ECONOMY: not bad, all things considered

All is well that ends well, and the most recent economic data from Bulgaria proves as much. The second quarter got off to a bad start as on Apr. 2nd the US “reciprocal” tariffs shocked the business community across the world. Despite its limited exposure to the US market, Bulgaria’s EU trading partners were heavily affected. That same month economic sentiment dropped, as did production indices in manufacturing and services, while domestic and external trade volumes narrowed.

Fortunately, the situation reversed after the US rolled back tariff rates for 90 days. In May and June, sentiment recovered, production in services edged up, domestic trade expanded, and uncertainty in manufacturing and retail diminished. The quarter ended on a high note with final approval of Bulgaria’s accession to the Eurozone at the start of 2026. GDP growth in Q2 is expected between 1.5% and 2.5% y/y, lower than the 3.1% y/y posted in Q1.

SUPPLY & DEMAND: perhaps light at the end of the tunnel

Development activity in Sofia in Q2 weakened. Three relatively small new project starts were recorded in the quarter for 18,000 sq m. These were designed for the own use of a car tire distributor, medical equipment distributor, and a bakery products maker. The total volume of light industrial and logistics space under construction slipped to 343,000 sq m, some 39% of which was speculative.

Meanwhile, completed space in the quarter was 31,000 sq m, the lowest in 15 months. This included a total of 5 projects, one of which was speculative. The rest were built for the own use of an isolation materials producer, a construction company, an automotive firm, and an international cargo carrier. The finish of buildings 3 and 4 in East Ring Logistic Park added 12,800 sq m to the speculative stock of the city, which now stands at 790,000 sq m.

Demand remained modest in Q2 as difficulties in manufacturing and wholesale persisted. Take-up amounted to 24,000 sq m, unchanged from Q1. An encouraging sign for next quarters is the diminishing uncertainty in manufacturing observed in May and June. This, in combination with the recently signed EU-US trade deal, has the potential to release production orders and investment plans put on hold by the turmoil in international trade.

PRICING: up on scarcity

The available space (excluding speculative projects in construction) on the market at the end of Q2 stood at 40,000 sq m, up just slightly from the previous quarter. Importantly, the near 13,000 sq m of speculative space brought on-line at East Ring Logistics Park did not help alleviate the scarcity. Some of this space was preleased already in Q2 2024, while the lease of the rest awaits final signature in the coming weeks. As a result, the vacancy rate inched up to 1.8% but is likely to compress again in Q3.

Lack of available space pushed prime asking rents higher – €5.6 per sq m – even if demand was generally soft. Prime yields for Class A logistics space (10,000+ sqm) stayed unchanged at 7.25%.