Ancoria E80 Boulevard Plot Fund 

Location
The Ancoria E80 Boulevard Plot Fund has been established with the purpose of purchasing a plot, which is located on the main European transport highway (E80), within the boundaries of Prolesha Village, Lazar Area, Bojuriste Municipality. The E80 highway is the main transport corridor connecting Sofia and the rest of Bulgaria with Serbia. The plot is situated 14 kms from the Sofia historic centre, 42 kms from Kalotina (Serbia), 7 kms from Sofia Ring Road and 21 kms from the new International airport of the capital. It is adjacent to a brand new factory.

 
Map of Sofia  [enlarge]

Planning Characteristics
The plot falls within the Multifunctional Planning Zone, which permits the construction of hotel complexes, trade and logistic centres, factories, warehouses, petrol stations and residential developments up to a total of 20% of the total permitted construction area. This planning zone is associated with the following parameters:

Local Market Dynamics (Sofia)
Supply
Industrial real estate is a highly attractive segment as seen by developers. Large players from Central Europe and beyond are considering the market opportunities and several projects are either planned for future development or have been initiated in the past nine months. Despite the expected growth in speculative developments, the market is still dominated by owner-occupiers. The total inventory of contemporary owner-occupied and speculative industrial space in Sofia and the region around the town is estimated at 1.200.000 m². This figure includes warehouse, manufacturing and flex buildings. Only 13% or approximately 160.000 m² of the current inventory is estimated to be speculative space consisting of 14.000 m² flex space and 146.000 m² warehouse space. The historic lack of contemporary space has forced many occupiers to choose a build-to-suit solution. With major speculative industrial projects about to be launched, it is expected that the share of owner-occupied space will be substantially reduced.

More than a third of the total inventory in Sofia is located in areas close to the international airport (Druzhba, Gara Iskar, Sofia Airport, Vraxhdebna and Slatina), which provides convenient access to railroad, air and ground transportation.  Besides the airport area, Kazichene and Bozhurishte are the fastest developing new industrial zones, located respectively just outside the eastern and western parts of the town and along main transportation corridors.

Demand
The demand for modern industrial facilities is gradually increasing. Most businesses still choose built-to-suit solutions as existing space is inadequate to meet their specific requirements. Retailers and distributors of food and beverages, pharmaceuticals and electronics are among the companies with growing needs for warehouse space. European Union regulations and requirements are creating a demand for industrial space, which comply with certain standards. For instance, the demand for temperature controlled facilities is expected to increase.

Forcast
New speculative and build-to-suite developments will continue to add to the industrial inventory. Third Party Logistic (3PL) companies servicing large logistics accounts as well as retailers and distributors are expected to experience increased demand for warehouse space. Local manufacturers are expected to expand along with foreign manufacturers who will take advantage of Bulgaria's competitive cost structure and the lowest corporate tax in the EU. A concentration of new industrial developments in Sofia is expected in the eastern part of the city in areas along the Ring Road between Trakia and Hemus Highways, all the way to the town of Elin Pelin. Another concentration of industrial facilities is foreseen in the western part of the town along the European highway E80. 

Bulgarian banks are increasing their exposure in these developments and predict growth with limited downside risk for the next five years.

 Prospects
The plot is strategically located on the European highway E80, 900 m. west of the brand new impressive Citroen showroom. Most of the plots along the highway have been bought mainly by foreign investors. Showrooms, offices, hypermarkets and factories have been developed along the highway during the past two years. The plot is situated 5 km from the Porsche showroom and Metro Hypermarket, where the prices of similar plots are 300% higher than the purchase price of the plot and 900 metres from the brand new Citroen showroom, where the prices are 60% higher. Taking into consideration the tempo of expansion along the European Highway E80, we expect that similar prices to the above will reach the neighborhood of the plot in question in the next 2-4 years. Currently, prices in the vicinity of the plot are changing on a quarterly basis, a phenomenon, which is common in the development countries and in the new EU members. We see this a a highly attractive investment with limited downside.