Boston, MA -- (ReleaseWire) -- 01/03/2014 -- Bulgaria's commercial real estate market is showing signs of life going into 2014, with the latest industry indicators pointing to a noticeable uptick in demand and rental activity in recent months across the retail and industrial subsectors in particular. A gradually improving macroeconomic backdrop should provide some stimulus to investment and consequently growth in rental rates in 2014, though we caution that oversupply continues to stymie growth in the office rental sector. With a focus on the country's principal cities of Sofia, Varna and Burgas, the report covers rental market performance in terms of rates and yields across the commercial office, retail, industrial and construction sectors.
A number of key economic indicators supports our view that the real estate segment will enjoy a return to growth this year. The country's current account surplus expanded to EUR884.4mn (US$1.19bn) in August 2013 from a surplus of EUR366.7mn (US$495.92mn) in August 2012, according to figures from the Bulgarian National Bank. The increase was attributed to positive balances on services, current transfers and foreign trade. The country's current account surplus stood at EUR1.26bn (US$1.70bn) in January-August, compared with a deficit of EUR279.2mn (US$377.58mn) in the same period a year ago.
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We expect the most positive impact to be seen across the retail and industrial real estate subsector, which will benefit from a continued improvement in consumer spending and industrial and manufacturing activity, respectively. Bulgaria is benefiting from improving external demand, with preliminary estimates from July showing strong export growth to key trading partners. We expect public spending and a positive contribution of net exports to continue to support real estate investment and growth going into 2014.
On the other hand, according to our in-country sources, the office rental sector will continue to struggle due to an ongoing supply-demand in balance and is expected to exhibit a marginal increase in rental rates, if any, in the three major cities we monitor.
- Bulgarian residential property transactions increased by 20% y-o-y during H213, according to, Standart. House prices grew by an average of 1-2% across the country and 5% in the capital, Sofia. According to property firm Arco Real Estate, the average house price in the capital was US$995 per square metre. The increase coincides with a drop in mortgage rates during 2013. Interest rates were reported to be averaging between 6.2%-6.5% in H213, compared with 8% in H212.
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