Sofia has experienced steady growth in its industrial space market during the first half of 2023. With a total stock of over 4.0 million sqm of ready-to-use space and an additional 252,000 sqm under construction, the city is witnessing an upward trend. These findings are part of the latest industrial report, issued by the real estate company MBL.
Inventory and construction activity
The majority of the current stock of industrial space in Sofia, comprising approximately two-thirds, is owner-occupied, while the remaining space is tenant-occupied. The Eastern part of the city holds the highest share of industrial space, accounting for 41% of the total, but Northern Sofia has witnessed the most significant construction activity. More than half of the ongoing projects there were for tenant occupation, rather than ownership
Demand and vacancy
The demand for industrial space in Sofia has remained high and stable in recent years. Despite a substantial increase in newly constructed industrial properties, vacancy rates have continued to decline, reaching below 3% in the second half of the previous year and dropping further to 2% at the beginning of 2023.
The Eastern industrial market experienced the least available space for rent during H1 2023, with vacancy plunging below 1%. This can be attributed to the convenient access to two major highways in Bulgaria, namely Trakiya and Hemus, making it an attractive location for businesses.
Rental rates and investment activity
The average rental rates for industrial properties in Sofia ranged between €3.90 and €5.10 per sqm, depending on the location and property specifications. Previously, rental rates were higher in the Southern and Eastern industrial zones compared to other areas. However, in H1 2023, asking prices became relatively equal across all parts of Sofia and displayed an upward trend due to the high demand and low vacancy rates. The Northern region experienced a significant increase in average rent, influenced by the introduction of modern projects with higher asking prices.
In terms of investment activity, the first half of 2023 did not register any noteworthy deals, despite some encouraging signs in 2022. Inflation is on a downward trend, and while lending terms in Bulgaria remain competitive, cautious economic optimism may influence investors' decisions..
Looking ahead, the industrial investment market in Sofia remains cautiously positive, as increasing interest rates and global uncertainties may lead to higher transaction yields. These fluctuations could attract new investors seeking higher yields, creating a healthier competitive environment for existing market players. The average yields for industrial properties in Sofia currently range between 8% and 9%, depending on location and property characteristics.
Overall, the industrial space market in Sofia has demonstrated resilience and stability in the face of economic disruptions. The city's strategic location, coupled with strong demand, favorable vacancy rates, and competitive rental prices, positions Sofia as an attractive destination for industrial businesses and potential investors.
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