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NOVEMBER 2007
BANK AUSTRIA CREDITANSTALT REAL ESTATE RESEARCH • UNICREDIT GROUP NEW EUROPE RESEARCH NETWORK
Bulgaria EU Speculations Boost Commercial Real Estate Market
Real Estate Country Facts
Real Estate Country Facts
November 2007 / Page 1
Imprint and Disclosure
Imprint
Publisher and media owner: Bank Austria Creditanstalt AG, Vordere Zollamtsstraße 13, A-1030 Vienna; Am Hof 2, A-1010 Vienna, Austria.
http://www.ba-ca.com Editor: BA-CA Real Estate Consulting & Investment, Karla Schestauber, Tel. +43 (0)50505-54784 and CEE Research, Bernhard Sinhuber, Tel +43(0)50505-41964
Layout: horvath grafik design Dated: 2 November, 2007 Sources:
This publication is based on our own research and research conducted by Immobilien Rating GmbH (IRG) as well as analyses of reports from various international and national sources, press reports and statistical data which we consider reliable.
Disclaimer:
Despite diligent research and the use of reliable sources, Bank Austria Creditanstalt AG assumes no responsibility or liability regarding the completeness and accuracy of the information herein. This publication is not a proposal or request for proposal and shall not be construed as such.
Real Estate Country Facts
November 2007 / Page 2
Bulgaria - exploiting benefits of EU
accession
Macroeconomic fundamentals are strongly un-
derpinned by successful structural transforma-
tion and EU accession in 2007
Most macroeconomic and financial sector indicators
exhibit values, which are fairly in line with those perceived
to be equilibrium ones for a converging economy. Recent
data showed that the speed of GDP growth has acceler-
ated. At the same time a substantial degree of fiscal tight-
ening has allowed public sector indebtedness to fall to risk-
free levels, while also driving fiscal reserves to above 14%
of projected GDP in 2007. Positively for the health of exter-
nal finances, FDI is estimated to pick up further this year,
reaching at least 15% of GDP. The risk of a large scale
capital misallocation is small since most of the investments
are channelled through the banking sector, which is con-
trolled by foreign banks with proven expertise in risk man-
agement. Above all, EU accession provides a host of posi-
tive stimuli for the economy including unconstrained access
to the single EU market, which represent an enormous
boost for competition and trade and therefore for growth
and prosperity.
While fundamentals of the Bulgarian economy remain
strong most recent data signal an aggravation of the exist-
ing macroeconomic imbalances. Inflation has reached
levels unseen since 1998, partly reflecting one-off external
shocks, but also excessive growth in labor costs as pres-
sure for higher incomes in the public sector spills over into
the rest of the economy.
The current account (CA) gap continued to expand, al-
though the extent of the deterioration is unclear as prob-
lems with the quality of foreign trade data collected through
the INTRASTAT system still persist. Difficult structural
reforms were put aside fuelling long-term concerns for the
competitiveness of the economy in the context of the fixed
exchange rate regime.
Economic growth accelerated to a real 6.6% yoy
in Q2 2007 and 6.4% in H1 2007
The growth pattern also experienced some improve-
ment, although, generally it remains overreliant on exter-
nally funded investments and robust consumption appetite
in the household sector. Compared with the previous quar-
ter, the negative contribution of net exports decreased
significantly, mostly in response to a gradual export recov-
ery. Despite the excessive increase in retail credit and
wages, individual consumption lost further momentum to
5.7% yoy in Q2 2007. Investments continued to expand at
an impressive rate compensating for the flagging spending
appetite in the households sector, thereby boosting me-
dium- to long-term economic growth prospects. Gross fixed
capital formation (GFCF) including changes in inventories,
reached 35% of GDP for Q2 2007, still somewhat weaker
when compared with the all-time record posted in the pre-
vious quarter, when investments edged up to 40% of GDP.
The structure of expenditure for the acquisition of tan-
gible fixed assets also improved. In H1 2007 capital spend-
Macroeconomic data and forecasts
2005 2006 2007f 2008f 2009f
Nominal GDP (EUR bn) 21.9 25.1 28.5 31.8 35.0
Per capita GDP (EUR) 2,835 3,268 3,732 4,178 4,623
Real GDP yoy (%) 6.2 6.1 6.2 6.2 6.0
Inflation (CPI) yoy, avg (%) 5.0 7.3 8.1 5.6 4.2
Unemployment rate, avg (%) 10.7 9.1 7.3 6.5 6.0
Exchange rate EUR / BGN, eop/avg 1.96 1.96 1.96 1.96 1.96
Current account / GDP (%) -12.0 -15.8 -17.6 -16.8 -15.0
FDI / GDP (%) 14.2 16.4 15.0 13.0 9.5
Consolidated gov. balance / GDP (%) 2.3 3.6 3.0 2.0 2.0
Public debt/ GDP (%) (ESA 95) 31.3 24.7 19.8 18.6 18.4
Sources: Bulgarian Central Bank, Statistical Office, UniCredit Group New Europe Research Network
Real Estate Country Facts
November 2007 / Page 3
ing in the tradable goods sectors increased by 55% on an
annual basis, raising their relative share on total invest-
ments to 40%, from 37% a year ago.
On the supply side, an anticipated drop in the agricul-
ture sector (-5.3% yoy), was more than balanced by indus-
try and services growing by a real 10.5% and 9.5% respec-
tively.
GDP growth (yoy, in % 2001 - 2006)
-10
-5
0
5
10
15
2001 2002 2003 2004 2005 2006
Private Consumption Public Consumption
Fixed Investment Net exports
GDP real growth
Source: Statistical Office Bulgaria
In the forthcoming years, growth prospects remain very
favorable. A gradual recovery in exports and solid growth
momentum behind investments, also backed by the start of
EU-funded projects, will keep GDP growth around 6.2% in
real terms in 2007 and in 2008. Nevertheless, renewed
volatility in the international markets remains the key down-
side risk for our baseline GDP growth scenario. The poten-
tial worsening of global financial conditions and the deep-
ening of risk aversion could have a detrimental impact on
FDI and the cost of external borrowing, thereby reducing
investments and GDP growth, and making it more difficult
for the country to finance its large CA shortfall.
Healthy fiscal performance made a 3% cut in so-
cial-insurance contribution rate possible in Octo-
ber and bolstered plans for introduction of a 10%
flat tax on personal incomes next year
With year-to-date revenues in July totalling 62% of
those planned for 2007 as a whole, and expenditures
amounting to only 52% of the plan, the state budget is in a
very favorable position to meet its year-end target of BGN
1.4 billion, equivalent to 2.5% of projected GDP. The com-
bination of a very conservative revenue planning, strong
economic growth and cutbacks in the size of the grey sec-
tor, enabled revenues in the consolidated fiscal program for
the first seven months of the year to outperform the target
by 17.1%. Thus, at the end of July the budget is running a
surplus of BGN 2.4 billion which corresponds to 4.2% of
GDP for the whole year.
Against these backdrops, the government unveiled
plans for another 10% increase in state-funded pensions on
top of the commitment to cut back the social insurance
contribution rate by 3%, effective from 1 October, 2007.
Fiscal plans for the next year include a reduction in
taxation on labour via the introduction of a 10% flat tax on
personal incomes, changing proportions at which social
insurance contributions are divided between employers and
employees and an indexation of pensions by a rate equal to
the sum of 50% of the inflation rate and 50% of the rate of
increase in the contributions actually collected in the first
pillar of the pension system. Excise on cigarettes will be
raised by half of what remains in order to complete the
harmonization process, with the last remaining step sched-
uled for 2009.
Fiscal plans for the coming year should bring no risks
to macroeconomic stability. On the contrary, the cutback in
the taxation on labour will have a broadly based favorable
impact on the economy and therefore deserves praise. It
will help to reduce the widely spread grey sector and will
boost the collection of social insurance contributions, a task
which has proved to be particularly elusive so far. Lower
taxation on high-income earners will bring an increase in
their disposable income and consequently will positively
affect saving rates.
The reduction of personal income tax was also wel-
comed by the representatives of employers organisations,
which in turn agreed to raise the wage ceilings used to
calculate due social insurance contributions in the private
sector. Thus, the income base to be used to calculate con-
tribution payments will increase by between 25% and 35%,
with rates being highest in sectors such as construction and
tourism, where the problem of underreporting of incomes
for tax evasion purposes has been particularly acute.
On the negative side, the government’s plans to re-
structure the ailing health care and education sectors re-
main controversial, which gives the impression that there is
still a lack of enough political will to forge ahead with the
process.
Risks for price stability shift upward in H2 2007
From 4.3% in May, twelve-month inflation broke
through the 10.0% mark in just three months to reach
13.1% in September, its highest level in almost nine years.
The unprecedented spike in consumer prices was attribut-
able, above all, to soaring food prices. Eurostat data for
June showed substantial increases in food and beverage
Real Estate Country Facts
November 2007 / Page 4
prices across all EU member countries, with new Member
States being hit particularly badly. Year-on-year price dy-
namics were highest in Bulgaria (14.7%), followed at a
narrow margin by Latvia (12.2%) and Hungary (10.1%).
Clearly, the spike in food costs witnessed in Bulgaria in
the last three months was part of a one-off supply shock of
global proportions. However, there are several country-
specific factors, some of them structural, which are also
exercising upside pressure on local prices. Slow progress
in the enlargement of arable land is restricting capital
spending and competition in the agriculture sector. Follow-
ing EU entry some local foodstuff manufacturers increased
the share of their output channelled to other EU countries
to benefit from the existing price differentials. Unfavorable
climate conditions adversely affected agriculture output,
while imports from non EU-neighbors became more expen-
sive, following the adoption of the Common External Tariff.
Consumer price inflation (yoy %)
-2
0
2
4
6
8
10
12
14
Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06
%
Source: Statistical Office Bulgaria
Lack of structural reforms aimed at boosting competi-
tion in agriculture, electricity, gas and water, railway trans-
port and postal services, makes it easy for the producers to
transfers all cost related pressure to end-customers. The
situation looks very similar also in the ailing health care and
education sectors, which are also among the sources of
inflationary pressure in the economy. Elevated pay pres-
sure (average wages increased by 17% in Q1 2007 and
18% in Q2 2007) and the robust expansion of money and
credit aggregates were also too high to have had no impact
on price stability.
Nevertheless, inflationary pressure should moderate
somewhat towards the end of the current year. However,
causes for unabated price pressure remain broadly based
and often structural in nature, which highlights the funda-
mental case for persistently high inflation in the forthcoming
periods.
We forecast average CPI (measured according to the
national methodology) to slow down gradually to 5.6% in
2008 and further to 4.2% in 2009. Anchoring inflationary
expectations will be challenging. It will require a sustained
restrictive fiscal and monetary policy, while reinvigorating
restructuring efforts aimed at expanding the role of the free
market and competition in the sectors, where reforms have
lost momentum in the last couple of years.
External imbalances widened amidst persisting
problems with quality of foreign trade data col-
lected through the INTRASTAT system
In January-July, the year-to-date CA gap expanded by
74% yoy, reaching 10.5% of projected full-year GDP. The
deterioration was entirely attributable to the widening of the
foreign trade shortfall, which increased by 31% in compari-
son with the same period last year. Merchandise exports
posted annual growth of 8.6%, which, however, was out-
paced by an even stronger increase in imports of 18.8%.
On the positive side, the year-to-date net services bal-
ance recorded a 40% increase, which was attributable
above all to the 18% growth in sales receipts from interna-
tional tourism. Accordingly, the coverage net services pro-
vides to the merchandise trade gap remained little changed
at around 20%. Net incomes reported a marginal deteriora-
tion, since the improved compensation of employees fell
short of balancing the combined effect of raising profit repa-
triation and higher debt servicing costs. Net current trans-
fers were almost flat, when compared with the last year, as
rising remittances from emigrants counterbalanced the
contribution payments in favour of the EU common budget.
On the financing side, net FDI edged up by 12% yoy
reaching 9.4% of projected full-year GDP, while BNB re-
serves increased almost in the same proportions as a year
ago (+ EUR 933 million), fuelling money supply and credit
aggregates.
Real Estate Country Facts
November 2007 / Page 5
Current account deficit (in % of GDP)
-30
-25
-20
-15
-10
-5
0
5
10
2001 2002 2003 2004 2005 2006 Aug`
2007
Trade Balance
Services Balance
Income Balance
Transfers Balance
Current plus Capital Account Balance
Source: Bulgarian Central Bank
This year, a moderate deterioration in the CA balance
to 17.6% of projected GDP is forecast. It should be noted
though that the quality of foreign trade statistical data col-
lected through the INTRASTAT system remains question-
able. Therefore, partial data released so far and any projec-
tions based thereon are subject to potentially sizeable revi-
sions in the months to come. Nevertheless, we remain
more optimistic for the CA prospects in 2008. New produc-
tion capacities added in the tradable goods sectors, begin-
ning to utilize EU structural funds and a slowly improving
business environment will help to ease the CA mismatch to
16.8% of projected GDP.
Summary
• Our baseline scenario for the period 2007 - 2009 envisage strong GDP growth accompanied by a moderate easing
of the CA gap and inflation, still far from the level which will qualify Bulgaria for euro adoption.
• The authorities need to press ahead with reforms geared to increase the resilience of the labor market, in order to
compensate for the lack of flexibility of exchange rates under the Currency Board Arrangement (CBA). It will be
crucial to reinvigorate restructuring measures aimed at boosting competition in sectors where inflationary pressure
persists, while also making more effective use of EU funds to develop human resources and encourage a moderni-
zation of the economy.
• One immediate challenge for the government and its social partners is to avoid excessive growth in wages in the
public sector, threatening competitiveness and macroeconomic stability. Wage increases need to be put in the con-
text of further productivity growth and progress in implementing restructuring efforts.
• If left unreformed, ailing health care and education sectors will continue to be a long-term risk for the fiscal sustain-
ability, a source of price pressure and a major cause for public frustration.
Real Estate Country Facts
November 2007 / Page 6
EU speculations boost real estate market Bulgaria's economy is benefiting strongly from EU ac-
cession. The net inflow of direct investment soared in the run-up to accession and in 2006 reached a good EUR 4 billion or 16.4% of GDP. Around one third of FDI to Bulgaria found its way into the real estate sector. If the funds that flowed into construction are included the figure rises to 45%. This year direct foreign investment seems to be stay-ing high. In the first six months 2007, FDI into Bulgaria totalled more than EUR 2 billion, with almost 50% of this targeting the real estate and construction business. This dynamic development has resulted in a tangible shortage of skilled construction workers and powerful surges in con-struction costs.
In the latest "Doing Business 2008" report of the World Bank, which is an important indicator of the investment climate in a country, Bulgaria managed to move up to posi-tion 46, slightly ahead of Romania.
Doing Business 2008
Country Ranking
Singapore 1
Estonia 17
Georgia 18
Latvia 22
Austria 25
Lithuania 26
Slovakia 32
Hungary 45
Bulgaria 46
Romania 48
Source: World Bank
Having a healthy investment climate is crucial to the
sustainability of economic growth. Yet in spite of the im-provements achieved, inadequate legal and administration conditions in particular still continue to be problematic. Major reform efforts are still required after EU accession as well.
Against this background, the market for commercial real estate is booming; yield compression is strong, though in this respect the country does somewhat lag behind Ro-mania, the other new EU member.
Key figures 2006
Bulgaria Romania
Area of country in 1,000 km2 110.9 238.4
Population in million 7.7 21.6 Gross domestic product
in EUR billion 25.1 97.2
GDP per capita in EUR 3,270 4,500
Top yields (midyear 2007)
Office in % 7.5 6.5
Retail in % 8.5 7.5
Logistics in % 9.0 8.0 Source: UniCredit Group New Europe Research Network, IRG, BA-CA Real Estate
When reflecting on future yield development one should not forget the higher risk represented by Bulgaria and Romania in comparison to the "more mature" econo-mies of the EU. The crisis on the US sub prime mortgage market has led to a worldwide dip in risk appetite, with fundamentals coming increasingly to the fore again. There-fore, in addition to market risk, the quality of construction of buildings especially is becoming a hot topic. So far, invest-ment demand is still high outstripping supply. Forward purchases of new developments in Sofia or in other large Bulgarian towns and cities remain common. Nevertheless, the behavior of investors is likely to undergo gradual change. One can assume that short-term investment strategies will become less popular as the potential for yield compression declines.
One of the most significant deals so far was the sale of Business Park Sofia in the south of the city for a reported EUR 180 million and an alleged yield of around 7.0% to a US investment fund.
Source: Colliers, IRG, BA-CA Real Estate
Office prime yields
0
1
2
3
4
5
6
7
8
9
10
Kiev
Moscow
Istanbul
Sofia
Bucharest
Warsaw
Praha
Budapest
%
Real Estate Country Facts
November 2007 / Page 7
Supply of office space is rising steadily
By mid-2007 the supply of office space in Sofia had in-
creased to 600,000 m2. DTZ estimates approximately
160,000 m2 of this can be classed as modern offices.
Classes B and C are primarily found in the city centre of
Sofia, while class A is offered principally in the newly de-
veloped office complexes along the main roads heading
into the city.
The rents for class A office space range from EUR 12
to 23 m2/month, whereby the best prices are obtained for
modern offices in central locations. Under strong demand
the vacancy rates have been relatively stable, averaging
out at 5% in the first six months of 2007, with the recorded
figures being lower in central locations.
The next few years will see some new office space
make its way onto the market. According to Colliers there is
some 450,000 m2 of space already under construction. The
majority should be completed between 2008 and 2011.
Source: Colliers, BA-CA Real Estate 1) Data for 2006
Most of the new developments are found along and
around the main roads leading into the city as well as
around the southern part of the ring-road. Large, multi-
purpose projects also containing office space are being
built as well, especially in the area around the airport. De-
velopment in the central business district (CBD) on the
other hand is hampered by the difficult traffic conditions and
the lack of suitable space for new developments.
There is also a whole range of office building projects
underway in the other large towns and cities of Plovdiv,
Varna and Burgas. The rents are on average about 30%
below what one can expect to achieve in Sofia.
The demand for modern office space is driven primarily
by international companies who are already present on the
market and want to expand or relocate their offices. Also
smaller Bulgarian firms who still often use converted
apartments as their offices are likely to move gradually into
more modern premises in the future. These developments
will contribute to an adjustment of the office market.
Yields have fallen sharply in recent years. While top
yields in Sofia two years ago still reached 10%, they cur-
rently amount to below 7%. Although there is still some
potential for further decreases, quality aspects of real es-
tate portfolios should become increasingly important.
Source: Colliers, BA-CA Real Estate
Shopping centre boom
Robust growth in salaries and a strong labour market
are fuelling the development of the retail trade in Bulgaria.
Although the gross domestic product (GDP) has risen pow-
erfully in recent years, the country still has a lot of ground to
make up as far as purchasing power is concerned. Per
capita GDP rose by EUR 433 in 2006 to EUR 3,270. In
Austria, by comparison, the corresponding figure amounts
to EUR 30,960.
Source: UniCredit Group New Europe Research Network
With a declining population the demographic structure
of Bulgaria is not too healthy. Nonetheless, Sofia in particu-
lar is managing to buck the trend. On account of migration
from rural areas the city is growing. Bottlenecks in infra-
Office space per capita
midyear 2007
0,00
0,20
0,40
0,60
0,80
1,00
1,20
1,40
1,60
1,80
2,00
Praha
War
saw
Bratis
lava
Bud
apes
t
Tallin
n
Mos
cow
Zagr
ebSof
ia
Buc
hare
st 1
)
Belgr
ade
Viln
ius
Kiev
Riga
Ista
nbul
sqm
Office space/capita Office space plus space under construction /capita
GDP per capita
0
2000
4000
6000
8000
10000
12000
Cze
ch R
epub
lic
Hun
gary
Slova
kia
Polan
d
Rus
sia
Rom
ania
Turke
y
Bulga
ria
Ukr
aine
in EUR
Spitzenrenditen im Bürobereich
Sofia
0
2
4
6
8
10
12
14
16
18
2002 2003 2004 2005 2006 1.Hj.2007
in %
Real Estate Country Facts
November 2007 / Page 8
structure rear their heads on a daily basis. Although there
are ambitious development plans for roads (e.g. upgrading
of the ring-road) and public transport (e.g. extension of the
underground system), subsequent action is slow.
The traditional shopping street in Sofia is the Vitosha
Blvd. Rents there fetch between EUR 40 and 150
m2/month. Many shoppers are also to be found on Graf
Ignatiev St., Rakovski St., Patriath Evtimii Blvd., Solunska
St. and Alabin St. Vacancy rates are very low. High street
development is hindered due to the limited building oppor-
tunities coupled with the transport and parking problems.
By contrast, the shopping center (SC) sector is making
dynamic progress. In 2006 the first three shopping centres
were opened in Sofia. The "Mall of Sofia" with its approxi-
mately 35,000 m2 of retail and entertainment space, the
"City Center Sofia" with its roughly 20,000 m2 and the "Sky
City Center" with around 15,000 m2 of space. These new
malls conform to international standards without exception,
accommodating global brands in the areas of both retail
and gastronomy.
There are other large and ambitious SC projects being
built or currently being planned. The new Carrefour Mall will
have lettable space in excess of 60,000 m2. The "Bulgaria
Mall" will be completed on Bulgaria Blvd by the end of 2009
with approximately 50,000 m2 in retail space and an office
tower. In summer 2007 the construction of the "Serdika
Center" began, which in addition to having about 50,000 m2
in retail space will also accommodate offices over a further
35,000 m2. A similar project, the "Olympian Mall" is being
built on Europa Blvd, which will offer roughly 45,000 m2 in
retail space and offices.
Existing shopping centers in Sofia
Name Opened Area to let in m2
TZUM 1999 19,000
Mall of Sofia 2006 35,000
City Centre Sofia (CCS) 2006 20,000
Sky City Center 2006 15,000
Source: IRG, Colliers, DTZ
Even bigger, multi-purpose mega-projects are in the
pipeline. If all these projects are actually realised they will
increase the available shopping centre space four-fold.
Retail space per capita, which in Sofia amounts currently to
0.07 m2, would rise to 0.30 m
2 as a result.
SCs under construction or planned in Sofia
Name Opening Area to let in m2
Carrefour Mall 2009 66,000
Serdika SC 2009 52,000
Bulgaria Mall 2009 50,000
Riofisa Project 2010+ 80,000
Olympian Mall 2010+ 45,000
Akropolis 2011+ 120,000
Source: IRG, Colliers, DTZ
The shopping centre sector is moving in Varna and
Plovdiv too with new openings planned this year and next.
And other provincial towns with 40,000 to 150,000 resi-
dents (e.g. Pleven, Stara Zagora, Dobrich, Sliven, Haskovo
Montana) appear on the "to-do" lists of developers and
investors as well. Shopping centers are set to open their
doors here in the coming years too. All in all, there are five
big cities and 40 smaller towns which are interesting for
retail development.
Shopping centers outside Sofia
City Name Ope-
ning
Area to let
in m2
Plovdiv Grand Trade Center 2006 12,000
Plovdiv Galeria Plovdi 2008 n.a.
Plovdiv Mall Plovdi 2008 20,000
Plovdiv Riofisa Mall 2009+ 54,200
Varna Mall Varna 2008 25,000
Varna Pfohe Mall 2008 17,500
Varna Central Plaza 2007 n.a.
Varna Orchid Mall Varna 2009 45,000
Varna Eternity SC 2009+ n.a.
Varna Varna Mall Towers 2009+ n.a.
Rousse Mall of Rousse n.a. 27,000
Veliko Tamovo Central Mall 2006 16,000
Stara Zagora Mall Stara Zagora 2008 20,500
Source: IRG, Colliers, DTZ
Logistics projects benefit from planned infra-
structure development
Five EU transport corridors traverse Bulgaria, which
are to be developed with the support of EU funding. Ac-
cording to King Sturge's "European Industrial Property
Markets 2007" report, a good many towns and cities in
Bulgaria will profit from the development of infrastructure. In
Real Estate Country Facts
November 2007 / Page 9
terms of expected growth in transport and traffic volume the
cities are ranked in the following order: Varna, Plovdiv,
Pleven, Burgas, Sofia and Vidin.
However, the inadequate legal and administrative con-
ditions that prevail in Bulgaria still could hinder investments.
Administrative bottlenecks in particular could lead to only
parts of the planned EU funding for infrastructure develop-
ment being made available.
The international airports in Sofia and Varna have al-
ready been modernised and expanded. The strong growth
in tourism has prompted no-frills airlines like Sky Europe for
example to fly regularly to Bulgaria. The key ports on the
Black Sea, Varna and Bourgas, are to be modernised and
developed. Although the ports on the Danube such as
Rousse and Lom are part of the EU transport corridor de-
velopment programme, there have yet to be any noticeable
investments.
The stock of logistics objects in Sofia is estimated by
Colliers at 1.2 million m2. Rents for old adapted premises
range from EUR 1.5 to 4/m2/month.
Modern logistic space
achieves between EUR 3.5 to 5.0/m2/month. One of the key
projects in Sofia is the Sofia Airport Center (SAC) with
space of 165,000 m2. Here, a class A business park is
being built. Locations along the Sofia ring-road would also
be suitable for logistics projects, were it not for the high
property prices that hinder development.
In addition to Sofia, the cities of Varna and Plovdiv
have also proved to be attractive locations for logistics
projects. Speculative areas are increasingly being offered
in industrial zones.
Motorway projects in Bulgaria
Motorway End points Total
km
Planned
completion
Hemus Sofia-Varna 433 2012-2013
Cherno More Varna, Bourgas 103 2012-2013
Trakiya Sofia-Bourgas 368 2012-2013
Struma Sofia-Greek border n.a. 2012-2013
Maritza Plovdiv-Turkish
border 114
2009
Lyulin Sofia ringroad-
Trachiya 19 2009
Source: DTZ
Summary
The commercial real estate market in Bulgaria:
• EU opportunities are stimulating foreign direct investment towards Bulgaria. This is benefiting not least the real estate and
the construction sectors. In 2006 and in the first half of 2007 almost 50% of all investment flowed into these two areas.
• There has been a strong yield compression in recent years, and there is still some downward yield potential. Nevertheless,
the crisis on the US sub prime mortgage market has led to a worldwide dip in risk appetite, with fundamentals coming in-
creasingly to the fore again. In addition to market risk consideration especially the quality of buildings is becoming a topic.
• Important office locations in Sofia are cropping up along the main roads into the city. Further development of the central
business district (CBD) is undermined by the lack of suitable areas and difficult transport conditions.
• The shopping center market is booming. In 2006, three shopping centers meeting modern standards opened their doors in
Sofia, and there are more large-scale projects either under construction or on the planning table. The SC boom has not by-
passed the larger provincial towns and cities either. Developers and investors are increasingly training their sights on small
and medium-sized towns.
• The field of logistics is also benefiting hugely from the opportunities provided by EU accession. Infrastructural development
is a key driving force here.
Real Estate Country Facts
November 2007 / Page 10
Contacts:
Bank Austria Creditanstalt AG
International Real Estate Finance
Vordere Zollamtstraße 13
A-1030 Vienna, Austria
Teresa Dreo
Tel: + 43 (0) 50505-55333
E-mail: [email protected]
Anton Höller
Tel: + 43 (0) 50505-55980
E-mail: anton.hö[email protected]
Real Estate Research
Karla Schestauber
Tel: + 43 (0) 50505-54784
E-mail: [email protected]
UniCredit New Europe Research Network
CEE Economic Research
Via Tortona, 33 – 20144 Mailand
Fabio Mucci
Tel: + 39 (0)2 4762-4055
E-Mail: [email protected]
UniCredit Bulbank
Real Estate Finance
7, Sveta Nedelq.Sq.
BG-1000 Sofia
Martin Gikov
Tel: + 359 2 9269 427
E-mail: [email protected]
Planning and Control Division, Economic Research Unit
1, Ivan Vazov Street
BG-1000 Sofia
Kristofor Pavlov
Tel: + 35 929 269390
E-mail: [email protected]
Katerina Topalova
Tel: + 35 929 269390
E-mail: [email protected]