In the first half of 2024, the volume of investment transactions was almost EUR 92.6 million, according to a report by the consulting company Colliers. Over 77% of it is due to one transaction with a portfolio of industrial and logistics properties and construction plots. Transactions with income generating assets is over 81%. The rest are speculative real estate transactions. The breakdown of investments by sector is as follows: 74% is industrial and logistics space, followed by hotels (15%), offices (8%) and construction land (3%).
Return levels for prime properties have maintained their values from the previous year, namely – 7.75% for office and commercial areas and 7.50% for industrial and logistics properties. Local investors continue to be permanently active on the Bulgarian market in recent years. The share of Bulgarian buyers has been constantly increasing since 2020. In the first half of the year, however, this trend did not hold, as international capital accounted for 77% of the volume, according to data from the Colliers report.
Central and Eastern Europe follows the trend started in Western Europe of a decrease in investment volumes, as a result of increased interest rates. Buyers continue to have expectations of low asset prices, while sellers are still not motivated to sell. Bulgaria is no exception, as in 2023 the volumes were almost 25% lower compared to the previous year. For comparison - in CEE this drop was over 50%. In the current year 2024, more investments are expected than in 2023, which will still be far from the traditional values characteristic of the period before the interest rate hike.
In the more attractive markets such as Poland, the Czech Republic and Hungary, a trend of price convergence is expected to begin (in parallel with the reductions in the ECB's main interest rate) and, respectively, investment volumes will recover there first. There is still no price adjustment in Bulgaria. At the same time, in the previous periods our country maintained good levels of activity, mainly due to the low indebtedness of the economy, as well as the conservative approach to investing.
The adoption of the euro as the country's official currency has been delayed due to failure to meet the inflation benchmark, and the lack of a regular government may further delay it. However, the expectations are that in 2025 this process will be able to start, as this is a prerequisite for increasing the interest of international investors in Bulgaria.
Commercial banks continue to be very active in the credit market. The increase in interest rates in Europe did not have much of an impact at the local level. In 2024, banks in Europe will for the first time have to report the ratio of financed “green“ projects. In this regard, ESG is expected to be an increasingly important criterion when making a decision to grant credit, as well as to be the focus of the wider community of market participants – entrepreneurs, owners, investors, tenants. The cost of improving and modernizing the already outdated buildings will be significant, but will be lower than the alternative of leaving them in their current state.
You can see detailed statistics on average property prices in Bulgaria by cities and neighborhoods HERE