ECONOMY: Anemic increase

The Bulgarian economy is forecasted to lose speed in 2023, reflecting the lower domestic demand and worsening external environment. According to the World Bank, Bulgaria’s GDP is expected to increase by only 1.7% in 2023 in the light of the looming global recession. One of the main growth factors – private consumption, is negatively affected by the price increases, tightening labor market and higher borrowing costs. The latest projections of the Bulgarian Central Bank are for 14.9% annual inflation at the end of 2022 and gradually slow down to 4.1% at the end of 2023. Although remaining volatile, food and energy prices are expected to decelerate gradually, especially in the second half of the year.

SUPPLY AND DEMAND: Discount retailers and retail parks in expansion

The past year 2022, was marked by the extremely rapid development of the retail parks segment. Over 100,000 sqm of new space was opened, mainly in the year’s second half, nearly three times above the space opened in 2021. Currently, over 300,000 sqm of retail parks are operating in the country, counting only those with leasable area of over 5,000 sqm. Unlike retail parks, shopping centers did not show significant movement as most projects are already established. The last year was marked by rise in revenues and recovery in shopping centers footfall and revenue to pre-crisis levels. The only retail space expansion was realized by Park Mall Stara Zagora, which increased its space by about 8,000 sqm. New mall openings or expansions are not planned for 2023. The vacancy rate of shopping centers in Sofia posted slight decrease within the last quarter, dropping to 5.6%, with the high-performing schemes remaining fully let.
Discount retailers such as Pepco, Kik, and Sinsay continued their rapid expansion countrywide. New brands are also entering the Bulgarian market. Most of them are retailers from neighboring countries, offering mainly clothing and footwear in the budget to midprice range.

PRICING: Rising rents

Asking rents in shopping centers in Sofia remained stable in the last quarter at 35 euros/sqm, with trend to slightly increase at the beginning of 2023. Rents for high street shops and retail parks rose within 5%, reflecting the inflation and the associated increase in
landlord costs.