Boston, MA -- (SBWIRE) -- 06/03/2014 -- Bulgaria's commercial real estate market is showing signs of life in 2014, with the most recent set of industry indicators pointing to an uptick in demand and rental activity across the retail and industrial subsectors in particular. A gradually improving macroeconomic backdrop should provide some stimulus to investment and growth in rental rates in 2014. However, the real estate sector faces a number of headwinds in 2014, including oversupply, weak consumer spending and deflationary pressures.

With a focus on the country's principal cities of Sofia, Varna and Burgas, the report covers rental market performance in terms of rates and yields across the commercial office, retail, and industrial sectors. As well as in-depth analysis and forecasting for across each of these cities and segments, reports fed back to us from our in-country research teams provide a snap-shot of the health of each market as well In H214, a growing Bulgarian economy chimes with our outlook for a strengthening business environment across the commercial real estate landscape. With overall GDP forecast to expand by 1.6% this year, the main growth factors we are looking at with a regards to real estate demand growth are growing export volumes and higher levels of household spending.

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However, we caution that the sector will face a number of threats over the coming months, including deflationary pressures which have the potential to feed through into lower property prices and yields. In addition, we note that the supply of commercial real estate stock is high in some areas of the market - a situation which could potentially see vacancy rates higher in the short-term with rents falling in the opposite direction.

Recent Developments

- April 2014 witnessed the opening of the Panorama Mall in Bulgaria's seventh largest city, Pleven. The three-story mall measures about 17,500 square metres of retail space including 60 retail units, 80% of which is fully leased. The mall is expected to be fully occupied by 2014.
- According to Colliers International, office vacancy rates in Sofia fell by 12% during H113 to 21%.The Plaza West shopping mall is due to open in Q414. The shopping centre will be anchored by French supermarket chain Carrefour.

Key BMI Forecasts

- Rental rates across all three real estate segments are forecast to remain stable during April-September 2014.
- The retail segment will continue to outperform both the office and industrial real estate sectors in terms of average rental rates over H2 2014.
- The industrial sector will retain the highest yields over the year, while the retail sector will see the lowest average yields of the three

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