News
• Group analysts expect another price drop of shopping area rents
• Increase in the vacant office buildings areas will persist
• Energy-efficient buildings will be in highest demand by business
During discounts season – in the mall again
Rents in Sofia’s shopping streets, which already suffered from the opening of malls in the recent years, will continue to drop, according to the latest report on the Bulgarian real estate sector development conducted by UniCredit analysts.
The report concludes that at the moment the monthly prices per square meter in the main shopping streets in Sofia vary between EUR 35 and 60 (according to the location), however, the tendency is towards further reduction and it is getting more and more difficult to find new tenants for the vacated premises. Thus in the discounts season, obviously clients will again flood the malls in stead of walking down the shopping streets they used to like.
In practice, the delay in the building of some projects (and the suspension of those at planning stage), triggered off by the world financial crisis, affected the market favourably. The completion of all planned shopping centers would have caused a glut on the market of such areas, the analysis pointed out. In 2009 no mall was opened in Sofia, but last year the opening of two big complexes – Serdika Center and The Mall reversed the tendency.
Thus within a couple of months the malls’ shopping area doubled reaching approximately 200 thousand sq.m. Additional increase is expected this year with the planned opening of Mega Mall that will add further 25 thousand sq.m. of shopping area. The total shopping area in the country as of end-2010 exceeds 500 thousand sq.m.
Despite tenants’ pressure, for the time being the mall rents remain relatively stable at levels between EUR 7-35 per sq.m. depending on the size of the store. The rental prices are stable as the current average vacant areas percentage remains small to moderate in Sofia’s operating malls. However, these prices may be challenged in the future as new areas are commissioned.
Regarding offices – energy-efficient buildings will be in demand
Despite the crisis, office areas, especially in Sofia, continuously increase. Last year alone the new office areas increased with more than 200 thousand sq.m. This logically leads to a lower occupancy rate and hence lower rents.
UniCredit’s analysts see potential for development in that segment only for those office building which have good energy efficiency and thanks to it can offer to their owners a good investment return rate of average rental levels around EUR 12 per sq.m.
The expectations published in the analysis are that international investors in real estate will turn their attention precisely to such high-quality projects.
This and next year the construction of new offices will considerably slow down.
Stalemate of logistics projects
Industrial real estate also suffered from the crisis. However, unlike the malls and the office buildings, the supply of new areas in logistics parks reacted faster to the decreasing demand.
Thus in 2010 new logistics projects were started only by companies that needed them. In the sector though there were practically no speculation-targeted projects.
Thus, as regards logistics parks, a paradox is seen – there are no actually good industrial areas and none are being built as unoccupied areas increased sharply - around 8.5% in 2010 compared to slightly above 4% in 2006.
According to data from mid-2010, the quality logistics areas are let out against a monthly rent of around EUR 4 per sq.m., and such in older buildings can be found at EUR 1.50-2.50 per sq.m. per month.
Contacts:
UniCredit Bulbank, Identity & Communications
Viktoria Blajeva, Tel: 0894 570 159, wjlj/ebwjepwbAvojdsfejuhspvq/ch
Ekaterina Ancheva, Tel: 0894 518 193, flbufsjob/bodifwbAvojdsfejuhspvq/ch