site.bta Analysts Report Active Retail Space Market and More Expansions

An active retail space market and a trend towards more expansions, especially in discount chains, are seen in the second quarter of 2022, commercial real estate consultancy Cushman & Wakefield Forton said Wednesday.

The market was stable during the period, with tenants reporting a return to their 2019 revenue levels. At the same time, some of the major brands are shifting their expansion to different areas of Central and Eastern Europe due to the war in Ukraine, contributing to increased demand for space. Interest in shopping malls is steady, but there is also a focus on retail parks. This trend is also a result of the expansion of retailers and discount chains to the district capitals and smaller towns.

Rents in shopping centres have overcome the pressure of the pandemic and are gradually returning to pre-crisis levels. In the second quarter of 2022, they increased to EUR 35/ sq m for prime spots at prime projects in Sofia. Rents in retail parks remain around EUR 10/sq m in Sofia and EUR 7-9/sq m in district capitals.

Logistics space

In the logistics space market in Sofia, rental activity reached one of its lowest levels in the last two years. That is due to a short supply of vacant space.

"In recent months we have seen absorption of space with short-term leases. This is partly due to the desire of many retailers and distributors to stock up on goods and raw materials in response to rising inflation," said Zhoro Angelov, a Forton manager for industrial property.

As a result, the vacancy rate is down from levels as low as 2% in the spring and 4% at the end of 2021. The vacancy rate is expected to remain low in the short term despite the high volume of new construction and the potential for market expansion. As of mid-2022, nearly 400,000 sq m of manufacturing and warehouse space is under construction in Sofia, which is a 15-year high. Most projects are planned for own use.

Due to rising operating costs, rising construction costs and high demand, rents for modern logistics space in Sofia continue to increase and have already surpassed EUR 4.5/sq m for medium-sized sites and EUR 4/sq m for larger sites of over 10,000 sq m.