C&W/H&B Secures Leading Position In Bulgaria

16 May, 2005, Sofia

C&W/H&B has appointed Forton International, the leading national commercial real estate consultancy in Bulgaria as an Associate Office.

Forton is part of Bulgaria's Address Group, one of the country's largest private property advisors. Forton has 100 people in six offices across the country. It provides a full range of services, in agency, advisory, investment, valuation and property management.

Ralph Holland, Head of C&W/H&B's Associate Offices, says: "Cross-border property players are arriving in Bulgaria, attracted by the country's imminent membership of the European Union and a property sector that shows significant potential for development.

"Our association with Forton builds on our already dominant position in Central and Eastern Europe and ensures that we can service the growing number of our cross-border clients looking to enter or expand in Bulgaria."

C&W/H&B was one of the first property consultants to open offices in Central and Eastern Europe, in the Czech Republic and Hungary in 1993, and Poland in 1995, while in January 2005 it acquired leading Russian real estate firm Stiles & Riabokobylko, with which it had an Association agreement since 1998. In addition, the Firm has Associate Offices in Croatia, Romania and Slovakia.

The announcement of the association with Forton follows the ratification by the European Parliament on 25 April 2005 of Bulgaria's entry to the European Union in 2007, together with neighbouring Romania.

Forton was formed from the Address Group, Bulgaria's leading real estate group, simultaneously with the announcement of the association with C&W/H&B. Valeri Valtchev, Chief Executive Officer of Forton, comments about the Bulgarian property market: "To date, the focus has primarily been on the residential and tourism sectors. Now commercial property is increasingly in the spotlight as the demand from office and retail occupiers is growing, more new developments are coming on stream and the investment market is starting to take shape."

As well as in Sofia, Forton has offices in Plovdiv, the two main Black Sea port towns of Varna and Bourgas, Pleven and Blagoevgrad.

Bulgaria has a population of 7.8 million, but its central position in the Balkans region means that a population of around 60 million lies within 500km of Sofia, with a network of international motorways crossing the country allowing access to Western and Central Europe, the Adriatic, the Black Sea coast as well as to Russia and Asia.

The country has one of the fastest economic growth rates in Europe; last year the economy grew by 5.3 per cent, with this year's estimate put at 4.9 per cent. In addition, it has single-digit inflation and a relatively stable currency.

The economy has been buoyed by the fast-growing tourism sector, centred on Bulgaria's ski resorts and Black Sea coast, and by foreign direct investment, which rose by nearly 90 per cent in 2003 and then by a further 14 per cent in 2004 to reach €2.1bn, according to provisional data from the Bulgarian National Bank.

Ralph Holland of C&W/H&B comments: "The property market is still relatively immature compared with those of the Central European countries that were part of the first wave of the eastward expansion of the European Union, such as Czech Republic, Hungary and Poland. This in turn opens the door for much greater possibilities, in particular given Bulgaria's geographical location as the gateway between East and West."

The big international food retailers, in particular Metro Cash & Carry, pioneered the development of the retail sector. Now the market is entering a new phase, with the arrival of the first modern shopping centres. A key scheme coming onto the market later this year is the Sofia City Center Mall, a development by a local company with 22,000 sq m of gross lease-able retail and leisure. "Leisure is another area with plenty of market scope as it is as yet an undeveloped concept in Bulgaria," says Valeri Valtchev.

The logistics sector has seen a growing demand from occupiers and interest from investors, given Bulgaria's strategic geographical location between East and West. Key areas of activity are around Sofia Airport, the main ports on the Black Sea and the Danube River, and the main artery roads running east-west and north-south.

In the office sector, prime space in the right location is in short supply, in particular in the Central Business District. Successful decentralised office markets continue to be Business Park Sofia, T Alexandrov Blvd, N Vaptsarov Blvd and Tsarigradsko Shosse, which connects the Central Business District with the airport.

Office rents increased in 2004 for the first time since 1998 because of the increase in demand from international tenants for quality office space, and demand from the banking and telecoms sectors. Looking ahead rents are expected to remain stable, with only modest acceleration over the next two to three years. Prime rents are around €180 per square metre a year, compared with €220 in Prague and €205 in Budapest

"With more businesses entering the market, demand for high-quality offices is expected to increase," says Valeri Valtechev. Future opportunities may also exist in towns such as the second city Plovdiv, and Varna and Bourgas.

Local and foreign private investors, in particular from Ireland, the UK and Israel, have to date dominated the investment market, but now they are being joined by the new local REITs (Real Estate Investment Trusts), introduced in 2003, as well as by international property and venture capital funds looking to expand their geographical coverage in the region. "With yields at 12-14 per cent and Bulgaria's forthcoming accession to the EU, we have experienced a higher level of demand from investors," says Ralph Holland of C&W/H&B.

"Till now the route to investment has been through development, given the shortage of good quality stock," says Valeri Valtchev of Forton. "Now this is changing, and the first speculative schemes are coming onto the market."

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