It would not be correct to use the term `saturation' to describe the current situation on the Bulgarian property market, Evgeni Vassilev, executive director of Arco Real Estate, told The Sofia Echo. The company, an arm of the Estonian Arco Vara group, specialises in property development, investments and sales.

It also conducts its own surveys, and last week it issued a statement concluding that in 2008 entrepreneurs still find commercial and business centres the most appealing projects for investment. But there was a possibility that this trend could change after 2010, when all planned construction is completed.

"I like to refer to this tendency as a catch-up point, or the time when supply and demand intersect," Vassilev said. He added that when that point is reached, only high quality property with a good location will survive on the market. "We need to refrain from generalisations because our property market has various segments that should be clearly differentiated," he said.

Currently, there's a slight shift in buyers' preferences towards residential property, Vassilev said. People grew tired of the `white-box' apartments (bare walls, unfurnished) offered by most investors. A thin segment of the Bulgarian middle class is beginning to demand homes in gated communities, or in higher quality developments. It was safe to acknowledge that more people were looking to escape Sofia's overpopulated boroughs and find some peace and quiet elsewhere in the city's vicinity, Vassilev said.

"We closely monitor development of the Central European market, and now in countries like Poland and the Czech Republic there is demand stagnation, although prices still remain high," Vassilev said. "Our forecast is that within two years the same will happen in Bulgaria, with the exception of higher-class residential property, which will remain appealing to buyers."

Vassilev also described the advertising of so-called class A office as exaggerated because actual premises seldom match the high standards specified by that category. Class A office space should tick off several features such as central location, sufficient parking spaces, air-conditioning and ventilation, security and video surveillance, as well as property management. There is no institution in Bulgaria that can categorise office buildings, Vassilev said.

Arco's executive director speculated that in about two years, there would be more that a million sq m of available office space. This could well cause saturation in that property market segment, he said.

Location will continue to be a price-defining factor, Vassilev said. He explained that foreign investors normally go for Sofia's central district where all state institutions and administrative buildings are within an acceptable distance.

According to Arco Real Estate, the Bulgarian market for shopping centres is booming because of accession to the European Union. Many foreign investors try to find a niche in the local market. The question is how many of the proposed developments will be carried out because right now there was a real need for more shopping centres in Sofia, Vassilev said.

In addition to the four shopping malls, there are a further 18 projects announced. The foundations for some of these have already been laid. These include Bulgaria Mall on Bulgaria boulevard, the CIVIS Centre near Sofia's Central railway station and the Olympian mall and tower on Slivnitsa boulevard, among others.

Those still under development include Forum Sofia, across from Business Park Sofia; Eurogate, a complex in Lyulin district; and DV South Mall complex in the Lozenets borough.

A possible explanation for interest in mall developments is that they meet the needs of modern Bulgarians, Vassilev said. Shopping centres are gradually replacing the old market-type merchant stalls, which are considered outdated and unfit for the dynamic lifestyle of urban people.

"Right now, the Bulgarian market is literally flooded with shopping malls, and the prices asked are not adequate for a developing market," Gerard Groener, an executive director for the Dutch Corio N.V. told Dow Jones Newswires, as quoted by the Bulgarian website investor.bg.

Corio is one of the largest real estate companies in Europe. Some time ago it expressed an interest in making a substantial investment in Bulgaria. However, at the moment, Groener was quoted as saying, a lack of proper management and high price increases have led the project to stall.