Research & Forecast Report Bulgaria | Retail Real Estate Market H2 2016
Retail Market Overview
Supply Over July-December 2016 the total stock of modern shopping centers** in Bulgaria reached 791,760 sqm, 406,660 sqm of which were in Sofia. This was the first six-month period since the second half of 2015, which saw an increase in the total volumes, due to Mall Markovo Tepe’s opening in Plovdiv.
Boryana Peneva
Manager I Retail Services boryana.peneva@colliers.com „Sustained momentum in the retail market in the country“
„A slight increase in prime rental rates* in the shopping malls and high streets“ „The balancing of demand with supply raised occupancy levels of retail space in most segments, with the exception of the food chains“ „Active expansion of retailers witnessed throughout the country“
The ratio “leasable retail space in shopping centers per 1,000 inhabitants” remained plateaued at 323 sqm for Sofia, and grew insignificantly to 111 sqm for the country overall (Fig.1).
Fig 1. Retail space in shopping centers per 1,000 inhabitants in the big cities 400 300
328 323
AVERAGE EUROPE
239 226
200
383 320
249
247 109 111
100 0
Sofia
Plovdiv
2015
Varna H1 2016
Stara Zagora
Burgas
Ruse
Total Bulgaria
H2 2016
Retail space supply on high streets kept its previous period levels: the vacancy rate in Sofia stood at 6%, and on Vitosha Blvd. at 3%.
Demand The demand for retail space in modern shopping centers in Sofia remained persistent. In the second half of 2016 the absorption was close to 15,000 sqm comparable to the results in the previous six-month period. Despite the increasing absorption of retail space in shopping centers in terms of new openings, the market saw higher vacancy rates for the first time in a year, coming from the restructuring of the food chain segment. This phenomenon explains the wider range of vacancy levels, between 2% - 28%. The variation in the data was mostly due to the retail space vacated by supermarkets, which varied from 5% to 18% of the gross leasable area. Over the surveyed period, Park Center (previously City Center Sofia) officially presented a new vision and tenant mix, displacing Serdika Center from its leading position in terms of number of new openings. Paradise Center and Sofia Ring Mall came respectively second and third in ranking, also leapfrogging Serdika Center. Love Moschino, Armani Exchange and Carducci monobrand shops, as well as the Finnish fast food chain Hesburger secured their first locations in Bulgaria. We observed active expansion of retailers throughout the country over the period. Among the examples were LC Waikiki in Plovdiv, H&M in Terra Mall in Gabrovo, CCC in Mall Markovo Tepe (Plovdiv), Intersport in Galleria Burgas and Galleria Stara Zagora, Sport Depot in Mall Markovo Tepe. The first shopping center locations were secured for the order and collection point of IKEA (Galleria Burgas) and Jumbo (Park
2
Retail Market Overview | H2 2016 | Colliers International
Mall, Stara Zagora). The entertainment sector saw strong momentum, as well. Kino Arena opened its first modern multiplex in Plovdiv (Mall Markovo Tepe), and Capella its third party center in Sofia (Park Center) with plans for a first one in Burgas (Burgas Plaza).
50 45 40 35 30 25 20 10
The food chain segment development was dynamic. Carrefour ceased its operations in the country and vacated about 80,000 sqm in shopping malls. Piccadilly closed its supermarkets in Sofia Ring Mall and Serdika Center, and opened new stores in Paradise Center and Grand Mall Varna. Lidl presented its first new generation supermarket in Sofia Ring Mall. Billa kept expanding adding a second location in a shopping mall – in Serdika Center. This development underpins the expectations for market share restructuring in the segment and leads to reassessing the food chains’ role of key tenants in the modern shopping centers.
30 28 26 24 22 20 18 16
30 28 26 24 22 20 18 16
Retailers’ presence on high streets remained stable. Tenant movement dynamics slightly dropped from 6% to 5%, aside from Vitosha Blvd., where it stood at 3%. The restaurants and cafes segment remained stable, keeping a share of 23%.
30 28 26 24 22 20 18 16
Rental Levels Prime rental rates in shopping centers and on Vitosha Blvd. slightly increased to EUR 35/sqm and EUR 45/sqm respectively (Fig.2).
30 30
30
31
42
42
32
34
34
35
High Street
Definitions: * Prime Rent represents the average top open-market rent estimated to be achievable for a new lease of a 100 sqm (net internal area) unit of the highest quality and specification in the best location, excluding service charges and taxes and not reflecting tenant incentives.“ ** Shopping centers above 10,000 sqm are included in the analysis.
3
2012
30
32
2013
2014
34
35
2015
2016
25
25
20
20
2015
2016
26
26
2017
PLOVDIV 28 23 20
20
24
19
19
2013
2014
18 2012
2017
VARNA 26 22
2011
24
23
20 20
2012
2013
25 19
19
2014
2015
18 2016
2017
BURGAS
22
2011
21 20
22 20
2012
2013
24 21 19
21 19
2014
2015
19
2016
2017
High Street
Forecast »»
By the end of 2016, the modern retail market will undergo a sustainable development, with decreasing levels of supply and stable demand.
»»
A notable reorganization is expected mainly in the food supermarket segment in shopping centers.
»»
High streets will continue to generate a growing interest both from tenants’ and buyers’ side.
»»
Prime rental rates* in shopping centers and Vitosha blvd. will remain steady.
»»
The stabilization of the market is a prerequisite to revive the attention of international operators towards Bulgaria and to result in their increased activity.
H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016
Shopping Centers
25
45
42
39
45
39 34
32
37
Shopping Centers
Fig 2. Prime rental rates in Sofia (EUR/sqm)
38
30
2011
Occupancy levels in the modern shopping centers in Plovdiv, Varna and Burgas showed an ongoing upward trend, reaching 95% in the well-established projects. Even the newly opened Mall Markovo Tepe achieved this decent level at the end of 2016.
37
40
2011
The electronics sector witnessed new openings for Technomarket, Zora, TechMart and Technomix with potential for more to follow in 2017.
41
SOFIA
Retail Market Overview | H2 2016 | Colliers International
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Shopping Arena Ruse is a new shopping center in Ruse, which is planned for construction. It will be part of a modern multifunctional complex, which includes also a class A office building, a hotel and an operational sports hall.
GLA – 17,700 sq.m. Leading local and international brands Museum and modern art gallery Cinema Food court, restaurants and cafes Children playground and party center 1,000 parking lots Ruse is among the five biggest cities in Bulgaria. It is located in its northeastern part, on the bank of Danube River, which ensures for an easy connection with other countries. The city is just 60 km away from Bucharest – the capital of Romania and 75 km from Bucharest Henri Coanda (Otopeni) Ariport. Ruse has a very well-developed infrastructure. It is a major road and railway hub in Northern Bulgaria and the biggest Bulgarian port town on the bank of Danube River. The latest statistics show that the population of Ruse is 145 765 people*. Ruse municipality is home to a university, seven secondary and eleven professional schools. * NSI (31.12.2015)
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Boryana Peneva Manager I Retail Services +359 2 976 9 976 boryana.peneva@colliers.com Lora Mitova Market Research +359 2 976 9 976 lora.mitova@colliers.com
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