CUSHMAN & WAKEFIELD FORTON: CONTINUING ACTIVITY AND SLIGHT RENTAL GROWTH IN THE LOGISTICS MARKET
NOTICEABLE DECLINE IN THE VACANT LOGISTICS SPACE IN SOFIA IN Q1 2022, REVEALS THE LATEST MARKETBEAT REPORT OF THE COMPANY
The industrial property market in Sofia registered another quarter of high activity along with a slight increase in rental rates. This is stated in the marketbeat report of the consulting company Cushman&Wakefield Forton for the first quarter of 2022.
During the period, a total of 34,204 sq.m was leased out in Sofia, with retail, logistics and distribution companies being the main market drivers.
A noticeable decrease of the vacant space in the industrial segment is also reported by the company. At 4.1% at the end of 2021, this percentage experienced a two-fold decrease to 2% at the beginning of 2022.
“In the past year, the industrial property market has received a strong boost, mostly because of increased demand for warehouse space during the pandemic and the growth of e-commerce. This translates into increasing development activity and supply of speculative space. As a result, the share of vacant logistics space posted a temporary increase until new supply is absorbed by the market”, said Zhoro Angelov, Head of “Industrial Property and Land Development” at Cushman & Wakefield Forton.
The company adds that only one project was completed in the first quarter of 2022 – a logistics centre of DHL near the airport with an area of just over 5,000 sq.m. Since the supply growth has slowed down and the tenant demand remained high, this resulted in the vacancy rate decline.
Most rental inquiries are for medium-sized logistics space in the area of the Ring Road or in the emerging industrial zones in Elin Pelin and Bozhurishte. Within the city, smaller areas are in demand, up to 1,000-2,000 sq.m, for servicing the so-called “last mile” in online orders.
As of the beginning of the year, 423,000 sq.m of warehouse, production and logistics space was under construction in Sofia and the nearby industrial zones. About 40% of these properties are speculative projects, i.e. planned for lease. The majority of the space under construction are extensions of owner-occupied production and warehousing facilities.
Rental rates in prime industrial facilities in Sofia registered a growth to EUR 4.4/sq.m for medium-sized facilities, from EUR 4/sq.m at the end of 2021, Cushman&Wakefield Forton also reports. The reason is the rising operating costs and active demand in the market. Modern warehouse space above 10,000 sq.m is let at EUR 4/sq.m.
Yields for transactions in the highest segment of the market remained stable at 7.5% with a tendency to maintain this value in the coming quarters.
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