BMI View: We expect occupier demand and rental values to improve in all three sub- markets of the commercial real estate sector that we cover, in line with economic growth . New development is taking place in the office sub- sector, which should increase the amount of new supply and offer greater investment grade assets to investors .
We forecast steady economic growth over the next five years, and se GDP rising by an average rate of 2.0% between 2015 and 2020, driven by robust growth in private consumption, rising consumer spending and improvements in trade.
The office market in Sofia and the key second-tier cities of Varna and Bourgas remains active in terms of leasing. Pre-lets are a prominent feature of the market, accounting for around half of all lettings, reflecting the limited availability of high quality space. Rents are expected to continue on an upward trend in 2016. As the capital city, Sofia is likely to benefit most from the growth in the services sector and hence occupier demand, but the prospects are also positive for key regional centres, and we are seeing higher levels of absorption in cities such as Varna and Bourgas as companies relocate from Sofia, enticed by available space and lower rents.
The outlook is also positive for retail rents, which are expect to continue rising in 2016 and 2017 on the back of rising household spending, strengthening consumer confidence and higher purchasing power. With demand rising, the supply of prime space is falling, and in the medium term retailers looking to expand are likely to diversify into key regional centres and smaller towns, where rental costs are lower and the retail market is less saturated than in Sofia.
In the industrial real estate market international companies are increasingly interested in Bulgaria as a hub for outsourced production facilities, with the automotive sector expected to be a strong driver of occupational demand. Growth in online retail will also bolster demand for warehouse space from retailers and third party logistics companies (3PLs). However, the amount of high quality space is in short supply, which is hampering the leasing market. With little speculative development taking place, the situation is unlikely to change in the short term. We expect build to suit and owner-occupation to remain key features of the industrial market in 2016 at least. There is evidence of more speculative development starting, but these will take time to reach the market. Moreover, there is a strong likelihood that a significant proportion of such space will be pre-leased, leaving supply tight.
Net yields are higher in Bulgaria than some of the other Eastern European countries, which is an advantage for the real estate sector in terms of attracting investors looking for higher yields. The office sub-sector is likely to fare better than retail and industrial in respect of demand from overseas investors given that new development will be bringing a fresh amount of high quality assets to the market. The retail investment outlook is less certain and we expect transactions to be dominated by local players interested in small lot sizes, while turnover in the industrial sub-sector is likely to remain low until such time as speculative construction delivers more high quality assets to the market. In the short term, therefore, we expect land rather than income producing assets to be the target for acquisition by investors active in industrial real estate.
The Bulgaria Real Estate Report features BMI Research's market assessment and independent forecasts of major construction projects in the residential and commercial markets, plus rental prices and yields in major cities. The report critically analyses the prospects for real estate within the broader economic and financial context - both domestic and global - via our econometrically-modelled and clearly explained banking and economic forecasts and follows this through to evaluate the implications for REITs.
BMI's Bulgaria Real Estate Report provides industry professionals and strategists, sector analysts, business investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the real estate industry in Bulgaria.
- Benchmark BMI's independent real estate industry forecasts for Bulgaria to test other views - a key input for successful budgeting and strategic business planning in the Bulgarian real estate market.
- Target business opportunities and risks in Bulgaria through our reviews of latest industry trends, regulatory changes and major deals, projects and investments.
- Assess the activities, strategy and market position of your competitors, partners and clients via our company profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering real estate and construction, regulatory changes, major investments and projects and significant national and multinational company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the real estate sector and within the broader political, financial, economic and business environment.
Industry Forecasts Outlook
Historic data series (2010-2013) and forecasts to end-2019 for the domestic real estate industry and for the local and global finance industry.
- Real Estate: Office, retail and industrial real estate yields for all major cities (%); short term forecasts on minimum and maximum real estate rental prices by sub-sector (USD per square metre and local currency per square metre).
- Construction: Industry value (USDbn); contribution to GDP (%); employment (‘000); real growth (%).
- economy: Economic growth (%); nominal GDP (USDbn); unemployment (%); interest rates (%); exchange rate (against USD).
BMI’s Real Estate Risk Reward Index
BMI’s Risk Reward Indices provide investors (real estate vendors, construction companies and financial investors) looking for opportunities in the region with a clear country comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide an indices of highest to lowest appeal to investors, with each position explained.
Overview of the real estate sector, including analysis of existing/planned real estate developments and emerging industry trends in the office, industrial and commercial sectors
Features detailed city-level data and analysis on rental prices, yields, contract terms and real estate availability with separate chapters covering the office, retail and industrial sub-sectors.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate Company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.