Institutional investors to dominate Bulgaria’s real estate market

Landmark Holdings consolidates the business interests of Alfa Finance Holding in the real estate sector in Southeast Europe (SEE). The company provides comprehensive asset management services starting from conceptual design to fully operational buildings. The list of projects for which Landmark has provided services includes Business Park Sofia, Bulgaria Mall, Ellipse Centre, Plovdiv Retail Park, Landmark Centre Sofia, Landmark Centre Varna and many others.

Yuri Katanov,
Landmark Holdings CEO

Which are the main trends on Bulgaria’s office space market?

Lack of new supply of offices in the last few years brought about a shortage of quality office spaces in Sofia. At the same time the capital continued to attract young urban population and new companies opened offices in the country. However, the master factor on the market is Bulgaria’s demographic development. Despite the macro challenges in this area we tend to think that over the next two or three years big cities will continue to grow as a result of intranational migration. The new offices expected to be delivered in the medium term will partly offset the supply-side pressure and will balance out prices.

At the same time, the IT/BPO companies, the tech environment and the drive towards a shared economy face us with new market demands. As our services’ bundle remains client-oriented, we no longer provide just the premises but offer support for all basic modern office needs including administration personnel lease, wholistic environment-friendly and sustainable energy supply solutions, even electro mobility – helped by our sister companies.

The market uptrend and higher client expectations prompt us to upgrade our assets quality – we are changing the systems wherever needed and implementing modern CRM technological solutions to cater to our tenants’ needs. One showcase example is our Bulgaria Center project, which was recently upgraded to a real class A building.

Which type of office spaces are in highest demand and companies from which sectors are most active in the search of new premises?

Location, location, location – the old rule is still true, and all new facilities developed in areas with good city transportation attract high demand. Competition and city development have led to the emergence of several preferred zones. However, the final mile run to a successful deal with clients remains the human touch. It is the extra effort in customer care – user experience, if you wish the technological and eco-friendly solutions and modern approach to fit-outs that win over the client.

Naturally, projects frozen for years have been restarted – we see this among all major transport arteria roads, incuding our new external project – Ellipse Centre. It is an example of a professional and mutually beneficial partnership between the developer Ilpa Development and Landmark as a Property Manager.

What are your expectations regarding Bulgaria’s market of industrial space in 2017 and 2018? Do you see any new regions emerging as hot locations for large investors?

We are witnessing increased demand for new logistic parks, warehouses with good adjacent infrastructure and quick access to highways and Sofia, including intracity warehousing. Logistic and industrial parks with sufficient electricity capacity, access for heavy trucks and good transportation links are well-positioned to find tenants in competition with companies across the whole SEE region.

Large investors are eyeing less popular areas with sufficient human capital. Varna is one location whose importance is more widely acknowledged. Blagoevgrad, Razlog and the nearby towns could be identified as the new industrial centres for many Greek companies. Northern Bulgaria is posed to attract the attention of West European and CEE companies seeking to expand their premises.

Several shopping centres in Bulgaria changed their ownership over the past year. Do you expect this trend to continue?

We expect the inflow of foreign capital to continue, not only to shopping centres but also to all real estate asset classes. Market sentiment has changed in the last two years and investors that have stayed for a while on assets would like to divest, while newcomers are looking for opportunities. Most deals will target assets suitable for institutional investors, predominantly in Sofia. Secondary locations will have to wait but in a mid-term perspective we are bullish on our market.