City of Varna

Retail Market Overview Q1 2011
Trends and Processes
In the first quarter of 2011 the stock of modern retail space in shopping centers - self-contained retail space of about 10,000 m² and more, with joint ownership and management - was 590,000 m², and the ratio of retail space per 1,000 people was 80 m² for the whole country. The supply of new retail space in 2011 is expected to be several times less than in 2010 and the increase of the total stock of modern retail space in the country is anticipated to be within several percent. Rental Levels At the beginning of 2011 the average annual rents in the operating shopping centers in the capital did not change substantially for a second quarter in a row and stabilized at approximately EUR 266 m². The annual rents, at which deals on the high streets in the capital and the other big cities were closed, fell for another quarter, pressed by the high retail space vacancy, which kept the rising trend. In the first quarter of 2011 in Bulgaria some temporarily frozen retail projects were restarted, as some of them announced changes in their original concept. The most active players on the market this quarter were again the big FMCG retail chains, which besides with their expansion, were involved in proving their practices of stipulation of terms and conditions to suppliers. The big retail chains launched novel formats to the local market - smaller convenience stores - a segment in which even the biggest food retailers are planning expansion. Forecast - 2011 The economic development of the EU-members, which are the main trading partner and investment source for Bulgaria, is expected to be at different pace but positive as a whole. This should in turn lead to changes in households' propensity to consume and save. However, the actual increase of the purchasing power of the population is expected to be restrained by the growing prices of food commodities, public utilities and fuels. Rental levels in the operating modern shopping centers in Sofia are expected to remain steady. By contrast, the country yet anticipates gradual rent stabilization, which will be valid only for the well planned and managed shopping centers. The current 2011 is expected to be characterized by a process of clearer segmentation, as the rental levels on the high streets, not only in the capital, but also in the other bigger cities (with more than 100,000 inhabitants), are forecasted to stabilize. Despite some positive trends in 2011, the imbalance between demand and supply of modern retail space in Bulgaria is expected to continue. The positive side of this process is that it is expected to lead to more balanced roles of the different market players. The growth of the business activity in Bulgaria at the beginning of 2011 (as compared to 2009 and 2010) was expected. Nevertheless, the retail market in the country is seriously lagging, in terms of dynamics and stock, not only behind the older EU-members, but even behind neighboring markets, as Romania and Turkey.

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The developers are the ones who experience the harshest problems. This is the reason why they look for solutions in all possible ways. Apart from dropping the prices, they have started to lease the apartments built by them to buyers with a minimal interest. Their return has been delayed by 15 years in some cases, thus preventing them from making new investments. Other bonuses include fitted kitchens costing up to 3000 lv and in the cases of two-bedroom apartments complete furnishing plus one or two parking lots. Some developers add to this a plasma TV. However, the analysts do not believe that these perks will do the trick and attract more customers. All these bonuses can not solve the problems of the buyers in getting a mortgage.