Interest in Bulgarian Real Estate Continues

SEPTEMBER saw many signs of a continuing increase in interest in real estate in Bulgaria.

On September 20, it was announced that Formula One team owner Eddie Jordan planned to invest in the construction of residential estates, a yacht port or a golf course near Bourgas. Jordan was in Bulgaria to meet Bourgas mayor Yoan Kostadinov.

During the talks, Jordan said he had already started investing in the construction of a residential estate in Obzor. The facility will have 630 apartments and will be ready in the next two years.

Kostadinov requested a written presentation of the intentions of Jordan’s investment company, saying that the municipality could make available land to construct a golf course, residential buildings and two yacht berths. But it could also use this interest to promote Bulgaria as a tourist and property destination.

Meanwhile, a large number of hotels at the Black Sea coast have been offered for sale at the end of the summer season. Observers of the market say that the owners of these hotels have found that the investment they have made might not prove worthwhile.

The number of offered sites varies between 180 and 200. Owners of 70 hotels are each asking more than one million euro. The rest are smaller, family-type hotels with no more than 50 beds, with starting prices of about 330 000 euro.

For larger hotels that are in operation, prices start from three million euro and go up to 25 million. The price is determined by factors such as location, number of rooms, additional services and surrounding land.

An additional 170 guest houses are being sold in the Bourgas region. About 40 are on sale in Varna. The average price is 768 euro a sq m. Property on the southern coast tends to be more expensive because of the larger beaches and longer season.

“I predicted this phenomenon long ago. Over the past two or three years, the development of tourism in Bulgaria has outpaced overall economic growth in the country, and especially the development of infrastructure,” said Blagoi Ragin, head of the Bulgarian Association of Hoteliers and Restaurateurs.

Ragin said that hotels had been put up for sale because the owners could not recover the costs of their investment. As a result, the real estate market was saturated.

As regards infrastructure, there has been no improvement for 15 tears. A tourism industry cannot exist without a working network of highways and a working economy, Ragin said.

Brokers say that there are a number of hotels in Sofia that have been or will soon be offered on the real estate market. Fifty new buildings are under construction in Sofia at present. It is unlikely that there will be buyers for all of them. And the problem is again rooted in the poor quality of infrastructure.

However, there is a positive sentiment on another segment of the real-estate market, according to some analysts. Sofia will have nine per cent more office space for rent at the end of this year, compared to six months before, but rents will still be rising, Colliers International said in their newest report, published on September 17.

High-quality office space for rent in Sofia will increase by more than 20 000 sq m by the end of 2005 from 228 000 sq m at the end of June, Colliers says. This increase will add to the 3.64 per cent increase between January and June, when new office buildings in the capital’s suburbs started operations.

Despite the higher offer, rents will keep rising in the second half of 2005, Colliers believes.

The average monthly rents for different types of office space were 10 to 13.5 euro a sq m in the first half of 2005, with leases for some downtown offices reaching as high as 18 euro. Rents averaged 12 euro for a sq m at the end of 2004.

Most of the office space that appears on the market in the second half is also in the suburbs of Sofia.

The largest supply of office space would push the vacancy rate up in the second half of 2005 despite increasing demand. Vacancy rates rose by 1.5 percentage points to 13.6 per cent in the first half of 2005.

The influx of foreign investors in Bulgaria and the expansion of those who already have businesses in the country have lifted demand for high quality office space.

Author: Ivan Vatahov
Source: www.sofiaecho.com