There was little new supply in the industrial market in Bulgaria during the second half of 2007, but several larger projects are expected to start delivering new space in the first half of 2008, Colliers International latest report says.
"Only Romania has a developed industrial property market with functioning industrial parks. In Bulgaria this segment is immature," says Atanas Garov, managing director of Colliers.
Bulgaria's first logistic park broke ground in Varna in H1 2007, while Industrial Park Sofia East concluded its first transactions in November. Industrial Park Plovdiv is also underway.
The industrial segment development is closely linked to retail property development, considering that demand for warehouses and logistic space comes mainly from logistic operators and retail chains.
The current inventory of modern industrial premises in Sofia amounts to 1 200 000 sq m, mostly built-to-suit and owner-occupied. Speculative space is still under-supplied, amounting to approximately 165 000 sq m in Sofia.
Almost half of all industrial facilities, 46 per cent, are warehouses, predominantly located within the city, while 25 per cent are manufacturing and 29 per cent flex-type buildings.
There was a relatively low supply of new space in the second half of 2007 to meet growing demand. Part of the new deliveries was still formed by small (1 000 sq m - 2 000 sq m) owner-occupied or build-to-suit properties located in separate areas (such as Lozen, Mramor and Lokorsko).
Currently, the largest industrial areas in Sofia and surrounding areas are Druzhba/Gara Iskar, Sofia Airport, Vrazhdebna, Gorublyane and Bozhuriste. With the exception of Sofia Airport, which mainly comprises owner-occupied facilities, these are old industrial zones. The market is still rather fragmented and lacking in compound projects built to contemporary standards.
The existing speculative inventory meeting modern standards remained unchanged in the second half of 2007. It is currently estimated at 165 000 sq m. A total of approximately 70 000 sq m is under construction (of which 22 500 sq m is speculative) and will be delivered in the first half of 2008.
Due to the lack of significant supply of contemporary industrial space, the vacancy rate in Sofia remains very low, about three per cent. Rental rates retained the same levels in all markets as in the first six months of 2007. Only in Sofia did secondary rents go up slightly - to four euro a sq m (from 3.5 a sq m in H1 2007), driven by the shortage in the supply of high quality industrial space.
Prime rents remained at the same level compared to the first half of 2007 and are expected to remain stable throughout H1 2008.
