The first half of 2021 saw a 9 percent decline in the supply of properties in the medium and high segment under construction, compared to the second half of 2020, according to data from Colliers. Thus, they become a total of 3,560 housing units. The trend that began since the beginning of the pandemic continues, namely to reduce the number of projects starting construction, the company said.
During the period, an increase of 8 percent was reported in the completed new projects, with which the total supply in the segment slightly exceeds 12 thousand apartments, terraced and detached houses, which are concentrated mainly in the southern districts and the districts of Vitosha collar. In the case of dwellings with a permit for use, the vacant ones continue to be utilized by the market and decrease by 1 percentage point. up to 3 percent in the first six months of the year.
During the period, active demand and a temporary decrease in supply brought an 8 percent increase in sales prices. The average price of a two-bedroom apartment (including garage and VAT) in the medium and high segment reaches between € 156 thousand and € 194 thousand for a two-bedroom apartment. The three-bedroom apartments are for sale for € 226 thousand to € 270 thousand. The terraced houses find a buyer for € 270 thousand to € 450 thousand, and the detached houses change hands for almost half a million euros. Colliers data also show that the difference between the offer and purchase price has almost narrowed and is less than 1% in the first half.
Given the active demand and the slower pace of new construction, it is expected that demand will outpace supply in the medium and high segment of the housing market in the second half of the year. Due to rising prices of construction materials, it is possible that some of the projects with a planned start of construction in 2021 will be postponed to next year. This in the short term will lead to a drop in supply and higher prices, the company predicts.
The activity of the housing market is largely tied to the policy of banks. Record low interest rates on loans stimulate purchases with a mortgage loan. Savings are rising, but zero interest rates on deposits and the policy of some banks to charge more than a certain amount stimulate investment in real estate.
During the period, clients are mostly looking for three-bedroom houses, apartments on the ground floor with courtyards and villas near Sofia. New construction continues to be preferred, say Colliers.
Growth of vacant office space
In the first half of 2021, the supply of office space in Sofia recorded a growth of 4%, with the total area reaching 2.5 million square meters. The new space completed during the period added 115 thousand square meters, with a significant share of Garitage Park Phase 3, NV Tower, Park Lane Office Center, Balkan Business Center, Ring Tower and others. The total area of the projects in the process of active construction decreases and amounts to 311,250 sq.m.
The levels of vacant areas increased by 3% for the first six months of 2021 and reached 16%, and this growth is mainly due to the added new supply.
Gross leased areas, ie all transactions for the first half of 2021 are 70,330 square meters, which is 6% higher in value than the first half of 2019.
The net utilized areas for offices class A, B and C amount to about 25,700 sq.m. During the period under review, 39% of the gross leased space is due to relocations, 37% to contract renewals, 10% – lease of space at the “under construction” stage, 10% – to the expansion of existing companies and 4% are agreed by new for market companies. The main sectors, drivers of demand, are: IT and outsourcing (73%), professional services (11%) and trade (8%).
The average offer rental levels (excluding VAT) are maintained, namely for class A offices they are 14 euros per sq.m. – ideal center, 12.5 euros per sq.m. – for a wide center and 12 euros per sq.m. – for peripheral areas.
In the second half of the year, a gradual increase in the share of employees in the offices is expected, depending on the sector, global or regional corporate policies.
Companies from the outsourcing industry will remain with the highest activity in the office market, and in addition to the capital are expected to continue to expand their presence in regional cities.
Increased interest in shopping streets
Increased interest is registered for the positioning of main shopping streets – a new trend, a consequence of the pandemic, is the relocation of small local traders from shopping centers to locations on a shopping street. Colliers data show that the shopping streets in the capital maintain stable employment levels and new openings at the end of 2020, and Vitosha Blvd. marked a slight decline in vacant space for the first half of the year from almost 9 percent to 7.5 percent.
During the period, the supply of retail space remained at 390,660 square meters. The supply levels in the shopping parks remained at 66,200 square meters. The rented space in the shopping centers in the capital reached 10,500 square meters, and the volume utilized area in the parks is 3,250 square meters.
Rental levels remain unchanged.
The forecast is that by the end of 2021 sites will be opened on an area of over 10,000 square meters in Sofia, and rental levels will remain unchanged.
Growth of constructions of industrial and logistics areas
The supply of modern industrial and logistics areas in Sofia for the period increased by almost 5% to 1,176,500 square meters, which is due to completed logistics centers in the areas of Bozhurishte, Krivina and Botevgradsko Shosse. The logistics market has maintained the levels of activity since the end of 2020, and in the first half of 2021 the demand is driven by logistics companies (41%), traders (31%), transport (19%), production (5%). ) and professional services (4%).
The net utilized areas for the considered period are 23 820 sq.m. The rental market remains relatively underdeveloped at the expense of investment in properties for own use. Demand for warehouse space is mainly concentrated in locations with labor availability and close to end users and delivery points. One of the landmark deals for the market is the one with DB Schenker, which is consolidating its activities.
Steady levels of demand lead to a slight decrease of 1% in vacant space – 6% remain.
The industrial and logistical areas under construction in the capital are 158,000 sq.m.
Stable levels of supply and demand keep wage levels low. Thus, the average rental levels for class A warehouse space, with a good location and built infrastructure are between 4.7 – 5.2 euros per square meter per month. Class B also remain at an average of 2.7 euros per sq.m. for a month.
The good prospects for the logistics and manufacturing segment have also led to an active market for construction plots. The entry of new companies developing logistics projects, as well as the activity of the companies already operating in the country, is expected to lead to an increase in the supply of areas for warehousing and cargo handling.
At the same time, a number of trade and logistics companies have started projects for their own needs and custom construction. This is expected to lead to high volumes of new construction in the segment.
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