In the first half of this year, approximately 92.6 million euros were invested in business properties in Bulgaria, according to data from the consulting firm Colliers International. Notably, over 77% of this amount came from a single transaction involving a portfolio of industrial and logistics properties, as well as construction plots.

The majority of the deals, over 81%, involved income-generating assets, with the remaining transactions being speculative real estate deals. A significant portion of the investments, 74%, was directed towards industrial and logistics areas, followed by hotels at 15%, offices at 8%, and construction land at 3%.

The returns on prime real estate remained stable from the previous year, with office and commercial spaces yielding 7.75%, and industrial and logistics properties at 7.50%. Local investors have been increasingly active in the Bulgarian market in recent years, although this trend paused in the first half of this year, with international capital accounting for 77% of the total investment volume.

The broader region of Central and Eastern Europe (CEE) has seen a reduction in investment volumes, reflecting a trend that began in Western Europe due to rising interest rates. In Bulgaria, the investment volumes were nearly 25% lower compared to the previous year, whereas in CEE, the decline exceeded 50%. Despite this, Colliers anticipates that 2024 will see an increase in investments, though still below the levels seen before the interest rate hikes.

In more attractive markets like Poland, the Czech Republic, and Hungary, a trend of price convergence is expected as the European Central Bank (ECB) reduces key interest rates, leading to a quicker recovery in investment volumes. However, Bulgaria has yet to see any price adjustments. The country has maintained good levels of market activity, largely due to its low economic indebtedness and conservative investment approach.

The adoption of the euro as Bulgaria’s official currency has been delayed, primarily due to unmet inflation criteria, with the lack of a stable government potentially causing further delays. However, Colliers predicts that this process could begin in 2025, which might increase international investor interest in Bulgaria.

Commercial banks remain very active in the credit market, with the rise in European interest rates having minimal impact locally. Starting in 2024, European banks will need to report the ratio of financed "green" projects. ESG considerations are expected to play a growing role in credit decisions and will likely become a focus for market participants, including entrepreneurs, investors, and tenants. The cost of updating older buildings will be significant but less than the alternative of leaving them outdated.

By mid-2024, the number of houses in residential complexes in Bulgaria is expected to reach 1,700, spread across 112 projects. The average square footage of these homes has decreased from about 435 square meters in 2020 to 375 square meters, a trend driven by the shift of parking spaces outside built-up areas and the rise of the "vertical apartment" concept, which features more compact rooms and smaller courtyards.

Currently, over 1,200 houses are under construction across more than 90 projects, with a third of these concentrated in the five largest developments. Popular locations for these investments include the southern arc of the ring road, Bistrica, Pancharevo, and Lozen.