Research & Forecast Report Bulgaria | Retail Real Estate Market H2 2014
Retail Market Overview
• Modern retail space supply in Sofia increased by 29% over the second half of 2014. • Retail space absorption in Sofia hit its peak since 2010 and reached over 87,000 m². • Demand for retail locations kept growing, both within and outside the capital, including cities with population below 100,000 inhabitants. • High streets in the four major cities in Bulgaria recorded stable occupancy on annual basis.
Supply In the second half of 2014, two new shopping centers opened doors in Sofia – Sofia Ring Mall (69,000 m²) and Mega Mall (24,000 m²). Thus, the total supply of retail space in the capital reached 418,660 m² and registered a growth of 29%. After the closure of The Strand in Burgas and Mega Mall Ruse in the second half of 2014, the total volume of modern retail space of shopping centers in Bulgaria reached 783,260 m². Thus the ratio “leasable retail space in shopping centers per 1,000 inhabitants” in the year end increased from 101 m² to 108 m² for the country and up to 345 m² for the capital. Colliers analyzed the profile of major shopping centers in Sofia as a combination of retail and entertainment formats under one roof (known as ‘retail-tainment’), based on two indicators – share of retail space leased to fashion operators compared to the area leased to leisure and entertainment industry. Within a landscape of increasing competition for clients, profitability and market share, the existing shopping malls will need to start nurturing their distinctive advantages. Such processes will be best illustrated with the following graph. (Graph 1)
ENTERTAINMENT & CAFÉ& RESTAURANTS
Graph 1. Profile of shopping centers in Sofia* 30% Paradise Center
25% 20%
Mall Sofia
Sofia Ring Mall The Mall
Bulgaria Mall
15% 10%
Mega Mall
Serdika Center
5% 0
0
10%
20%
30%
40%
50%
60%
FASHION
*Calculations are made based on a % of each category from the overvall leased space in the shopping centers
Occupancy rate of high street shops in the four largest cities in Bulgaria was stable in 2014. Varna registered 4% growth of the available retail space (from 10% to 14%), while Plovdiv and Burgas retained levels of 9% and 7%, respectively. Over the past six months there was no significant change in the vacancy levels in Sofia 6% for the high streets in total and 7% on Vitosha Blvd.
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Retail Market Overview | H2 2014 | Colliers International
Demand
Rental Levels
In the second half of 2014, demand for modern retail space in the capital marked its peak. The absorption for this period exceeded 87,000 m², which is the highest value of the indicator since 2010, according to Colliers’ analysis. For comparison, 76,600 m² of retail space were absorbed during 2013.
Prime rental levels in shopping malls and high streets mark a slight change over the second half of 2014. A 3-4% growth was registered for shopping centers in Sofia, Varna and Plovdiv. As for the high streets – Varna and Burgas registered a 5% drop, Sofia – an increase of 3%. (Graph 2 and Table 1)
New brands that entereted the Bulgarian market were Mango (directly), Notos Galleries, Calzedonia and FUNtasy Ring Park.
Graph 2. Prime Rental Rates in Sofia (EUR/ m2/month)
Growing competition urged shopping centers in Sofia to focus more into tenant mix improvements. A recent Colliers’ analysis on shopping malls in the capital, operational for more than 2 years, showed that over the past six months, The Mall and Mall of Sofia featured the largest number of new additions to their mix, as a percentage of the leasable space (5% and 3%, respectively). Demand for retail space outside of the shopping centers continues and is expected to grow in two directions – retail parks and high streets. The renovation of high streets and consolidation of existing fragmented properties will enhance their attractiveness to large international retailers as viable expansion opportunity. In 2014, the big box segment showed new tendencies. So far, this market was predominantly driven by increase in the network of the operators. The second half of 2014, however, was dominated by changes in ownership and restructuring in the segment. The acquisition of international chains by domestic owners is a signal that the local capital sees good market potential and consolidation is a preferred way to increase market share. The largest number of new openings in the food sector in the last six months were registered by Billa (6), followed by Lidl (3). The French sports giant Decathlon opened its first stores outside of Sofia - in Plovdiv and Varna. High streets in the four largest cities in Bulgaria maintained stable occupancy levels and tenant activity. The indicator declined slightly in Sofia, Varna and Plovdiv on an annual basis. Burgas, on the other hand, marked a 5% growth (from 6% to 11%). Key highlights of the high street segment in the capital during the reported period are as follows: • Major fashion operators on Vitosha Blvd. are developing well and recorded solid results for 2014; • High-end operators moved from high street to shopping center environment; • Cafes and restaurants are highly clustered on Vitosha Blvd., which is expected to continue in 2015.
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Retail Market Overview | H2 2014 | Colliers International
72 65 55
39
37
40 35
38
32
33
37 30 25
30
30
39
38
32
31
H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014
Shopping Malls
High Street
Table 1. Rental levels* (euro/m2/month) Location
Sofia
Plovdiv
Burgas
Varna
Shopping malls
32
24
21
25
High Street
39
19
19
19
*Prime Rent represents the average top open-market rent estimated to be achievable for a new lease of a 100 m² (net internal area) unit of the highest quality and specification in the best location, excluding service charges and taxes and not reflective tenant incentives.
Forecast • Major retail operators are set for expansion in cities with population below 100,000 inhabitants, where they are not present yet. • High streets and retail parks are expected to increase their share as preferred formats for expansion on the Bulgarian retail market. • Restructuring and expansion of big box operators is anticipated to continue in 2015. • E-commerce will be playing an increasing role in the retail and industrial market development.
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Boryana Peneva Manager | Retail Services +359 2 976 9 976 boryana.peneva@colliers.com Adriana Toncheva Senior Market Researcher +359 2 976 9 976 adriana.toncheva@colliers.com
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