Research & Forecast Report Bulgaria | Industrial Real Estate Market H2 2014
Industrial Market Overview
• Bulgaria is well positioned to become a hub for outsourced production facilities for automotive components.
Supply A slight increase by less than 3% was registered in modern logistic and industrial space supply in Sofia during the second half of 2014, amounting to 757,200 m². (Graph 1) The new stock was concentrated into numerous small projects and the newly finished warehouse facility of East Ring Logistic Park, totaling 6,000 m² in area.
• Colliers’ recent analysis indicates that 56% of the international manufacturers that entered the Bulgarian market over the past two years were part of the automotive industry.
Graph 1. Logistics & Industrial space in Sofia (in `000 m2) 800 700
665 692
600 500
506 546
400
757
580
441
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302
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• The lack of supply of modern high quality logistics supply led to the restructuring of big box premises into temporary warehouse and urban logistics space solutions.
721 737
100 0 H1 2010
H2 2010
H1 2011
H2 2011
H1 2012
H2 2012
H1 2013
H2 2013
H1 2014
H2 2014
The first stage of the construction of the industrial zone close to Bozhurishte was completed. Behr Hella Thermocontrol became the first company to start operations in the zone covering a total of 7,500 m². Nexans Autoelectric, an automotive cable manufacturing company opened doors in Pleven at the end of 2014, while Gebruder Weiss logistics base in Musachevo village (8,500 m²) completed its first stage. Two of the largest Bulgarian cosmetics manufacturers opened modern logistics centers in Shumen – Lavena (8,500 m²) and Ficosota (8,500 m²). The majority of the players on the industrial and logistics market remained focused on owner-occupied and built-tosuit space due to the acute shortage of quality space over the past few years.
Demand Production companies and logistics operators remained the key driver of demand during the second half of 2014. Dominant occupiers continued to be manufacturers of automotive components and electronics. Colliers’ recent analysis indicates that 56% of the international manufacturers who have entered the Bulgarian market over the past two years were related to the automotive industry.
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Industrial Market Overview | H2 2014 | Colliers International
The analysis of the companies by country of origin shows that 31% were German, 19% - Turkish, 13% - Swiss. At the end of 2014 most attractive to automotive manufacturers were the region of Plovdiv (31%), Sofia (19%), Ruse and Sliven (13%) and Pleven (6%). Plovdiv and Elin Pelin emerged as leading industrial hubs due to the good transportation links and availability of workforce. Elin Pelin has become a preferred destination for construction of industrial and logistics parks. In the past year, the deficit of modern quality industrial space provoked manufacturers, logistics operators and retailers to assess vacant big box premises in the city suburbs, which offer good level of accessibility. Such spaces meet the needs of large commercial operations, storage and light manufacturing. The market already saw a few examples - a recent one being the former Roda hypermarket in Sofia which was partially rented out to a Polish operator. Such transactions represent a win-win situation for both parties – to the landlords who manage to successfully reposition their assets and to the tenants, as they secure modern industrial space for their business. Another shortage the market experienced last year was the lack of brownfield sites, which can be reconstructed to meet specific business needs. Demand for such properties is usually driven by foreign market entrants. The renovation of these plants and bases in Bulgaria, however, is costly and sometimes even impossible. A trend, known as onshoring or reshoring, is gaining momentum in Western Europe. This is a process of return of manufacturing to the periphery of Europe, in particular – Southeast Europe. An optimal scenario is pursued, but this time - in close proximity to the parent company. When outsourcing business is related to laborintensive industries, such investments are often directed to Southeast Europe in pursuit of lower labour and transportation costs. Bulgaria is in the focus of the investors, but still competing with other countries from the region – the Balkan countries, Hungary, Czech republic, Slovakia and etc. Those markets offer competitive facilities, efficient administrative services and last, but not least – a successful markeitng of their competitive advantages on a country level, therefore - attract a significant share of the active investors.
Vacant spaces The low activity in the segment led to insignificant decline in the available industrial space in Sofia by 2% compared to the second half of 2013. Net absorption reached 22,600 m² for the second half of 2014.
Rental levels The prime and secondary industrial space rental levels in Sofia remained unchanged during the second half of 2014 – at 3.8 euro / m² / month for the prime locations and 2.5 euro / m² / month – for the secondary locations. (Graph 2)
Graph 2. Asking rental rates of modern industrial space in Sofia (euro/ m²/ month) 4.8
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3.8
3.8
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2.5
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3.3 2.8
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Prime location
Secondary location
Forecast • In 2015 Bulgaria will continue to experience sustained demand by light industry manufacturers along with increasing attractiveness of the country as a destination for outsourced production. • Alternative solutions such as repositioning of vacant retail premises or built-to-suit projects will dominate the market, being the most flexible formats to meet new demand. • Rental levels are expected to remain stable during the year.
Major competitors in this direction are the neighboring Macedonia and Serbia where the government provides specific benefits and tax incentives related to employment policy. In addition to a EU membership, Bulgaria can offer competitive advantages such as a currency board, low taxes and labor costs.
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4.5
Industrial Market Overview | H2 2014 | Colliers International
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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
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