ECONOMY: Increasing inflation

The Bulgarian economy is facing a challenging time, as a result of the deteriorating external environment. The real GDP growth is
expected to slow to 2.8% in 2022, followed by anemic increase of 0.1% in 2023 in the light of the forecasted global recession. The
economy is affected mostly by the deceleration of the private consumption, reflecting the negative effect of the growing inflation on
the disposable household income. The latest projections of the Bulgarian Central Bank are for 14.9% annual inflation at the end of
2022 and slow down to 4.1% at the end of 2023. A bright spot are public investments, which are expected to increase, primarily due
to European funds.

SUPPLY AND DEMAND: Discount retailers in expansion

Growth in consumption led to sustained increase in occupiers’ revenue and demand of retail space. The nine-months of 2022 were
marked by strong expansion of discount retailers, drugstores and FMCG sector which are among the rapidly growing categories.
The focus is on retail parks, as well as small retail centers in regional cities. As many fashion brands change their strategy and
sales channels, high dynamic is observed in the shopping malls segment, as well. In order to improve their performance, some
international retailers optimise their physical stores network, retaining only the best performing sites, and allocate resources
towards online sales. In the last quarter, vacancy rate in Sofia posted slight increase to 6.6%, with the high-performing shopping
centers remaining fully let.

On the supply side, retail parks continue to draw developers’ attention, due to the short construction deadlines and high tenants’
interest in such projects. As at the third quarter of 2022, the existing schemes with leasable area over 5,000 sqm countrywide
reached 240,000 sqm, with the completions of 22,600 sqm new premises. Land acquisitions for new projects are also on the
developer’s agenda

PRICING: Stable rents

The asking rents in shopping centers in Sofia remained stable in the last quarter at 35 euro/sqm. Rents in retail parks also
demonstrate stability, despite increasing occupier’s interest. Prices stay at 10 euro/sqm in Sofia and 7-9 euro/sqm in the regional
cities.