Office. Office supply in the region experienced significant increase in the second half of 2007. As of the end of 2007 Class A office inventory in Sofia stood at 369 600 sq m, in Bucharest – 608 200 sq m, and Belgrade – 244 200 sq m. The segment saw record absorption levels. Exceeding all expectations for 2007, in Sofia it reached 161 000 sq m. Leased and pre-leased space in Bucharest reached 203 800 sq m last year. Demand came from the IT sector, financial institutions and pharmaceutical companies, and was primarily driven by relocations and expansions rather than new market entries.
The pipeline of office space for 2008-2010 is significant across the region. Sofia currently has over 590 000 sq m of office space under construction. In H1 deliveries in Bucharest for 2008 are expected to be 200 000 sq m and in Belgrade by the end of the year – 175 000 sq m. Sofia and Bucharest experienced a decrease of vacancy, commanding record low rates of three per cent and 1-2 per cent respectively. In Belgrade 10 per cent of the class A CBD stock is unoccupied. Driven by high demand, average rent levels for CBD Class A space in the three capitals have increased, reaching 17 euro a sq m for Sofia, 18 euro a sq m for Bucharest and 20 euro a sq m for Belgrade.
Retail. The retail segment saw significant increase in supply across the region. The pipeline of planned deliveries in 2008 for Bucharest amounts to 253 000 sq m and Belgrade – 58 700 sq m. Although in Sofia there will be no shopping centres opening this year, in other parts of Bulgaria a total of 102 500 sq m will be completed. Despite the sizable pipeline of projects, overall market saturation is not imminent. Both in Bulgaria and Romania new retail formats are entering the market and second-tier cities are forming the next wave of development for shopping malls.
Currently, Belgrade has the lowest ratio of GLA/1 000 inhabitants in the region at 37 sq m, followed by Sofia – 61 sq m and Bucharest – 70 sq m. Based on significant plans for retail development, however, by 2009 the Bulgarian capital can reach as much as 185 sq m GLA/1 000 capita.
Logistic and Industrial. In the logistics and industrial segment, a genuine market exists only in Romania. Bulgaria is catching up with large-scale logistics parks, delivering build-to-suit and speculative space, which will shape the market. For 2008 the pipeline of contemporary industrial space is 190 600 sq m for Bulgaria and 310 000 sq m for Romania.
Vacancy in Bulgaria remained stable at three per cent, while Romania experienced a decrease to 7.5 per cent. Rents for prime space command relatively unchanged levels at 3.8 – 5 euro a sq m for Bulgaria, and 4 – 5.5 euro a sq m for Romania.
