Bulgaria is a country where prices and asset values have to adjust in response to imbalances around a fixed currency peg. In our interviews with in-country sources at the beginning of 2010, we learned that rents had fallen by around one-third in all three sub-sectors and in all three of the cities for which we have gathered data - Sofia, Bourgas and Varna - since early 2009.
Pessimists indicated that further decreases in rentals were likely through 2010. Bulgaria remains in the grip of a long and deflationary recession, characterised by weakness in investment, net government spending and - in particular - consumption. Consumer sentiment and spending is likely to stay soft as unemployment remains high. Only a major devaluation of the lev relative to the euro (to which the currency is currently pegged at a rate of 1.96) could change the dynamics of the economy. However, as yet, such a devaluation has not taken place.
The implication of all this is that Bulgaria is a country where there is unlikely to be substantial supply of new office, retail or industrial space over the coming years. Some of our in-country sources also suggest that the lack of greenfield development sites represents a constraint on new supply. However, demand for new space is likely to remain weak.
Our interviews in mid-2010 indicated that rents had tracked sideways. The impact of softness in demand had been offset by the effect of restricted new supply. There had not been a wholesale fall in capital values. Surprisingly, our in-country sources are looking for modest rises in rents in Sofia and Varna. Looking forward, we expect that rental yields will continue to track sideways over the next year or so, as movements in rents are matched by changes in capital values. From 2010, though, yields should start to rise. In our forecast scenario, we expect that rental yields for office space in Sofia will rise relative to yields for other sub-sectors.
Key Features Of This Report
This is the latest edition of a new series of industry reports published by BMI that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. The questions that we seek to answer for each country remain as follows: What are the main issues for actors in and around real estate development in the country concerned, over both the long and the short term? What are the main constraints that they face? What are the key insights to be gleaned by comparing the real estate sector of a country with its regional peers?
In Q3 we introduced a very substantial improvement to our reports. We incorporated data and qualitative observations provided to us by commercial real estate agents operating in the countries we survey. As a result we have gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors - office, retail and industrial. We have also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology section of this report.
In Q4, we have incorporated a lot of new data in relation to rents and yields in 2010. We gained this data through a new round of interviews with our in-country sources in mid-2010. In some cases, the latest information from our sources has caused us to make significant revisions to our forecasts for 2011-2014. We asked our sources to indicate what growth in rents is likely for 2011. We explain their answers in the Forecast Scenarios.
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Partial Table of Contents:
Executive Summary
SWOT Analysis
- Bulgaria Real Estate/Construction SWOT
- Bulgaria Economic SWOT
- Bulgaria Business Environment SWOT
Regional Real Estate Overview
- Table: Central And Eastern European Office Markets At A Glance - Rents, 2009-2011 (EUR per m2 per month)
- Table: Central And Eastern European Retail Markets At A Glance - Rents, 2009-2011 (EUR per m2 per month)
- Table: Central And Eastern European Industrial Markets At A Glance - Rents, 2009-2011 (EUR per m2 per month)
Real Estate Market Overview
- Table: Bulgaria's Real Estate Market - Rentals, 2008 And 2009 (mSq/month, EUR)
- Table: Bulgaria's Real Estate Market - Net Yield, 2008 And 2009 (%)
- Table: Bulgaria's Real Estate Market - Terms Of Contract/Lease
- Table: Bulgaria's Real Estate Market - Available And Vacant Space (mSq)
Forecast Scenario
- Table: Bulgaria's Real Estate Markets - Rentals, 2008-2009 (EUR, mSq/month)
- Table: Bulgaria's Real Estate Markets - Net Yield, 2008 And 2009 (%)
- Table: Bulgaria's Real Estate Markets - Terms Of Contract/Lease
- Table: Bulgaria's Real Estate Markets - Available And Vacant Space (mSq)
- Table: Bulgaria's Real Estate Markets - Rentals, 2009-2011 (EUR, mSq/month)
- Table: Bulgaria's Real Estate Markets - Net Yield, 2008-2014 (%)
- Bulgaria's Construction Outlook
- Table: Construction Industry Data And Forecasts, 2007-2014
- Bulgaria's Macroeconomic Outlook
- Table: Bulgaria - Economic Activity, 2007-2014
Business Environment
- Real Estate/Construction Business Environment Rating
- Table: Europe Real Estate/Construction Business Environment Rating
- Bulgaria's RECBER
- Table: Design And Construction Rating
- Table: Commissioning And Operating Rating
- Table: Central And Eastern Europe Overall Project Finance Rating
- Bulgaria's Business Environment
- Table: BMI Business And Operational Risk Ratings
- Table: BMI Legal Framework Ratings
- Table: Annual FDI Inflows Into Central And Eastern Europe And Central Asia
- Table: BMI Trade Ratings
- Table: Bulgaria's Top Export Destinations, 2001-2008 (US$mn)
Company Monitor
- Balkanstroy JSC
- Equest Balkan Properties (EBP)
- Glavbolgarstroy
- Holcim (Bulgaria)
- Landmark Property Management
- Mott MacDonald
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