The Bulgarian business real estate market is spiraling out of control as projects are being delayed or postponed for better times, showed the annual market analyses by property consultants Colliers International and Forton International.

Many projects will remain architect sketches in 2009, while others will be tweaked to reduce costs.

Analysts who forecast an oversupply of retail and office space will be proven wrong as banks have reduced ample loan financing to a trickle and are now pushing for debt refinancing.

The credit squeeze is taking the biggest toll on the retail property segment, but it will also leave a raft of residential projects unfinished.

Banks have been cutting financing even to projects that have already been started if investors refuse to renegotiate loan terms, said David Davidkov, business space director at Colliers’ Bulgarian office.

Lenders are demanding higher interest rates, a bigger share of co-funding and higher threshold for pre-leased space, as pressure from foreign parent banks is building up.

As many as 813 000 sq m of shopping malls are said to be under construction but, in fact, construction on many of them might never be started.

Malls in locations other than Sofia find it hard to attract tenants, and even if they do, they fail to achieve expected returns, said Krassimir Dimitrov, managing partner at Source Real Estate Advisers.

Companies are sharing offices to streamline costs and reduce staff, Colliers executive director Atanas Garov said.

The robust supply of retail and office space has pressed down prices, and the trend is likely to continue through 2009, brokers predicted.

Office rental prices fell as low as 8-12 euro a square metre, Dimitrov said.

Source: Dnevnik