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Sofia with the largest growth of office space in Central and Eastern Europe by the end of 2017

Developing industrial areas in the Bulgarian capital grew by 120% last year
In Sofia, the largest increase of the active office space in Central and Eastern Europe (CEE) was registered at the end of 2017 with a growth of 24%. Growth was recorded in five of the six capitals of the countries in the region, with Prague being the only exception, with a decline of 7%.

This is clear from the new report on the real estate investment market in Central and Eastern Europe.

The growing industrial areas in Sofia and Bratislava have increased by 120% last year, with experts in the region expecting a boom in office building. However, they foresee a boom in building commercial areas only in Bratislava and Budapest. Only Sofia and Budapest may miss the industrial boom if the rents are not stabilized, the experts warn.

Steady GDP growth in Europe (2.5% on an annual basis in 2017) motivates investment in Central and Eastern European countries, says the consulting firm. The increased activity of local and EU investors in the six countries of the region (Poland, the Czech Republic, Hungary, Slovakia, Romania and Bulgaria) as well as consumption levels will probably lead to the peak of economic growth in 2019. the report said.

The company predicts that investment volumes will be expanding in the region this year, possibly over the € 12.9 billion in 2017.
Will there be a peak soon?

Rental rates rise to high levels in the office space sector in the region, showing stable economic activity. Construction in the countries of Central and Eastern Europe implies a significant upturn in this area. Another indication of this is that investment in hotels doubled in 2017 to an amount of EUR 988 million. Such a development is usually a sign in that direction.

Symptoms of "fear of heights"

Major risks include inflation growth, labor shortages, high interest rates, and increased investment costs in the region, respectively, according to experts. Outside of Central and Eastern Europe, the ECB may surprise the markets and also increase interest rates. Other factors to consider include online trade, tax and populist politics, as well as excessive project development, which could happen in 2019.

Growth motors

It is expected that the current development of the investment market in Central and Eastern Europe will remain in 2018, possibly leading to continued GDP growth. The German IFO Business Climate Index remains a condition for positive market expectations in the six countries in the region.

The market in Europe is booming, the eurozone is showing a healthy growth of 2.5% in the third quarter of 2017 compared to the same period of the previous year. GDP in the six countries of Central and Eastern Europe is improving as a result of exports to Europe (and not only), investment and consumer activity. Although interest rates (in the Czech Republic and Romania) are increasing and the trend will remain, growth will remain a reality in 2018.

Investment volumes are rising

The positive development of the real estate sector is directly proportional to the investment volumes. The EU ESI consumption indicator for the six Central and Eastern European countries signaled a slight increase in investment over the previous year. In 2017, their volume was 12.9 billion euros - 6% more than in 2016 (12.2 billion euros). The direction of development is positive for at least the next 18 months.

Why buyers to buy?

In most European capitals, rental rates are rising, as experts predicted 12 months ago. This trend continues, especially in more liquid markets such as Warsaw and Prague. The employment of major shopping centers is very high. What is worth mentioning is the cyclical growth in office rents, which was particularly noticeable by the end of 2017, and is a signal of an upturn in the economy. This is most evident in Budapest, Sofia, Bucharest and Prague, the consultancy company notes.