Investment Market Overview, H2 2016

Research & Forecast Report Bulgaria | Investment Real Estate Market H2 2016

Investment Market Overview

Fig 1. Total Sales Transactions Volume (mln EUR) 600 500

594

565

400 300

Georgi Kirov Director | Investment Services georgi.kirov@colliers.com

200

205

100 59

0 2007

• The total value of completed investment deals in 2016 was slightly above EUR 262 mln (Fig.1).

The three largest deals, accounting for 36% of the total volume, were the sale of Sofia Airport Center, SOMAT Logistic Park and Stokov Bazar Ilientsi.

• The biggest share of investment volume involved hotels (27%), followed by industrial and logistics space (20%), the third position is split between office and retail properties (18%) (Fig.2).

• In contrast to H1 2016 when the share of international buyers was 59%, local investors took 75% in the total investment volume in H2 2016. The overall trend that started in 2012 is still valid (Fig.3).

2008 2009

2010

2011

2012

234

210

262

2014

2015

2016

118

2013

Fig 2. Total Sales Transactions Volume by Sector 27%

20%

18%

18%

15%

2%

Hotels

Industrial & Logistics

Offices

Retail

Development land

Other

Fig 3. Origin of Investments (mln EUR) 600 500 400 300 200 100 0 2007

2008

2009

2010

2011

International buyers

2012

2013

2014

2015

2016

2014

2015

2016

Bulgarian buyers

Fig 4. Transactions type (mln. EUR)

• The volume of deals with incomegenerating properties considerably prevailed (65%) over speculative (19%) and owner-occupied properties (16%) (Fig.4).

600 500 400 300 200 100 0

2007

2008

2009

Income - generating

2

Investment Market Overview | H2 2016 | Colliers International

2010

2011 Speculative

2012

2013

Owner - occupied

• The increased investor interest in real estate led to a significant increase of their share in the total number of buyers from 65% in 2015 to 84% in 2016. Conversely, investments in owner-occupied assets dropped from 35% of the volume in 2015 to 16% in 2016 (Fig.5).

• Yields for both office and retail properties decreased reaching 8.75%, while industrial one remained stable at 11.00% (Fig.6).

Large-scale assets transactions, started at the end of 2016 and scheduled to close at the beginning of 2017, are expected to shift the yields down between 50 -100 basis points (-0.5%-1%) (Fig. 6).

Fig 5. Investors type

84% 16%

Investors

Business users

Fig 6. Prime Yields 12% 11% 10% 9% 8% 7% 6% 2007

2008 Offices

2009

2010

2011

Retail

2012

2013

2014

2015

2016

Industrial

Forecast »»

Total transaction volume is expected to significantly exceed the result in 2016.

»»

After the Stress Test of the banks in the first quarter of 2016, interest levels decreased to 2% to 3% which led to an increase in the profit margin of investors.

3

»»

Office and retail properties will remain on top of the list for investors, due to their high occupancy rates and consistent rent levels.

»»

Property transactions in Central and Eastern Europe have been growing in number, as a result of increased funding by other sources. Asian and South African investors are expected to play a bigger role in these markets.

Investment Market Overview | H2 2016 | Colliers International

554 offices in 66 countries on 6 continents €2.34

billion in annual revenue

186

Georgi Kirov Director | Investment Services +359 2 976 9 976 georgi.kirov@colliers.com Lora Mitova Market Research +359 2 976 9 976 lora.mitova@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

million square meters under management

16,000

professionals and staff

About Colliers International Colliers International is a global leader in commercial real estate services, with over 16,000 professionals operating out of more than 554 offices in 66 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”.

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The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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