The economy exceeds expectations
There were several major economic developments in Q3 2025. The Council of the European Union formally approved Bulgaria’s accession to the euro area. Standard & Poor’s and Fitch upgraded the country’s long-term foreign currency credit rating. GDP data for Q2 exceeded expectations, and finally, the IMF, the World Bank and the EBRD all revised upward their Bulgaria forecasts, adding 50+ basis points on top of their previous GDP projections for 2025 and 2026.
Most economic indicators maintained their trajectories in Q3. Output in retail, services and construction grew y/y, while industry continued to suffer. Domestic consumption was again the key pillar of the economy, benefitting from a significant wage hike in the public sector in Q2. External demand was weak. Exports of goods dropped in low double digits, as did the preliminary numbers for FDI in July and August. Surveys showed that business climate was stable and economic sentiment remained positive.
Solid pipeline, narrow new supply & modest take-up
Logistics and industrial development activity in and around Sofia in Q3 proceeded at a good pace. Construction works were carried out at up to 30 different facilities. The volume of space being built stood at 348,000 sqm, of which 42% were intended for leasing purposes. A notable project start in the period was the repurposing of a former furniture production base into a last mile distribution center for a leading online grocery retailer.
New supply was very limited. Less than 13,000 sqm of space were brought online, which was the lowest volume in the last six quarters. This volume was split among three projects for the own use of an engineering and automation business, stationary distributor, and an aviation firm. As a result, the logistics and light industrial stock in and around the city edged up to 2,325,586 sqm, of which 34% were speculative.
Leasing activity was helped by the recent completion of speculative space in East Ring Logistic Park. Gross take-up in Q3 amounted to 34,000 sq m, an improvement from the previous quarter. New leases accounted for 60% of the volume, followed by own use with 35%, and renewals with 5%. From an industry perspective, distribution and logistics took 33% of the volume, followed by retail with 31%, energy with 15%, and others with 22%.
Landlord favorable conditions
In-line with expectations, the available space on the market at the end of Q3 narrowed to just 31,000 sq m, for a vacancy rate of 1.3%. The difficulties in domestic manufacturing and wholesale, as well as the persistent instability in international trade, have inserted a significant degree of caution in operators and investors. As a result, they put extra efforts in securing leasing contracts ahead of construction works or chose built-to-suit options.
In Q3 prime rents for Class A logistics space (10,000+ sqm) stood at €5.6/sq m and prime yields were at 7.25%. The current market conditions are generally landlord favorable and looking ahead, average prices may creep up across all submarkets in and around Sofia.
