Companies from the high-tech sector have emerged as the new stars of the commercial real estate market in 2024 with the completion of several landmark deals. Along with traditional players, they contributed to the stable growth of the market compared to previous years, with the volume of investment acquisitions during the year exceeding EUR 360 million.
Traditionally, for the Bulgarian market, buyers in the office segment remain the most active, where over 50% of the deals were concluded. In retail space, hotels and industrial properties, several large acquisitions were key, including property portfolios.
„We report as a positive trend the fact that local capital is active and creates liquidity in the market, which leads to over 60% growth in the investment volume for the current year compared to the previous one. The market remains driven by local players, but sectors that are in one way or another related to high technology and have accumulated significant capital over the years are strengthening their presence in it“, commented Yavor Kostov, Managing Partner of Cushman&Wakefield Forton.
According to his observations, key large investors are emerging in all segments of the market in the form of companies and groups operating in the local market. In industrial properties, these are CTP and Lion’s Head Investments, in retail spaces - – „Trinity Capital“ and „Videolux“. High-tech companies, such as Enduro Sat, Chaos Group and SiteGround have established themselves in various segments of the market, while in hotels, large hotel groups traditionally grow through acquisitions.
With regard to foreign capital, Cushman&Wakefield Forton observes signs of easing mainly in mature markets in Western Europe. Their orientation from Central to Eastern Europe will take at least a year or two and will depend mainly on how competitive financing conditions banks will offer and on the development of the market in the individual segments.
The market by segment
The rental activity for office space remains relatively good compared to previous years, the same can be said for the share of vacant space - around 15%. Looking deeper, however, the market is growing weakly and is mainly driven by contract renewals and relocations.
Against the backdrop of limited demand, supply is growing at modest volumes, and in 2024 it is not expected to exceed 60,000 sq m. This leads to relative balance in the market. However, next year, landmark projects are planned to be completed in the central part of Sofia and on the major boulevards. At the same time, a significant volume of new projects is taking shape in the Paradise Center and N.Y. Vaptsarov Blvd. area - some of them have been started, and others are in the pre-start phase with a building permit. This is a request for a serious volume of supply of modern office space in the coming years and a challenging market environment for older projects if demand does not recover.
In the retail space, construction activity continues in the retail park segment. The expectations are that in 2024 over 81,000 sq m will be completed, and in the following year - another 103,000 sq m. The growth of this type of space is determined by several factors - stable consumption and the desire of retailers to expand, as well as the gradual increase in rental levels.
While in the shopping centers the market is already in a mature phase and serious shifts are not expected, in the retail parks the consolidation of ownership is underway. With the ongoing construction of new areas, larger players are already emerging, developing projects under a common brand in different settlements. The expectations are that with the accumulation of a critical mass of competitive projects in the coming years, we will observe the weeding out of good projects, with good management and effective management of the areas being key to success.
In the industrial property segment, construction activity in and around Sofia is very active. Preliminary data indicate that the completed areas in 2024 will be around 200,000 sq m. m. This will probably be the third best result in the last 15 years. This activity is largely due to local enterprises, mainly engaged in retail trade (online and through physical sites) and distribution, as well as various manufacturing. The high construction activity in the sector is expected to continue in 2025.
Traditionally, in industrial areas in our country, sites for own use dominate. This is the situation in 2024 and the expectations for the next one. Medium-sized objects (under 10,000 sq m) dominate this year, but a reversal of the trend is expected in 2025 and an increase in completed areas over 10,000 sq m. This is largely due to the formation of large investors in the speculative segment of the market, who are developing their portfolios of logistics projects.
Detailed statistics on average property prices in Bulgaria by city and neighborhood can be found HERE