GDP KEEPS GROWING, HORMUZ EFFECT SHOWS IN INFLATION DATA
On the back of the 4th highest GDP growth in the EU in Q1 (3.1% y/y), Bulgaria’s economy continued to expand in the second quarter of 2026.
The most recent readings of production indices (Apr.) show solid and broad growth in the services sector – led by administrative and support activities, professional, scientific and technical activities. Meanwhile, the situation in the industrial sector (Apr. and May) was mixed – mining and manufacturing continued to struggle, while energy appeared to improve, and production in construction grew in high single-digits.
Domestic trade numbers (Apr.-May) were also mixed – wholesale volume thinned slightly while retail volume in stores grew in high single-digits (especially in non-food categories), and online retail volume expanded in high teens.
The fallout from the crisis in the strait of Hormuz showed clearly in inflation data. The annual rate of change of the HICP nearly doubled between March and June (from 2.8% to 5.3%). The cost of diesel shot up nearly 50% in this period and transportation prices increased in high teens. Prices in services increased at nearly twice the headline inflation rate.
ABOVE AVERAGE DEMAND
The second quarter of 2026 was a good period for Sofia’s logistics and light industrial market. Gross take-up reached 66,000 sq m, on par with Q4 2025 and otherwise the best quarterly volume since Q4 2024.
The leasing contracts signed in Q2 2026 amounted to 55,000 sq m. These included 3,300 sq m of renewals, 11,000 sq m of standard leases, and almost 41,000 sq m of pre-lease agreements. Notably, there was one lease in the 10,000+ sq m range, and three contracts in the 5,000 to 10,000 sq m range. The largest volume was contracted at the premises of CTP, the biggest international developer in the industrial segment in Bulgaria.
From an economic sector perspective, wholesale firms took 41% of gross take-up volume (27,107 sq m). Retail companies came second with 21.3% of the volume (14,000 sq m). Transport and logistics enterprises were third with 20.9% of the volume (13,700 sq m). Finally, manufacturers held fourth place with 16.5% (10,825 sq m).
NEW SUPPLY AND ONGOING CONSTRUCTION RISING
New supply in Q2 2026 edged up to 27,553 sqm, the highest level in the last four quarters. This volume was spread among just three projects – two for lease (speculative) and one for own use.
Unfortunately, the speculative projects did not add to the available space on the market. The largest of them – bldg. 7 at Industrial Park Sofia East (13,800 sq m of GLA) – was built-to-suit taken with a pre-lease agreement. Similarly, the second facility (under 3,000 sq m of GLA) in Lozen village was also taken ahead of completion. The own use project was Aero Technic’s production and warehouse installation (10,825 sqm of GLA).
Thanks to the newly completed buildings, the total stock in Sofia and its vicinity increased to 2,404 thousand sq m at the end of June. Of these, about 822,000 sq m were speculative.
Development activity picked up pace in the quarter. Five new projects, all of which for own use, were started in the period with a combined GLA of 42,000 sq m. In total, construction works were carried out at 26 locations. The volume of space in construction was 242,000 sq m. Some 41.7% of this volume was intended for leasing purposes.
MARKET CONDITIONS FAVOR LANDLORDS
Leasing conditions on the Sofia market were decidedly in favor of landlords. Prime asking rents for Class A logistics space (10,000+ sqm) were at €5.80/sq m (excluding service charges and other expenses). The vacant space is critically low at 15,000 sq m, for a vacancy rate of 0.62%. Lack of available space is forcing some of the largest tenants to secure warehouse and production space in advance via pre-lease agreements. This works well for landlords as such contracts help secure financing for new projects.
On the investment market, yields for prime logistics assets (10,000+ sqm) remained flat at 7.25%
