ECONOMY: the expansion goes ahead

The main economic indicators suggest that Bulgaria’s economy continued to widen at the start of 2025. In January and February, production in the all-important service sector was up, retail sales in constant prices edged higher, and foreign investment increased. The economy was driven primarily by household spending and investments, while industrial production and exports underperformed.

GDP is expected to rise in Q1 2025, but likely at a slower pace compared to 3.4% y/y in Q4 2024 (6th highest in the EU), partly due to somewhat softer consumer confidence. Still, the economic sentiment is firmly in positive territory, suggesting continued expansion.

SUPPLY & DEMAND: solid completions and modest take-up

Development activity in Sofia in Q1 2025 was solid with some 48,000 sqm of completed light industrial and warehouse space. A total of seven facilities entered service, five of which for own use. The latter projects were built by producers of furniture, stationary, and child care products, as well as trade and logistics firms. On the speculative side, each of the two new facilities exceeded 10,000 sqm. This helped lift the speculative stock in and around Sofia up to 777,000 sqm.

Four project starts were recorded in the quarter for a total of 54,000 sqm. Two speculative, located in industrial parks, and two developed for own use by an electronics retailer and aviation services firm. The total space under construction edged up to 350,000 sqm.

Demand was modest as manufacturing and wholesale continued to struggle. Take-up amounted to 23,000 sqm, double what it was a year ago, but substantially lower compared to Q4 2024. The actual physical space taken was 49,000 sqm as several large tenants with prelease contracts finally moved into newly completed premises.

PRICING: flat

With improved investor sentiment and positive expectations for the sector, prime yields for Class A logistics space (10,000+ sqm) descended to 7.25%. The available space narrowed slightly to 34,000 sqm for a vacancy rate of 1.5%. Prime rents were unaffected and remained flat at €5.4/sqm.