Professor Federico Chiavazza of SDA Bocconi Talks Trends in Real Estate

How does Bulgaria look to foreign investors, are technology and real estate finally meeting and does sustainability matter to international real estate professionals? Professor Federico Chiavazza of SDA Bocconi answered these questions during his lecture in AUBG’s Elieff Center in Sofia June 27. The event was a part of the “International Real Estate and Investments” class Chiavazza currently teaches to the second cohort of the Executive Master in Finance, Banking & Real Estate (EMFBRE), a joint venture program of SDA Bocconi and the American University in Bulgaria.

Chiavazza holds a master’s degree in Real Estate from New York University, has worked on the investment management team of Forest City Ratner Companies which is one of the largest real estate developers in the U.S., and is currently a professor of Corporate Finance and Real Estate at SDA Bocconi and Founder and Chief Operating Officer at Avalon Real Estate.   

At the start of his lecture, he offered an overview of the current state of real estate in Europe and the world. “There is a huge need for yields and returns everywhere in the world,” he said. “What we are seeing at the moment -- and what we saw last year too -- is that real estate could really be an option for global investment.”


Global investors are looking at emerging cities, but some cities are better than others, Chiavazza also said. “In a safe and healthy environment real estate follows the economic growth and the economic development,” he said.  What makes a city attractive for investment are features such as the quality of education and infrastructure, low taxes and low political risk. “A savvy real estate investor looks at these features and if at least some of them are there then he or she would decide to invest in that market,” Chiavazza said.

According to his observations, local demand is still the main driver for the property market in Bulgaria. “Foreign investors are looking at the market but are not there yet as much as you would like,” Chiavazza said. “But you have economic growth, you have employment growth, you have wages growth, low interest rates and a very strong housing market so from my point of view the opportunity is there.”

Another thing to consider in today’s world of real estate is technology, Chiavazza said. “Until yesterday, real estate and technology were things that were very far apart,” he said. This is not the case anymore and “technology will change the market,” he said.

Successful real estate investors should also consider the best sustainability practices, the professor said. “Keep in mind that international investors need to have sustainability certifications and will only look at properties that have a high sustainability level.”

Chiavazza, who has been teaching at SDA Bocconi for 11 years, joined the EMFBRE Program in 2018. “I had a really fascinating and interesting class [last year], very different in terms of culture and very different in terms of experience,” he said.  “It was very interesting for me to try to front a different culture and a different kind of class and try to explain the fundamentals of international real estate investing to people that had a very diverse way of thinking. That was fascinating; it was a lot of fun. I’m really looking forward to doing the same this year.”

Following Chiavazza’s lecture, Olga Stoichkova and Adina Welsh from the Association of Commercial Building Owners in Bulgaria gave short presentations that further discussed the specifics of the Bulgarian real estate market.

Stoichkova is a deputy chairwoman of the Managing Board of ACBO and spoke about Sofia’s most dynamically developing office zones. The three most developed zones in the capital are 7-11 km on Tsarigradsko shose, Business Park Sofia and Hladilnika, she said. 

"Actually, every year for the last few years there is about 200,000 square meters appearing on the market," Stoichkova said. "The last three years are very interesting because most of the big transactions are consolidations of big tenants moving from several buildings into one single building."

There are a lot of local investors in Bulgaria that not only construct but also acquire investment property, she said. The sellers are also local ones, as well as Western Europe and UK.

Welsh, who is Director Bulgaria of Raiffeisen Property Holding International, gave her insights on the types of companies that rent property in Bulgaria's capital.

The most stable tenants are the international ones that have already achieved optimum size for the market, tend to have mid-sized requirements and are head or management offices of multinational companies and financial institutions, Welsh said. The advantages of such companies are that they commit to longer terms, invest themselves significantly into the leased space, sustain prime rental rates and help achieve record yields.

Other typical tenants are "the bulk," or operational offices of major international companies, in-sourcing operations of international companies, private utility companies, telecoms and large BPO companies. Such companies generate the largest office requirements but are also price sensitive, require space flexibility, are more likely to move at the end of the lease, use the buildings extensively and some of them are directly affected by economic changes, Welsh said.

There is a third type of tenants -- the so-called "disruptors" -- that is a new trend on the Bulgarian market, she said. These are the co-working share office spaces that offer short-term flexible office leases. The disruptors' bring flexibility and added value to other regular tenants but are less stable, require high investment cost and are difficult to get bank financing for. They also affect building valuations negatively if occupying more than 30%, Welsh said. 

She also spoke about the "green" certifications for sustainable building. Such certifications are LEED (popular in the U.S.), BREEAM (Great Britain) and DGNB Denmark (Germany and the Scandinavian countries). 

"At the end of the day we all have a responsibility towards the environment," Welsh said. "The buildings stay there pretty much forever. So, when building, choose the right thing."

Article link: