 sqm

Vacancy – 9.6% overall / 2% prime

Take-up H1 2018 – 66,982 sqm

Selected Leasing Transactions

• 12,500 sqm/ Fairplay Office Building / Teva Pharmaceuticals
• 10,800 sqm/ Grafix Business Center/ Progress
• 10,500 sqm/ Space Tower /Experian
• 6,000 sqm/ B Tower/ Louis Dreyfus
• 6,000 sqm / Office Park Central / 60K
• 2,978 sqm/ BSR Building II/ Sutherland
• 2,300 sqm / Garitage Office Center/ Milestone Systems
• 2,250 sqm/ BSR Building II/ dm

Development Pipeline

• Sky Fort/ Suburban / 82,000 sqm/ Fort Noks (local developer)
• Garitage Park 1 / Suburban / 30,000 sqm out of 95,000 sqm / Garitage Investment Management (local developer)
• Richhill Business Center /Suburban/ 27,800 sqm/ Telelink (local developer)
• Sofia Office Center 1 / Tsarigradsko Shousse Blvd./ 24,200sqm out of 43,000 sqm/ Europroperty (local developer)
• Office A / Tsarigradsko Shousse Blvd./ 13,800 sqm/ Local developers
• Srebarna Park Lane Office Building / 20,000 sqm/ Park Lane Developments (local developer)
• Ellipse Center / Suburban/ 18,800 sqm/ local developer
• Business Park Sofia B15 /Suburban/ 19,600 sqm/ Arco Real Property Holdings
• Advance Business Center 1 / Suburban/ 15,630 sqm out of 33,130 sqm/ GTC