Industrial Market Overview, 2015

Research & Forecast Report Bulgaria | Industrial Real Estate Market 2015

Industrial Market Overview

Supply

Verka Petkova Manager | Offices and Industrial Services verka.petkova@colliers.com “First industrial pre-lease deals registered since 2008.”

“Net absorption increased by 50% on an annual base.”

“Demand for industrial and logistics space still driven by FMCG and logistics operators, and by automotive components producers and light industry – in the manufacturing sector.”

“Modern logistics space rents rose with 11%.”

The supply of modern warehouse and logistics space in Sofia increased by 3% for 2015 and reached 802,000 m². (Fig.1) The projects that contributed majority of the new stock were Logistics Park East Ring in Novi Han – phase 1 (6,400 m²), the expansion of manufacturing complex Festo, Trisa logistics center (3,000 m²), Universal Logistics Park - phase 2 (8,800 m²), Trade Center Europe - building 1. The new stock totalled 44,860 m², where owner-occupied space prevailed over speculative.

Fig 1. Logistics and warehouse space in Sofia (‘000 m²) 800 700

665

600 500

200

757

802

546

400 300

721

441 289

100 0 2009

2010

2011

2012

2013

2014

2015

Higher dynamics was registered in the supply of logistics and warehouse space. For the first time in a couple of years, modern speculative stock was delivered to market and was immediately absorbed. The shortage of new space led to transformation of big box formats into premises, suitable to the needs of logistics sector or light industry- a trend that continues from 2014.

The disbalance between supply and demand and the fast absorption of completed speculative space stimulated the start of a couple of projects - ZMM Logo Center 3, East Ring Logistics Park - phase 2, Sofia Ring Logistics Park in Krivina, Industrial Park Sofia East, close to Elin Pelin. In 2016 some 40,000 m² of new stock are expected to be delivered to the market – a record since 2008. Logistics Park Pleven added 3,000 m² new industrial and logistics space in 2015.

The food retailer Lidl and the courier company Speedy started construction of logistics centers for their own use, located in close proximity to Maritza highway. The e-commerce growing influence over courrier companies business would intensify their demand for space.

Bulgaria preserved its attractiveness to the light industry manufacturers, mostly companies for automotive components and electronics. In 2015 Sensata’s brand new production facility opened doors, Libherr and Standart Profill expanded their plants.

Kostal, the German company for automotive components, completed their production facility in Smolyan.

Plovdiv remained on top of the list for the manufacturing companies thanks to its infrastructure, workforce and location.

Other regional cities such as Varna, Burgas, Stara Zagora, Pleven and Ruse continued to draw attention. The completion of Maritza highway further triggered the investment flow to the region.

2

Industrial Market Overview | 2015 | Colliers International

Built-to-suit construction dominated the market in 2015.

Representatives of the trend were SMC Industrial Automation and Willi Elbe Gelenkwellen in Plovdiv, Arkomat in Karlovo, RSN Sihn in Saedinenie and JYSK in Bozhurishte (logistics center for the Balkans). The availability of quality product was still constrained during the period, leaving companies with the built-to-suit model as the only solution to their needs.

Demand The demand drivers for warehouse and logistics space were FMCG, logistics operators and courier companies. The reasons behind their movements were either expansion of business or warehouse space optimization. Net absorption on annual base was 62,700 m² representing 50% growth compared to 2014. The subject of the deals was predominantly owner-occupied or class B space.

Rental levels Rental rates of modern logistics space soared, explained with the lack of completed projects. Average rents increased to 4.2 euro per m² with perspectives to exceed 5 euro per m² in projects with good location and infrastructure. (Fig.2) The Class A warehouse rates in the second half of 2015 were 3.8 euro per m² and 2.5 euro per m² for Class B. Rental levels for industrial facilities could go above 5.5 euro per m², depending on the specific tenant fit-out requirements.

Fig 2. Average asking rental rates for modern logistics space in Sofia (euro/ m²/ month) 4.8

2.8

2009

Light industry and automotive components producers dominated industrial space demand, investing mainly in owner-occupied facilities.

The available warehouse and logistics space in Sofia shrank by 3% on an annual basis arriving at 11% vacancy rate, concentrated in owner-occupied or class B projects failing to meet tenants’ requirements.

3

Industrial Market Overview | 2015 | Colliers International

4.2

4

3.8

3.8

3.8

2.5

2.5

2.5

2.5

2.5

2011

2012

2013

2014

2015

3.3

The insufficiency of ready-to-use modern speculative product resonated into the first pre-leases on the market since 2008, seen as the beginning of a positive trend.

Vacancy

4.5

2010

Class A

Class B

Forecast »»

40,000 m² of modern logistics and warehouse speculative space is expected to enter the market in 2016, thus balancing supply and demand.

»»

The lack of modern speculative product will lead to an increase in the number of pre-lease deals.

»»

E-commerce development will result into a higher demand for space by couriers companies.

»»

Rental levels will remain stable in 2016.

Industrial Park Sofia East

XIV - Kaven Orbico ш.

1 561. 544

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308 кв.м

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170

3

R= 3

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318 кв.м

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VII 218023 290 кв.м

1137 кв.м

I 1410032

XXII 139001

тп

IX 139006

VIII 102 кв.м 218025

2372 кв.м

5438 кв.м

Building 1

XI 000971 2160 кв.м

Industrial Park Sofia East (IPSE) is

XXIII 140036

18 857m2

X 1410010,1410001

1012 кв.м

XXV

XXIV 140040

1782 кв.м

2672 кв.м

III

an integrated, large-scale logistics industrial complex located in the Eastern

584 кв.м

XII 139020

wc

2800 кв.м

XIII 1410035

XXVI - IPSE

XIV141036 4153 кв.м

71943 кв.м

тп R=1

XV140001

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411 кв.м

XVI 201011

outskirts of Sofia, which offers:

12 R=

XVII 218005 1100 кв.м

1520 кв.м

XXVII

тп

XVIII 218028

Building 2

1856 кв.м

XIX 141016

53 374 m2

18 857m2

2028 кв.м

• •

XX 140013 5068 кв.м

17д

XXI 140028

тп

1918 кв.м

XXXVII 16342 кв.м

XXIX

кпп

2824 кв.м

грп автомивка

тп ресторант

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тп дг

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тп

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дг

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XXXI

76 463 m2

1а

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грп

тп

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тп тп

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тп дг П.С. рез.

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Strategic location and fast access Full-range solutions – speculative lease, built-to-suit options and sale of land with turnkey development with access to infrastructure in exploitation Building design in accord with international logistics standards Natural gas heating and exclusive agreements with utility providers for minimum operating costs for potable and fire-extinguishing water and electricity Professional full-service facility management Onsite warehouse administration in integrated office units Onsite cars and trucks parking areas

Industrial Park SOFIA EAST

CATCHMENT AREA At 2–hour drive 2,7 mln. residents At 1–hour drive 1,8 mln. residents

Industrial Park Sofia East with its strategic location and excellent transport accessibility aims to create a new logistics and light industrial hub for the Sofia region, forming a cluster of business involved in similar activities and facilitating synergies and business relations.

Distance to key locations and transport connections: • Sofia city center – 25 km • Sofia International Airport – 21 km • Plovdiv city center – 122 km • Kalotina crossborder checkpoint (to Serbia) – 83 km • Kulata crossborder checkpoint (to Greece) – 202 km • Gueshevo crossborder checkpoint (to Macedonia) – 130 km • Kapitan Andreevo crossborder checkpoint (to Turkey) – 276 km • Vidin Danube port and crossborder checkpoint (to Romania) – 223 km • Ruse Danube port and crossborder checkpoint (to Romania) – 290 km • Seaport of Varna – 430 km • Seaport of Burgas – 365 km

Industrial Park Sofia East is owned by a consortium of local and international investors with significant experience and a long track-record of successful investments in the region. The consortium is lead by Rosslyn Capital Partners, a well established local investment management company.

Paladin Property Development is a professional construction advisory company specializing in comprehensive real estate project management with capacity to carry through a project from the initial stages of idea inception through to its commissioning. The company has wide-ranging experience in the management of different types of large-scale real estate projects including hotels, holiday, residential, industrial and logistics developments. Paladin is initiator and project manager for Industrial Park Sofia East and is responsible for all activities related to the project.

Contacts: Park Industria - Sofia Iztok AD 5 Slavyanska Str. 1000 Sofia, Bulgaria Telephone: (02) 915 8010 Fax: (02) 981 5812 E-mail: info@ipse.bg

502 offices in 67 countries on 6 continents United States: 140 Canada: 31 Latin America: 24 Asia: 199 EMEA: 108

€1.75

billion in annual revenue

Verka Petkova Manager | Offices and Industrial Services +359 2 976 9 976 verka.petkova@colliers.com Adriana Toncheva Senior Market Researcher +359 2 976 9 976 adriana.toncheva@colliers.com

Colliers International | Sofia European Trade Center 115K Tsarigradsko Shose Blvd.

Build. B, 7th floor 1784 Sofia | Bulgaria TEL +359 2 976 9 976

160

million square meters under management

16,300

professionals and staff

About Colliers International Colliers International is a global leader in commercial real estate services, with over 16,300 professionals operating out of more than 502 offices in 67 countries. The company operates in Bulgaria since 1991 and delivers a full range of services to real estate users, owners and investors worldwide. Presently Colliers represents some of the most innovative and professionally planned projects in all market segments, including office, retail, logistics, industrial and residential. As of June 2015, Colliers is an independently owned company. The common shares of Colliers International Group Inc. trade on the NASDAQ under the symbol “CIGI” and on the Toronto Stock Exchange under the symbol “CIG”.

As part of the CEE Quality Awards 2015 Colliers won for the fourth time in a row the Industrial agent of the year award. The latest annual survey by the Lipsey Company ranked Colliers International as the third-most recognized commercial real estate firm in the world. colliers.com Copyright © 2016 Colliers International.

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