SNAPSHOT OF SOFIA'S REAL ESTATE MARKET BY COLLIERS

The yields in the main segments of the property investment market in Bulgaria remain stable, shows the latest report of Colliers, a consulting company. The paper surveys the real estate market in Sofia in the third quarter of 2023. According to it, yields stand at 7.75% for offices and retail, 7.5% for industrial, and 4% for residential properties. The total investment volume has reached nearly 150 million euros, of which about 84 million euros are income-generating assets.

In the office segment, the average rental rates in the capital also remain consistent. They are 14 euros per sqm per month for Class A offices and 10 euros per sqm per month for Class B. At the time of Colliers' data publication, there were 269,900 sqm under active construction, with 78,500 sqm of gross leasable area and vacancy rates of 12.7% for Class A offices and 13.4% for Class B.

For flex offices in Sofia, the average rent for a dedicated desk is 180 euros per sqm per month, while for a hot desk it is 150 euros per sqm per month. The existing supply amounts to 82,200 sqm, with an additional 9,850 sqm expected to be introduced to the market. There are 64 flexible workspace operators offering a total of 8,640 workstations. The overall flex office market, compared to Class A and B standard offices, represents 3.5%.

In the industrial property segment, there is an increase in rental rates, reaching 5.25 euros per sqm per month for Class A properties and 3 euros per sqm per month for Class B. The existing supply includes 1,334,800 sqm of completed ready to use space and 117,100 sqm under construction. Gross leased areas are 38,800 sqm, with an increased vacancy rate of 4.3% compared to the previous quarter.

Prime rents in shopping malls have increased to 40 euros per sqm per month. The same trend is observed on highstreets, where the indicator reaches 56 euros per sqm per month. Retail parks maintain their rents at 10 euros per sqm per month. There are no new projects planned in the shopping center segment, but 7,900 sqm of retail parks are under construction. The vacancy rate is decreasing, with 3.6% for shopping malls, 1% for highstreets, and less than 1% for retail parks.

High and upper-middle-class residential units offered on the Sofia market total 15,000, with an additional 5,060 under construction. The average offer prices for a two-bedroom apartment range from 180,000 to 230,000 euros, for a rowhouse, it's between 320,000 and 450,000 euros, and for a single house, it's above 486,000 euros. Rent for a two-bedroom apartment can range from 1,000 to 1,300 euros per month, while for a house, it's over 2,150 euros per month.

By the end of 2023, Colliers does not expect significant changes in the real estate market in Bulgaria. The country is still expected to maintain significantly better market stability compared to Central and Western Europe, where investment volumes have decreased by approximately 50% compared to 2022. Here the low level of debt and low interest rates help keep the market in excellent shape. In 2024, it is possible for the dynamics to change, including for Bulgaria. If this happens, it is likely to occur more through user markets (the dynamics between tenants/end users of properties and property owners) rather than through capital markets.

Colliers (NASDAQ, TSX: CIGI) is a leading company for professional services and investment management in real estate. It has offices in 65 country and over 18,000 people work for it globally, offering expert consultations to tennants, owners and investors on how to increase the value of their properties. For over 30 years now, Colliers' team of leaders has helped for achieving annual return rates of investment up to 20%. In 2021, the corporate incomes reached $4.6 billion, and the value of the investment assets managed by Colliers was $92 billion. For more information and news, follow Colliers on corporate.colliers.com, X (former Twitter) @Colliers and LinkedIn.