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Bulgaria's warehouse market is extremely diverse and dynamic - interview with Simeon Mitev for Europaproperty.com
1. Please provide some information about the company. When was it established? What are the main areas of competence?
Agency "Chance-96" is a Bulgarian real estate company specializing in sales and rentals of industrial properties. It has a detailed portfolio of tenant, owner, investor, contractor, sales, consultancy, project management, and industrial property marketing services. As an owner, I have more than 25 years of experience in the field of industrial properties. Years later, as a reflection of the experience I have gained, and the fact that I know the market closely, I came to the idea that the time had come to create a separate platform that was directed only and uniquely at INDUSTRIAL PROPERTIES. Such platform has not existed so far neither in Bulgaria, nor in many other countries. Currently, it is the only platform with so much specialized information in Bulgaria. In the BGSKLAD platform, you can find information and offers for warehouses, factories, premises, terrains and production workshops all over the country. It provides the business with interactive maps of industrial areas, analyzes and professional consultation. It is nominated for the European Business Awards 2015-2016 in the "Business of the Year" category. Some of the tenant services that "Chance-96" offers are help in formulating the search terms for buyers and tenants, searching for warehouses and industrial sites or industrial projects, negotiating with owners, protecting the interests of customers. For customers which are owners, we offer two types of service packs – a standard pack, which includes consulting the owner about rental rates, market development, top demand information and transaction assistance, and a VIP pack, that allows maximum team organization for quick results, with the only requirement being agreement on the price, the duration of the contract, and the signature of the client. A SWOT analysis, as well as an audit of the financial performance of the site or related activity with partner companies, can also be prepared. Agency "Chance-96" also offers the development of conceptual projects with solutions based on marketing and financial targeting, as well as a potential place for resources. In addition, it also analyzes the various segments of the real estate market, the offers, pricing, demand, development trends, identifying the key competitors, existing projects, building and planning projects.
2. What is the current state of the warehouse / logistics sector in Bulgaria and what is the perspective for the future?
The demand and supply of warehouses is extremely varied and dynamic. The time at the moment is suitable for building new logistics complexes. There is a shortage of modern class A warehouses in Bulgaria. The most active demand is in the following sectors - Trade 27%, Transport and logistics 17%, Electronics 15%, Construction 13%. There is an increase in consumption, a stir in the construction of buildings and an e-commerce boom (online stores). There is a great demand for logistics areas and construction of new sites especially for them, as the market has a deficit of quality warehouses. It can be said that the risk for developers is minimal due to the high demand for new and quality sites and the fact that they are not present on the market.
3. What are the expectations of Bulgarian logistics operators?
The demand for new, large and modern warehouses and industrial properties continues. There is also demand for small storage areas up to 500 sq. m. The investors looking for logistics and production areas cannot accept the fact that on the basis of land prices and prices for new construction, the return on the project will be within 9-11 years. There is a demand for projects with returns up to 7 years. The demand and rental of warehouse areas along the coastline of Bulgaria has turned from seasonal into an year-round one in the recent years.
4. How is the situation in the industry compared to other European countries?
The real estate market in Bulgaria is at a normal pace but not enough to meet the demand. There is an increase in the demand for industrial properties compared to previous years. Bulgaria has the strongest growth in demand from the markets in Central and Eastern Europe. Investment growth rates are expected to hold this year and reach a higher value. Although industrial property transactions remain limited due to the lack of projects to meet demand, Bulgaria remains one of the most appealing destinations for investment projects.
The second most evolving property market is in Romania, and the third – in the Czech Republic. Bulgaria ranks fifth in fastest annual growth rate in construction. First is Hungary, followed by Poland, Slovenia, Sweden. The interest of investors in the purchase of industrial properties in Bulgaria is increasing. There are inquiries about logistics and production buildings conforming to modern standards as well as long-term leases. The lack of a ready investment project is an obstacle to large deals, but investor interest is high due to the stable rental rates.
5. What else can we expect in the near future?
We expect growth in the sales of industrial properties. Currently, the market offers more spaces for rent rather than for sale.
The demand for production areas is situated in regions that match the labor resources and competitiveness. There is an active demand for warehouse and industrial areas, even to the extent that there is a shortage of such. This necessitates the realization of new construction for the investment projects.
In 2018, we expect the 2017 trend to continue, as well as to conclude new and even bigger deals, to attract foreign investors through used and proven marketing approaches and through the implementation of new methods.
6. How important is new technology and innovation for tenants and developers?
For tenants looking for new and modern warehouses, it is important that they are in compliance with European requirements and new technologies. E-commerce marks a rapid growth in Bulgaria and has a major impact on the warehouse market. Its development has a positive effect on the logistics industry and is expected to continue to increase in the future. New construction is the most sought after in Bulgaria and this trend will be preserved in the future. The interest of foreign investors in industrial and warehouse areas in Bulgaria is gradually increasing. Additional requirements to warehouses compared to previous years are for them to be air-conditioned, to have duplication of water sources, energy sources and optical fiber lines for the Internet. Large park areas are very sought after, so that service trucks can be easily served at the base.
7. What will be the biggest challenge in the sector that is moving forward?
The biggest challenge is for the investors, who will have to be more optimistic and brave in their investment plans. They should be able to invest gradually and reasonably and be with the consultant at each step of the project.
8. How attractive is the warehouse product for investors?
The main attraction factors for investors in Bulgaria are the location, the infrastructure, the cheap and qualified workforce. In the past year, all newly built warehouses were occupied before they were finished. The few available vacancies at the moment, as well as the rising rental rates and the good rate of office buildings under construction, are the basis for optimism among investors. This provides a prerequisite for the successful realization of their investment intentions.