LM Legal Services Blog

Although that according to the official statistics the construction of buildings has decreased by 1,4% on an annual basis, the index of the construction has increased by 2.1% in March 2012 in comparison with March 2011. The production of the construction industry in March 2012 has increased by 7.1% annually. This is mainly due to the increase of the volume of civil and engineering construction.
In comparison with February 2012 the retail index in March 2012 has increased by 3.9%. The highest increase was in the sales of home appliances and hi-fi, furniture and home ware. However in comparison with February, the online and phone sales have decreased, as well as the sales of medicines and perfumes.
The industrial production in March 2012 has increased by 1% in comparison with February 2012. The index of the industrial production has decreased on an annual basis by 3.2%. The production and the supply of electricity, heating and gas have decreased.

Vitosha Boulevard in the Bulgarian capital Sofia dropped out of the top 50 most expensive  streets  in the world. The boulevard is in 53-rd place with an average rent of 120 EUR/ sq m.  The rent in all locations around the world have dropped in the last 12 months because of the global recession.  Although the most expensive streets are without any competition, the big brand names tend to avoid opening new veniews there and prefer to open smaller shops in other areas.

Number one among them is still 5th Ave, New York with an average rent of 15 000 USD per m per annum. Chanzelysee in Paris is in the second place and Russel Street in Hong Kong is in the third place.

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.

The number of new shopping centres in Europe which will open in 2009 be about 40% lower than the forecasts made a year ago. In 2010 it is expected that this number will be even lower and the total area of the new shopping centres will not exceed 7 million sq m. These will be the lowest figures in the last five years.
Due to the recession in Europe alone the construction of newly planned shopping centres totaling 7 million square metres will be put on hold.

In 2008 in Europe 310 retail centres with a total area of 9 million sq m have been completed. Most of them were in Russia where the growth was 23% and the total area of the newly completed retail centres was 1,65 million sq m. Turkey was in the second place, closely followed by the U.K., Spain and Romania. In terms of percentage, the highest increase was in Bulgaria – 76% and in Romania – 63%.

It is expected that the current recession will have the most powerful effect in Turkey, Russia and the Ukraine. A year ago 58% of the project took place in these countries, but now only 22% of the new shopping centres are completed in these countries.

Office and retail rents fall and will keep falling in the next two years according to Raiffeisen Property. In short term the office space on offer will outnumber the demand. The same tendency is valid for retail space, as only in the next 2.5 years it is expected that the retail space will increase eight times.

Meanwhile the interest of investors is expected to decrease due to the world crisis which has hit the property market. As result the secondary market will become rather active.  Those who bought property as investment will rush to sell it. The demand will be focused mainly in the cities. The prices of high quality residential property will rise in expensive city areas.

In the mountain and sea resorts there are too many properties on offer. In the end of 2007 there were more than 80 000 newly built properties there, while currently there is demand for about 65% of them.