CUSHMAN & WAKEFILED FORTON: SLIGHT GROWTH IN LOGISTICS AND REATAIL SPACE RENTS
The first quarter of 2023 marked weak leasing activity in the industrial property market with low vacancy rates driven by rising prices and limited supply, according to the latest report from the commercial property consultant Cushman & Wakefield Forton.
GROWTH IN THE VOLUME OF COMPLETED OWN USE LOGISTICS PROJECTS IN SOFIA DURING THE FIRST QUARTER OF THE YEAR
On the supply side, the volume of completed projects reached a three-year high of 87,000 sqm, however only a few of the newly completed assets are inteded for the open market. The trend of more than three-quarters of the new logistics projects being for own use is continuing. Business activity has led to the exhaustion of vacant spaces and their share has remained permanently low – 1.5% of the total supply.
“The change of the main economic indicators in an economic environment is a development factor for the market. The increase of rental prices has caused tenants to be more cautious, while on the other hand, changes in construction costs have caused investors to be more considearte about their development plans. The combination of all factors is expected to lead to a new wave of interest in investments in own lands”, summarized Zhoro Angelov, Industrial Property and Land Development Manager at Cushman & Wakefield Forton.
As of the first quarter of 2023, the projects under construction in Sofia region remain over 350,000 sqm. During the period, three new projects with a total area of 47,000 sqm were completed. A new increase in rental levels was recorded for the prime logistics areas, reaching 5 euro/sqm for premises over 10,000 sqm. Rents for small to mid-size schemes edged up 8% q/q to 5.40 euro/sqm. The uplift was driven mainly by low availability of speculative space and rising construction costs of new projects.
RETAIL PARKS EXPANSION CONTINUES, REACHING 360,000 SQM IN THE FIRST QUARTER OF 2023
The retail space segment moves in similar dynamics as in 2022. In the first quarter, the trend of retail parks and discount chains expansion is continuing, with 9,000 sqm of new retail park sites completed throughout the country during the period. Factors such as a strong labor market and stable employment levels are contributing the retail demand and sales in 2023.
“Retail parks are emerging as a standard concept for retailers and those who need a larger area to enter smaller cities. Discount retailers, affordable clothing brands as well as sports stores and pet shops are actively expanding, same as last year” commented Krasimir Petrov, Head of Asset & Property Management Services at Cushman & Wakefield Forton.
The existing retail parks in the country as of the beginning of 2023 have a total area of over 360,000 sqm. Another 240,000 sqm are under construction and expected to be completed in the next two years. No new mall openings or expansions are planned for 2023.
Like the other segments, rental levels here showed slight increase, mainly reflecting the high demand and inflationary pressures. In the first quarter of the year, the asking rents for retail spaces in Sofia’s shopping centers posted increase of 3% and reached 36 euro/sqm for a site of 100 sqm with good location. On the retail parks side, rental levels are also slightly increased, varying around 9-12 euro/sqm depending on the location.
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