Real estate sector in Bulgaria

21 Apr 2011 • by Natalie Aster

SeeNews, a business information provider for Southeast Europe, has published the report “Real estate sector in Bulgaria”. In 2010 the Bulgarian real estate market continued to be under the pressure of the global economic downturn but showed first signs of recovery. The residential market went down on an annual basis in terms of issued building permits, completed residential buildings and price levels. However, the number of residential property deals started to grow with real estate agencies reporting a twofold growth in January 2011.

The number of building permits for the construction of residential buildings went down by 23.9% on the year in 2010. An annual drop of 43% was registered in the number of completed residential buildings in 2010. In the four major cities – Sofia, Plovdiv, Varna and Burgas the prices of homes fell by between 10% and 19%. The total office area in Sofia grew by 28% year-on-year in 2010 with the fourth quarter of the year registering a record high delivery of office space, according to real estate agencies data. The oversupply of office area raised vacancy levels and pushed down rents.

In 2010 retail space supply in Bulgaria grew almost five times compared to 2009 as large shopping centres opened doors in all major Bulgarian cities. The vacancy levels stood at between 5.0% in Sofia to 24% in the other largest cities with rent levels going down in all locations. Modern industrial space in the Sofia area reached 538,551 sq m and more than 115,000 sq m were under construction at end-2010. Demand for logistics space was driven mainly by distributors of Fast Moving Consumer Goods (FMCG) and pharmaceutical companies.

The combined land portfolio of Bulgarian real estate investment trusts (REIT) stood at 87,200 ha with almost all of them reporting a net profit in 2010. In 2011 the Bulgarian real estate market will continue to recover as market representatives expect transactions across almost all of its segments to increase, driven by the expected improvement of the country's macroeconomic and microeconomic indicators.

Report Details:

Real estate sector in Bulgaria
Published: April 2011
Pages: 29
Price: US$ 360.00

Report Sample Abstract:

Bulgaria's gross domestic product climbed 2.1% on the year to EUR 36.081 bln in 2010, according to preliminary estimates of the National Statistical Institute (NSI). According to a NSI survey among managers from the construction, retail trade and services sectors, the overall business climate indicator in February 2011 increased by 2.7 percentage points compared to a month earlier.

In 2010 a total of 4,891 building permits for the construction of residential buildings were issued in Bulgaria, down by 23.9% in comparison to 2009, according to the National Statistical Institute (NSI). In terms of total built-up area, the annual drop was 37.1%, reflecting a greater demand for one- and two-bed flats.

In 2010 the construction of a total of 2,615 residential buildings was started, NSI data showed. This number was much lower than the number of issued building permits for residential buildings due to the fact that many construction entrepreneurs failed to provide the necessary funding and decided to put on hold or sell their projects. The highest annual drop among the largest Bulgarian cities was registered in Ruse, where the number of completed residential buildings more than halved to 34 in 2010. In 2010 the total useful area of the newly completed homes stood at 1.194 million sq m, down by 25.9%, compared to 2009 and reaching the level in 2006.

Market experts forecast new players to enter the market in 2011, bringing additional investments in the sector and will define its development in the medium term. According to a Colliers survey carried out among more than 5,000 local companies in the second half of 2010, a total of 53% of the respondents see the general outlook for business in Bulgaria in 2011 as positive compared to 2010, while only 21% were optimistic in the first half of 2010.

Demand on the residential market in Sofia is expected to increase in 2011 as the city continues to receive migrants from other parts of the country. Market representatives expect stable prices and a rise in the number of deals on the Bulgarian residential property market in 2011. Experts also forecasts that from end-2011 to mid-2012 residential prices will rise between 2.0% and 5.0%.

The expected recovery of the residential market will boost the investments in the segment and residential properties with a total built-up area of between 2,000 sq m to 3,000 sq m could be delivered to the market in the second half of 2011. The high street segment in Bulgaria's largest cities is expected to make a come-back and discount retailers will continue to be active in 2011. The large international players will stick to their expansion plans, while the local and smaller operators will be more cautious, focusing on optimizing costs. Demand will be fuelled mainly by convenience stores, low-end fashion retailers and non-food hypermarkets.

Several projects in Bulgaria's major cities are expected to add more than 184,000 sq m of retail space in 2011, according to local real estate companies. In the first half of 2011 the vacancy rate in Sofia is expected to remain at 5.0%, while in the other major cities it will range from 10% to 30%. Attracting tenants will remain the most difficult challenge in 2011 and will determine the opening dates of the projects in the pipeline with office vacancy rates seen at 32%. The growing vacancy rates will push rents further down. The transactions on the Sofia office market are expected to increase in 2011 because of the high number of expiring lease contracts, according to real estate agencies.

In Sofia, office projects with a total area of 150,000 sq m are scheduled for completion in the first half of 2011. Market experts see no major boost for the development of the logistics market in the first half of 2011. The major projects to be completed in the first quarter of 2011 include the logistics and distribution centre of Belgian food products distributor Univeg. The centre, located in Musachevo village, near Sofia, will deliver 8,000 sq m of industrial space to the market. The other major projects are the A6 building of Logistics Park Varna with a total built-up area of 10,000 sq m and Logistics Park Ruse, spreading on a 53,676 sq m plot near Ruse, on the Danube.

More information can be found in the report “Real estate sector in Bulgaria” by SeeNews.

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