In the office segment, Sofia modern office space stock increased by 5% during the second half of 2012. For the same period, vacancy remained significant at over 20%. Only Class A offices registered higher than the average absorption rates. In 2013/14, several big projects of this type are expected to open. Bulgaria Boulevard will become an important destination for supply of modern office stock, due to two high quality office buildings, one of them the office section of Bulgaria Mall (20,000 sq. m.), and the other - Vertigo Business Center (18,000 sq.m).

By the end of 2014, contemporary office supply is scheduled to increase significantly, provided that the planned large projects (Capital Fort, City Tower and Millennium Centre) are completed. Main drivers of demand in 2013 will continue to be the big outsourcing/off-shoring centers (IT, BPO, SCC), the latter were also registered as the most active on the market during the second half of 2012.

A similar situation is observed on the retail market in Bulgaria. Supply exceeds demand in the segment and in 2012 its volume increased by 40.000 square meters, as a result of the newly open Bulgaria Mall and the first level of City Mall Stara Zagora. In 2013 two large-scale projects are announced to open in the capital - Sofia Ring Mall, located on Sofia ring road, close to IKEA, and Paradise Centre, In addition, another project is scheduled to open in the city of Burgas - The Strand.

By the end of 2014, Mega Mall Liulin and Carrefour Lilulin are also expected to become operational. Thus, the contemporary shopping centre supply is anticipated to increase altogether by more than 40%, reaching a total of 905,000 sq. m. for the country by the end of 2014.

Absorption in the short term will be a challenge for market participants, given the slow pace of growth in consumer purchasing power. However, projects with well developed concept, sustainable tenant mix and convenient location will continue to attract interest.

A positive trend during the second half of 2012 is the entry of new international brands on the Bulgarian market. During the previous year they absorbed nearly 30% of the vacant retail space in Sofia shopping centers. This proves that certain international companies identify good local market potential. In 2013, the French sports-retailing giant – Decathlon, will open its first store close to IKEA and Sofia Ring Mall. Its debut in Bulgaria will strengthen competition and will change the status quo in the sports goods segment.

Similar to the prior year, 2013 will witness a demand-driven real estate market. The environment will require adequate positioning and careful target segments selection for the owners, while potential tenants and buyers will become more cautious in decision making. All market participants will face the right choice challenge - in the year of choices.