LM Legal Services Blog

The price of agricultural land in Bulgaria has decreased by 40% in the first months of 2009 in comparison with 2008. The reason for this is the recession and the boosted prices of agricultural land in the beginning of 2008. This has put off many prospective buyers.

At the moment the average price is between 200 and 300 levs per 1000 sq m.
The top most expensive agricultural land is in north-east Bulgaria, in the area of Dobrudja, while the cheapest around Vidin in north-west Bulgaria, Haskovo in the south, Lovetch and Gabrovo in mid-Bulgaria and Pernik, close to Sofia.
Despite the price drop, the rent of agricultural land steadily increases. At the moment the average rent is between 18 and 20 levs per 1000 sq m, which is an increase of 10 levs in comparison with the same time last year.

Companies in Sofia which offer office space for rent have a special offer of 3 to 12 rent free months. Tenants who sign a contract with them do not pay rent for some time as a bonus.

The reason for this is the collapse of the rental market of office space in the last few months. According to the statistics, 12% of the office space on offer in Sofia is empty. The average rent of good quality office space is 13-14 EUR per sq m.

Many retailers started leaving the shops in the central parts of Sofia which they have hired and look for new shops in the shopping centers and streets in the outskirts where the rents are lower. Many retailers have terminated their rental contracts for their shops in the central Vitosha Blvd, Solunska, Graf Ignatiev and Rakovski Streets. Most of these retailers sell mobile phones, clothes and shoes. In the last years there has been a boom the sale of mobile phones but now sales have drastically dropped and many shops have closed. At the moment the rent of a shop on Vitosha Blvd is unacceptably high – between 70 and 100 Euros per sq m – while in the shopping centers it varies between 30 and 70 Euros per sq m. It is expected that due to the lack of tenants the rents of retail space in the central parts of Sofia will drop.

Sofia is in third place among the European capitals in terms of profitability of office space. A high quality office building can have a 10% annual return. Only the Russian capital Moscow (11.5%) and the Ukrainian capital Kiev (14%) are rating better than Sofia. The profitability of office space in the Bulgarian capital has increased by 3% or 300 points from its lowest position three years ago. The figures for Belgrade are similar – 10% – while for the other Balkan cities this ratio varies from 7% to 8.5%. Only offices in the Romanian capital Bucharest show higher annual return of 9.5%. The more developed markets of office space like Prague, Budapest and Warsaw have much lower levels of annual returns of 6.75 % – 7.75%.

The rent of office space in the Bulgarian capital has actually decreased by 6.85% in the last year and now is 17 EUR/sq.m. on average as it is linked to the decreasing prices of properties in general. There is similar decrease of office rent in Madrid, Dublin, Moscow, Kiev, Belgrade, Budapest, Warsaw and Bucharest. In the 15 older EU-member states the office rent has decreased by 4% on average.

Despite the financial and economic crisis, the market of agricultural land will stay relatively active in 2009 but the prices will fall, according to the Bulgarian Deputy Agricultural Minister Svetla Bachvarova. In her annual analysis of the agricultural land market she said that there has been an increase of more than 21% of the market in comparison with 2007. The average price of the deals in the last year has been 312 levs per 1000 sq m, according to the System for Agricultural Market Information. This is an increase of almost 33% of the market values in comparison with 2008. The prediction for this year is that they will fall to 280-300 levs per 1000 sq m. The differences in the prices for the different regions of the country remain. The lowest prices are in the area of Lovech and Pernik, relatively 201 lv per 1000 sq m and 140 lv per 1000 sq m. The highest prices are in Dobrich – 546 levs per 1000 sq m.
In 2008 for the second consecutive year the highest number of purchases of land took place in the Northern Central area.
There is a decrease in the renting of agricultural land. This was due to the fact that in 2008 and 2007 a larger part of the tenants have signed long-term contracts for more than four years with the land owners.
The regulation of agricultural land has decreased in the last year by 20% in comparison with 2007. The reason is the decreased interest for investment in tourism.
In 2009 it is expected that the area of the land for growing agricultural production will stay the same and only the land used for growing wheat will increase by 10%.