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Bulgaria: Marketbeat Retail Snapshot for Q1’2015



April 28, 2015, 16:28 (PX Newswire)

OVERVIEW
The beginning of 2015 was marked by the continued restructuring in the retail sector driven by the investors’ effort to improve the performance of their shopping centres. Large international retailers went on their expansion not only in Sofia but also in established projects in the secondary cities. For the period there were no openings of new schemes rather the existing ones were trying to strengthen their positions on the market.

SUPPLY
After the opening of two shopping malls with total leasable space of more than 80,000 sqm in 2014 there were no newly completed projects in Sofia in the first quarter of 2015. Of the recently opened Sofia Ring Mall and Mega Mall improved their market positions in terms of occupancy levels and tenant mix. Due to the lack of new openings on a national level the stock of modern retail space remained the same as in the previous quarter but the pipeline increased after the deal for Markovo Tepe Mall (around 16,000 sqm) in Plovdiv and the plan of the new developer to restart the construction works.

Plaza West in the west part of Sofia is planned for completion by the end of 2015. Other notable event for the first quarter was the start of a large scale restructuring program of City Center Sofia with the assistance of Forton as exclusive leasing agent. The shopping center was acquired by Revetas Capital last year and now the new owner aims to reposition and re-brand the project, as well as to enhance its tenant mix.

Nationnwide the market density remains modest with average retail space of 105 sqm per 1,000 residents. With 276.9 sqm Sofia has fourth highest level. Stara Zagora tops the chart with 383.1 sqm per 1,000 residents.

In the big box segment the high competition in the do-ityourself and food sectors is basis for continued activity. Following the acquisition of the Bulgarian business of Baumax by a local company the stores are re-branded as Homemax with the announcement the chain to be repositioned in the home improvement segment. Other do-it-yourself brand Mr. Bricolage, opened in March its first store in a shopping mall – a 4,500 sqm outlet in Sofia Ring Mall.

In the food sector the big discount players such as Kaufland and Lidl continued their expansion across the country while Piccadilly and Billa retained their focus on Sofia. The new Piccadilly store in Sofia Ring Mall was also among the notable events in the sector.

DEMAND
Demand on the retail market in the first quarter was driven mostly by the ambition of the value- and middle-segment fashion brands to gain market share. However, while Sofia and big cities remain targets for the newcomers some large and established international operators such as H&M, LC Waikiki, New Yorker were looking for new opportunities in smaller cities of over 100,000 inhabitants. Polish shoe brand CCC was the fastest expanding new brand in the first quarter of 2015 with first stores in Sofia Ring Mall and Mall Ruse.

Next openings are expected in the Galleria shopping centers in Burgas and Stara Zagora, as well as in Grand Mall Varna. In the premium segment Tommy Hilfiger entered the market with monobrand concept but for the time being is interested mainly in Sofia.

HIGH-STREET
Demand for high-street retail space remained stable driven mostly by fashion brands which were already operating in the shopping centres. The lack of significant leases for the period was due to the shortage of right-size units that meet their criteria. The reconstruction of the last section of Vitosha Blvd. (between str. Alabin and Solunska) which started in April is also expected to have a positive effect on the retailers interest..

As to rents, for 100-150 sqm ground-floor stores the levels were seen stable at €44/sqm/month in the first quarter of 2015.

RENTS
After the drop with 10% in the last quarter of 2014 the rental levels in shopping centers stabilized at the beginning of 2015. For Sofia the average prime rent remained about € 20 /sqm/ month. In second-tier markеts the rental levels remained in the range of €12-16 /sqm/month.

INVESTMENT FOCUS
Although the investor’s demand remained relatively modest there were some significant transactions over the quarter. The purchase of Markovo tepe Mall by the Bulgarian construction company GP Group was in line with the trend of loan restructuring deals. Modern Theatre Cinema , an old movie theater in the heart of Sofia, also found a new owner.

Retail space transactions totaled €14 mln as banks continued to be main driver of the market activity.

TRENDS AND FORECASTS
● Deals with distressed assets and restructuring of underperforming schemes continue to generate market activity

● While Sofia and big cities remain main targets for the newcomers the established international operators are looking for opportunities in smaller cities.





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