Logistics, Retail and Distribution Companies Remain the Major Driver on the Market
The advisory company “Cushman & Wakefield Forton” published its Q4 2020 reports on the state of the industrial, office and retail market. According to the data, the completion of 43,930 sqm production and logistics space provided significant input to the industrial market stock in Sofia in the last quarter of 2020. With the new completions, the modern industrial stock in Sofia reaches almost 1.4 mln sqm, with logistics, retail and distribution companies still being the major driver of the Sofia industrial property market.
The new supply includes three large projects – Industrial Park Sofia East, Retail Park Vladimir Vazov and the logistics park of RGS Invest in Bozhurishte, as well as extensions of owner-occupied premises.
Rents in Sofia remain stable, with prime rates in the range of 4.2-4.4 euro/sqm for mid-sized units and slightly below 4 euro/sqm for larger premises, above 10,000 sqm.
The situation on the office space market is different. According to Cushman & Wakefield Forton, 2020 was the weakest of the last five years. The amount of rented space dropped by 39% compared to the previous twelve months. The new completions are lower than expected – roughly 93,000 sqm in 2020 and most buildings obtained use permits with high vacancy rates.
Some companies reconsidered their office space needs, offering part of their premises for sublease. According to Cushman & Wakefield Forton’s research, this supply accounts to about 10% of the available space in Sofia or 28,046 sqm.
Prime asking rents in the central business districts remain unchanged at 15 euro/sqm. The main road and suburban areas’ rents registered a slight decrease. At the end of 2020, Class A projects alongside main boulevards are relatively stable at 12-14 euro/sqm. The increase of vacancy is expected to keep rents under pressure in the coming months, especially in areas with new office construction, the report states.
The average vacancy rate in shopping centers in Sofia slightly decreased in Q4, before the second lockdown, to 7.9%, having reached almost 9% in the previous quarters.
After slight decrease in the previous quarters, the asking rents in Sofia stabilised in the end of 2020 at 53 euro/sqm on average for high street locations and 36 euro/sqm for shopping centers. However, the volatile market keeps rents under pressure. Rents in the retail parks remain unchanged, in the range of 8-10 euro/sqm.
At an online conference, the European Investment Bank (EIB) presented the results of its annual survey on the corporate investment landscape in Bulgaria. The event was held on February 8 and was organized jointly with the Ministry of Finance. The presentation of the results for Bulgaria is part of a series of events in all EU countries. TThe survey is based on 12 000 companies across the 27 Member States countires.
The meeting was attended by EIB Vice President Lilyana Pavlova, Finance Minister Kiril Ananiev, EIB Senior Economist and Analyst Atanas Kolev, Deputy Minister of Economy Stamen Yanev, Fund of Fund’s Executive Director Vladimir Danailov, Trakia Tech Chairman Georgi Stoev, CEO and Board Member of the Bulgarian Startup Association – BESCO and others.
Should you be interested, you can get the EIB Investment Survey for Bulgaria here https://www.eib.org/en/publications/econ-eibis-2020-bulgaria, and below are some of the main conclusions.
Highlights of the report
The COVID-19 crisis has affected companies’ investment strategies this year, with more than a half of them (53%) stating that they will either invest less (46%) or invest more than planned (7%), which is close to the EU averages.
Almost 59% report operating at or above full capacity in the last financial year. In the next 3 years, enterprises plan to invest mostly in capacity expansion (34%) and new products and services (27%).
Almost one third of all firms claim to have developed or introduced new products, processes or
services (28%) which is close to 2019 results but well behind the EU average (42%). More than 55% of all companies have implemented (fully or partially) at least one digital technology. This is below the EU average of 63%.
Drivers and Constraints
Both in BUlgaria and in Europe, the businesses are less optimistic about the overall economic climate. The most cited long term barrier to investment in Bulgaria is uncertainty about the future (86%). This is above the EU average (81%).
Around eight in ten firms in Bulgaria (83%) and EU-wide (80%) report that they were generating a profit in the last financial year. Internal funding was the main source of investment in
Bulgaria (67%) in 2019, above the EU average (62%). Bank loans made up the largest share of external finance (40%), well below the EU average (59%).
In 2020, 37% of the Bulgarian companies have invested in measures to
Sofia Investment Agency is negotiating a partnership agreement with Varna – another large city in Bulgaria, to work together to attract foreign investors to our country. The cooperation between the two cities will be part of the joint initiative launched at the end of last year between Sofia and Plovdiv to build a national union of the major industrial centers in Bulgaria.
The partnership with Varna will be signed between Sofia Municipality and Varna Municipality. It will aim to develop investment profiles of the cities and through joint efforts and a unified marketing strategy to attract strategic investors to the location with the most appropriate profile.
According to the Institute for Market Economics, Varna Region reports moderate investment activity. The number of enterprises remains high (70 per 1,000 compared to 59 for the country), and domestic and foreign investment is growing. Foreign direct investment reaches EUR 3968/person (compared to EUR 3560/person in the country).
Varna Municipality is working to develop a business-friendly environment that will allow sustainable growth and the establishment of high value-added businesses. In recent years, large companies have expanded their activities in our country by opening offices in our Black Sea capital. At the end of last year, Paysafe chose Varna as its first office outside Sofia for Bulgaria. Sofia-based Pontica Solutions also chose Varna for its second office in the country.
We believe that Varna Municipality is an important partner in our initiative for the national coalition of the major industrial centers in our country, and we will be able to exchange best practices, as well as implement the most appropriate investment projects for both cities.
Sofia Investment Agency will sign a partnership agreement with Burgas. This is the next step in the joint initiative launched at the end of last year between Sofia and Plovdiv for the national union between the major industrial centers in Bulgaria.
The Memorandum with Burgas to be signed with DigIhub (Southeastern Digital Innovation Hub) – a non-profit association that started its activities at the beginning of last year. Co-founder is the Burgas Municipality.
DigIhub is a joint initiative of organizations from the city’s public, private, non-governmental, and educational sectors. Digital Hub’s primary goal is to support innovation, boost the digital transformation of manufacturing enterprises in the Industrial and Logistics Park – Burgas, and the companies in the ICT sector by facilitating cooperation between stakeholders, technology experts, investors, government, and academia.
The agreement has been approved by the Supervisory Board of Sofia Municipal Privatization and Investment Agency and is soon to be signed. The Memorandum will aim to establish cooperation between Sofia and Burgas to make the investment profiles of the two cities and attract investors through shared resources and a common strategy.
Maria Hristova, Chief Executive Officer of Sofia Investment Agency, and Plamen Panchev, Executive Director of the Trakia Economic Zone (TEZ), discussed the opportunities for joint initiatives to develop Sofia’s investment policy. The conversation focused on working models and possible joint activities between the Agency and TEZ in projects related to the development of the industrial and business areas and the attraction of investors in Sofia.
The meeting was the next step in a joint initiative launched at the end of last year between Sofia and Plovdiv for national union of major industrial centers in Bulgaria, which would establish our country as an attractive investment destination through joint efforts, resource sharing, and a unified marketing strategy for our country. We are glad that during the discussion with TEZ, we reaffirmed our shared vision that Bulgaria has strong competitive advantages in the region and has the potential to become a preferred nearshoring destination in Europe. During the meeting, our team spoke about our vision for the future and the models for transforming the former industrial zones in Sofia, which would become modern multifunctional urban areas through proper planning and a balanced mix of functions.
Sofia Municipality and TEZ have a solid basis for cooperation in investment projects due to the expertise of both parties in public- private partnerships, local strategies for attracting investors, managing investment projects, and attracting leading companies from countries such as the USA, Italy, Germany, France, the Netherlands, Great Britain, etc. We also share the common goal to attract investors in high value-added services and industries, at the expense of low-profile ones, and to create a healthy environment for business development and sustainable growth.
In recent years, the public and private initiative TEZ has implemented many successful projects for Plovdiv and the region with the development of 6 industrial zones. More than EUR 2 billion have been invested in an area of 10,700,000 sq.m, and more than 30,000 jobs have been created. The company applies a complex investor service model – from site selection with developed infrastructure, through construction of facilities, to assisting investors in applying for European programmes. The investments in projects agreed for implementation in 2021 amount to about BGN 100 million – in high value-added products, automotive sector, electronic components, logistics, pharmacy, etc.
TEZ also has joint projects with other municipalities in the country (Haskovo, Burgas, Gabrovo, etc.). It partners with Sofia projects for centers of
Sofia is an indisputable leader in investment activity, has the largest number of companies, and the attracted foreign direct investments are significantly higher than the national average reaching EUR 9361 / person per capita. The data are from the ninth annual study “Regional Profiles 2020” of the Institute for Market Economics (IME), presented on 26 January in a live broadcast on Facebook.
According to the report, Sofia is also the indisputable leader in terms of investment activity. It shows the highest investments in tangible fixed assets – BGN 5568 per person at BGN 2750 on average for the country. The attracted foreign direct investments are also significantly higher than the average for Bulgaria – EUR 9361 per capita. The number of working enterprises reaches 91 per 1,000 people, with an average of 59 per 1,000 people in the country.
City government has received a high assessment as well. Sofia administration’s work has been recognized as the most transparent in the country and has the highest rating for the development of e-government and the provision of “one-stop-shop” administrative services.
According to the report, Sofia is the region with the highest gross domestic product (BGN 33,437.00 per capita) and the highest salaries and incomes. The employment rate reaches a record level of 76.4% (compared to 70.1% in the country). The lowest value in Bulgaria’s modern economic history is noted by the unemployment rate – 1.6% (compared to 4.2% in the country). The average annual gross salary in Sofia reaches nearly BGN 19,000 and exceeds Bulgaria’s average by over 38%.
Sofia remains the area having the workforce with the highest educational attainment levels. It has the most favorable demographic structure and is among the few regions that continue to attract people showing a positive mechanical population growth rate of 2.4%.
Sofia has weak performance in only two criteria – taxes and fees and security and justice. The first is due to the fact that the capital has the highest local taxes in the country and the second – to the increased workload of judges and the relatively large number of crimes.
The annual study “Regional Profiles” by IME is the only one of its kind in terms of scale and depth of the social and economic situation of the 28 regions in Bulgaria. The analysis is based on 64 indicators and this year it focuses on the labor market and the effects
Discussing with the Trade and Economic Office in the Czech Republic a Potential Memorandum of Cooperation under the City-to-City Business Programme
Senior Executive Director Maria Hristova and Georgi Stoilov, trade representative for Bulgaria in the Czech Republic at the Trade and Economic Office in the Czech Republic with the Ministry of Economy, discussed the possibility of signing a Memorandum of Cooperation under the City-to-City programme – an initiative launched by Sofia Investment Agency in 2018. The City-to-City Agreements for cooperation focus on networking, knowledge-exchange and business support to companies that want to start operations in the partner cities.
The initiative aims to facilitate business cooperation, build trade and investment relations, as well as to provide incentives to support the business in establishing it in new cities.
For several years now, our team has been in partnership with the Trade and Economic Office in the Czech Republic to exchange good practices, assistance to Sofia-based companies in participating in major international fairs and exhibitions in the Czech Republic, as well as to provide entrepreneurs with latest data on the business environment in both countries. Georgi Stoilov also assisted us in publishing an overview of the opportunities for entering the market of the Czech Republic and the special features of the local business environment to help local companies seeking internationalization. Read the full article here
We express our gratitude to Mr. Stoilov for his commitment to assist us with a potential City-to-City Agreement on the market in the Czech Republic. Stay tuned for the latest news on the project.
If you are an investor or an entrepreneur interested in business opportunities in Sofia and Bulgaria or the Czech Republic, do not hesitate to contact our team for a free consultation on cooperation opportunities in both markets.
Sofia has the potential to drive economic growth and creates opportunities for job creation and innovation. We believe investment intentions after BREXIT can spark Sofia’s economic growing.
It’s our view that after Brexit, UK based businesses may find Sofia more attractive from an investment perspective if the Bulgaria’s business, regulatory and societal climates reflect their own aspirations.
Sofia investment agency will participate at fifth annual “BBBA Tax & Regulatory Update” webinar organized by British Bulgarian Business Association (BBBA).
The event will take place online on two consecutive days – January 25 – 26, 2021. It will give a short overview of business related regulatory changes from top experts.
Regulatory Changes in Bulgaria
Regulatory Changes Related to Brexit
We are thankful to the colleagues from BBBA for the great initiative.
Sofia investment agency took part at the ”Business science” webinar organized by British Bulgarian Business Association (BBBA) where the focus was turning challenges into opportunities.
Experienced professionals from Ironbridge Associates provided comprehensive explanation of the today’s challenges and the importance of Business Science and the fact that it uses analytic methods, processes, systems, education and machine learning to discover patterns, trends, and relationships in activities and data. How the Business Science identifies opportunities to enhance customer experience, identify new revenue opportunities, embrace innovation and improve business efficiency.
The professionals also described the importance of the process intelligence and the opportunities organizations to decrease the operational costs by combining hyper automation technologies with redesigned operational processes. The seriousness of data security, new technology and people skills were also thoroughly discussed and the latest aspects were highlighted.
We are thankful to the colleagues from BBBA for the great initiative. The SOAPI team was pleased to participate in the promotion of best practices in business in order to provide investors in Sofia with the latest and most appropriate solutions for their needs.
Download from our website the new report “Economic effects of COVID-19 and growth potential of Sofia”, developed by the Institute for Market Economics for Sofia Investment Agency.
The report examines the pandemic’s effects on the capital’s economy, taking into account the second partial lockdown in December 2020. The focus is on Sofia’s long-term potential and the sectors that continue to pull the capital’s economy forward or have the opportunity to return to the growth trajectory as soon as possible.
In the document, you will find data on the impact of the crisis on the labor market, tourism and air transport, construction, and others., as well as a forecast of the prospects for manufacturing, trade and repair, transportation, warehousing, real estate, culture and entertainment, accommodation, ICT and outsourcing sector.
Java2Days 2020 goes live again. Two months ago, the organizers decided to cancel the event. But after a pile of emails from the ecosystem asking for the conference, Innovation Center decided to transform Java2Days into a virtual networking event on December 21-23 – completely open and free for the Java community.
Sofia Investment Agency is glad to be a partner of the event. Chief Executive Officer Maria Hristova was invited to join the opening session of the conference.
The impact of the COVID-19 pandemic is being felt across the world. There is no playbook, there is no instruction manual, but COVID-19 could have a lasting, positive impact on workplace culture. The COVID-19 lockdown means that developers and other technologists are finding more time to contribute to projects. As communities around the world come together in response to COVID-19, the developer community is playing an active and important role in relief efforts. We’ve seen an inspiring response from developers looking to build crisis response apps and sites to help keep their users and the public informed and healthy, Maria Hristova said in her welcome speech.
The upcoming discussions in the next 3 days include:
If you are interested to join the discussions, show your code, or deliver any talk – just let the organizers know. They don’t expect polished presentations or tailored content, but just speakers with passion!
Join the event! Free registration here.
Sofia Investment Agency has opened a Business Support Center for Completing Applications for Financial Support. Our goal is to support every entrepreneur from micro-, small- and medium-sized enterprises in the COVID-19 situation.
A team of experts will provide information on the available programs for which SMEs can apply, their eligibility, and deadlines.
All services are completely free. Every day on our website, we publish the current open calls.
Consultations will be provided by e-mail, telephone, or on-site at our two contact points.
If you need information about current programs or assistance in filling out applications for financial support, send us an inquiry at the e-mail below or call us at the contact number provided.
If you want to visit our Center on-site, you can do so from 9.00 to 17.00 on weekdays. In order for us to be as useful to you as possible, so that you receive assistance quickly and without waiting, and with care for your health in the current situation, we recommend that you indicate by phone or e-mail the time and day when it will be convenient for you to visit us, and specify a preferred address.
phone number: +359 885 23 16 87
6 Petko R. Slaveykov Square, 1st floor
phone number: +359 885 23 16 87
12 General Gourko Street, 4th floor