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BULGARIA

Industrial Market
Snapshot
Fourth Quarter | 2018

MARKET INDICATORS Overview


Market Outlook Strong domestic demand appeared to be the main driver of
Prime Rents: Remain unchanged at €4 euro/sq.m Sofia’s industrial property market during the last year. The
increasing need of storage space resulted in development of a
Prime Yields: Slightly decreased to 8.5% at the end of 2018, number of speculative and built-to-suit projects. Countrywide
projected to remain stable
the automotive industry underpinned the demand of production
Supply: Steadily increasing stock, mostly by owner-occupied space.
and built-to-suit space
Demand: Logistics and retail sectors are main drivers of the Occupier focus
leasing market
With the completion of 126,600 sqm logistics and production
Prime Industrial Rents – December 2018 space 2018 was the second strongest period for the Sofia’s
LOGISTICS LOCATION € € US$ GROWTH % market over the last ten years. The new deliveries increased
SQ.M SQ.M SQ.FT 1YR 5YR total stock to 1,075,468 sqm, still with solid dominance of built-
MTH YR YR CAGR
Sofia 4.00 48.0 5.08 0.0 2.7
to-suit and owner-occupied schemes. The logistics center of the
Austrian 3PL operator Cargo Partners, which provided roughly
Prime Industrial Yields – December 2018
17,000 sqm in the east part of Sofia, was the largest new
LOGISTICS LOCATION CURRENT LAST LAST 10 YEAR
(FIGURES ARE NET, %) Q Q Y HIGH LOW delivery in the last quarter of 2018. Along with the logistics,
Sofia 8.50 8.75 9.00 13.00 8.50 courier and retail companies, data center operators are
With respect to the yield data provided, in light of the changing nature of the market and the costs implicit in increasing their market presence with the new project of Equinix
any transaction, such as financing, these are very much a guide only to indicate the approximate trend and
direction of prime initial yield levels and should not be used as a comparable for any particular property or exemplifying the trend. Speculative supply expanded by 51,763
transaction without regard to the specifics of the property.
sqm over the year with Phase 1 of Industrial Park Sofia East
Recent performance
and the partial reconstruction of Industrial Park Rozhen 41
Yield - Prime Rental Growth - Prime among the largest contributions. Although half of the new
18.00% 10.0%
leasable area was pre-let, the vacancy rate slightly increased to
Rental growth (y/y)

0.0%
13.00% 3.5% in the last quarter. Since some large-scale tenants invest
Yields

-10.0% in their own premises, the vacant speculative space is forecast


8.00%
-20.0% to grow further to approximately 5% in the present year. The
3.00% -30.0% later will stabilize the headline rents at €4-4.20/sqm/month for
Dec-08 Dec-10 Dec-12 Dec-14 Dec-16 Dec-18
medium to big-size storage space in Sofia.
Countrywide, the market is driven mostly by automotive sector’s
investments in production space. The lack of suitable brownfield
opportunities shifts the focus on acquisitions of development
land.

Investment focus
Despite the investors’ attention to the industrial market, a limited
number of acquisitions were closed in 2018. Prime yields posted
slight decrease to 8.5% at the end of the year. Construction land
in the industrial areas and the outskirts of the big cities is in high
demand for industrial projects development.

Outlook
With 190,000 sqm under construction as to the end of 2018 the
Sofia’s industrial market gradually overcomes the shortage of
modern space. Rents and yields are projected to remain stable
in the short term.

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