The market for light industrial and warehouse space slowed down the tempo at the start of the year. Take-up in the period January to March, 2024, narrowed to mere 11,760 sqm from over 80,000 sqm in the previous quarter. Meanwhile, the volume of completed projects during the quarter slipped to less than 10,000 sqm, the lowest in over two years. These are some of the key datapoints highlighted by commercial real estate consulting firm Cushman&Wakefield Forton.

“The momentary slowdown on the market is in part due to narrowing volume of imports which affects demand. After a lengthy period characterized by good rates of absorption, the industrial market appears to enter a new phase. Speculative projects currently under construction would create new opportunities for even more dynamic developments in the segment,” comments Zhoro Angelov, manager Industrial and Logistics Space at Cushman & Wakefield Forton.

SIGNIFICANT VOLUME OF NEW PROJECTS ARE UNDER CONSTRUCTION – JUST OVER 350,000 SQM

During the first quarter of 2024, construction works started on new projects with combined GLA of near 74,000 sqm, up from just 41,000 sqm in the last three months of 2023. Almost the entirety of this volume was comprised of speculative projects, indicating a reasonable confidence among developers about the perspectives of the Sofia market. At present, the total volume of projects under construction amounts to 350,000 sqm, which is the highest in the last 12 months. Some 144,000 sqm or 41% of the total volume are speculative, according to the data of the consulting firm.

The total stock of light industrial and warehouse space in Sofia stood at 2.04 million sqm of GLA at the end of the period. Of these, just over one million were in 10,000+ sqm facilities. Meanwhile, the available space on the market amounted to about 60,000 sqm for a vacancy rate of 2.8%, up slightly from 2.3% in the last quarter 2023. This level of vacancy reflects the recent introduction of large projects and the market’s need of more time to absorb the space made available.

RENT LEVELS STABILIZE FOR THE FIRST TIME SINCE THE END OF 2021

During the quarter, prime yields increased by 50 basis points to 8%. Meanwhile, for the first time since the end of 2021, rent levels stabilized. The price of newly constructed Class A warehouse space at prime locations remained unchanged at EUR 5.4 per sqm. Looking forward, rent levels are expected to stay stable, according to the report of Cushman&Wakefield Forton.