The expected improvement of Bulgaria's macro- and microeconomic indicators in 2011 will lead to an increase in real estate transactions across all market segments, according to Colliers International's latest market reports. The analyses provide a performance overview of the four key segments - retail, office, residential and logistics - during the second half of 2010, and outline the market development trends for 2011.
"Our expectations for the first half of 2011 are to be as challenging as 2010 was. The second half of the year will mark the upswing in almost all real estate segments," said Atanas S. Garov, Managing Director of Colliers International, Bulgaria. "We are positive that new players will be seen this year, which will bring liquidity on the market and will define its development in the medium term."
With the opening of four shopping malls in Varna, Stara Zagora and Rousse, in the second half of 2010, the total inventory of contemporary shopping mall space in Bulgaria has increased to 560,000 m² equal to 74 m² per 1,000 inhabitants. This is the largest growth (327,000 m² of new stock) in this segment on an annual basis so far. There are two projects in the pipeline for 2011 - in Plovdiv and Rousse, while in Sofia, the focus will be on positioning the operational schemes. The high street is expected to make a come-back in the coming period. Discount retailers will continue to be the most active within the Big Box format, which will be defining the retail market.
Large international players are sticking to their expansion plans, while the local and smaller operators are more cautious, focusing on optimizing costs. Future demand is expected to come from three main segments; soft cash & carry, convenience stores and lower-end fashion retailers.
Supply of new office space in Sofia reached a new peak in early 2011. The market grew by 150,000 m², predominantly class-A premises. According to Colliers, inventory is expected to mark the same increase during the first half of 2011. During the second half of 2010, the net absorption was 60,900 m². The incremental demand was driven primarily by the outsourcing sector and pharmaceutical companies which are already present on the market. As a significant number of lease contracts expire in 2011, the number of transactions is certain to increase.
The improving economic indicators, favorable lease rates and the general positive outlook for businesses are likely to further lead to expansions of office premises. The majority of the demand was driven by relocation needs. Many occupiers took advantage of the attractive rental rate level for high quality office space in communicative locations, and this trend is likely to continue in 2011.
The supply of speculative industrial and logistics real estate in Sofia grew moderately in the second half of 2010. Outsourcing of logistics services continues to define the development in demand on the market. More and more companies are inclined to outsource part of their activities to be able to focus on their core business - a development that will continue in 2011. Large, international food chains - the major players on the logistics market - prefer to build their own central distribution facility. The area around Elin Pelin is preferred for such bases, because of its proximity to the two highways in Bulgaria.
In 2011, demand in mid-plus and high-end residential real estate will continue to grow as the Bulgarian economy gradually improves. However, with the increasing absorption, there is a genuine risk of the market becoming qualitatively undersupplied. Demand for residential real estate is growing in maturity with increasing segmentation of the market. Buyers of mid-plus and high-end properties have high expectations and requirements and prefer new projects offering an attractive standard of living, such as gated communities (compounds).
According to Colliers, there is a clear expectation that the residential market has reached the bottom in terms of sales prices. Some developers might even consider adjust