Bulgarian Retail Market – Q1 | 2011
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Bulgarian Retail Market – Q1 | 2011 Q1 | 2011 Bulgarian Retail Market Bulgarian Retail Market – Q1 | 2011 SUPPLY Existing Shopping Center Space - Q1 2011 Stock and Pipeline Sofia 53 300 In Q1 2011 there were no new shopping center 11 000 Plovdiv openings registered in the retail property sector in 16 000 Varna 185 900 Bulgaria. On the supply side, a number of mall projects 45 000 Burgas are still on hold or in an early stage of construction and Gabrovo 18 000 only one new scheme is likely to open in 2011. Thus, 30 800 Stara Zagora contrary to the record volumes of new supply in 2010, Veliko Turnovo this year is expected to pass in the limelight with Pleven existing mall developments consolidating and focusing 67 000 130 500 Ruse their strategy on maintaining higher occupancy and sustainable tenant relations. Source: Forton International Pipeline shopping center space as at Pipeline schemes currently under construction will Q1 2011 350 000 deliver approximately 218 000 sqm of GLA upon 300 000 175 000 completion while projects which are currently on hold 250 000 amount to a further 359 000 sqm. However, the timing 200 000 of most of these developments remains uncertain due to 150 000 both lack of financing and difficulties with the leasing 100 000 59 500 51 000 52 500 process. The next significant new supply wave is 50 000 108 000 36 000 20 900 20 000 36 500 expected in the period starting from Q4 2012. 0 17 500 Sofia Plovdiv Varna Burgas Ruse Stara Pleven Still, 2011 brought some optimism to investors as Zagora development activity in the capital witnessed some Source: Forton International under construction on hold positive signs of revival – Bulgaria Mall (33 000 sqm) Shopping center GLA/1,000 population renewed construction works after being on hold for 2 Norway Sweden years. Another frozen project - Mega Mall in Lyulin Ireland Luxembourg (24 000 sqm), is on the market again with a new Estonia Netherlands leasing campaign already underway. The project of Austria Danaos - South Ring Mall (72 000 sqm) is also about to Slovenia Denmark commence construction works this summer. At present Finland Latvia the most significant factor in the shopping center Portugal UK pipeline in Sofia is the ongoing construction of Paradise Lithuania Center which is scheduled for opening at the end of France EU-27 Average 2012. Spain Italy Switzerland Shopping center GLA per capita Czech Rep. Slovakia Bulgaria has outstripped Greece and Ukraine in C&W’s Poland Germany ranking “Shopping Center GLA per capita” with Malta Croatia approximately 73,4 sqm of shopping center floorspace Hungary per 1000 people. The average across the EU-27 now Belgium Romania stands at 235.4 sqm. Russia Turkey Bulgaria DEMAND Ukraine Greece Data in recent months recorded further decline in retail Serbia Bosnia Herz. sales and most retail tenants in existing malls registered 0 100 200 300 400 500 600 700 turnover fall by over 40-50% over the reviewed period. Source: Cushman & Wakefield Bulgarian Retail Market – Q1 | 2011 All this had a fairly negative impact on shopping center Sofia High Street Rents and Yields performance even in some of the prime schemes in the € 140 16% capital. € 120 14% 12% Most retailers are currently seeking to cut costs and € 100 10% very few have plans for expansion. As a result, no € 80 8% significant upsurge in demand activity can be expected € 60 6% in the next months. € 40 4% € 20 RENTS 2% € 0 0% On a yearly basis, shopping center rents have recorded a decrease of almost 23% against the levels of Q1 2010. Average shopping center rates for regular 100-150 sqm Sofia high street rents Sofia High Street Yields units are in the range of € 26-30/sqm/month. Source: Forton International Occupancy in shopping malls came under significant Sofia Shopping Center Yields pressure this quarter and even prime schemes 12% witnessed a considerable increase in the share of vacant 11% 10,5% units. 10% 9,5% 9,5% 9,0% 9,0% 9,0% In the high street segment, rents remained weak 9% preserving their low levels from the second half of 2010. 8,0% 8% However on an annual basis, the decrease amounts to 7% approximately 17% for the capital and over 28% for 7,5% other large cities. 6% 5% INVESTMENT ACTIVITY AND TRENDS 2007 2008 2009 Q1 Q2 Q3 Q4 Q1 2010 2010 2010 2010 2011 Transaction activity in the retail segment increased Source: Forton International ostensibly in Q1 2011 compared to the entire 2010 with PIPELINE SHOPPING CENTERS deals negotiated at values over € 15 million. Currently, Project Name GLA Locatio Completion n investment activity is focused on retail parks and big- Bulgaria Mall 33 000 Sofia under construction box schemes rather than shopping malls. Clear evidence Mega Mall 24 000 Sofia on hold in this direction is the acquisition of Retail Park Plovdiv Paradise Center 75 000 Sofia under construction by Europa Capital in January 2011. The transaction was closed at €20 million. In addition, in March 2011, the South Ring Mall 72 000 Sofia design phase Greek Fund Bluehouse Capital acquired two of the Evropa Center 79 000 Sofia on hold properties of ERG Capital’s portfolio in Bulgaria for € New Century Mall 45 000 Sofia design phase/ on hold 24,7 million – the hypermarket and HQ of Praktiker in Galleria Varna 36 000 Varna under construction Sofia as well as the big-box schemes of Praktiker and Markovo Tepe Mall 17 500 Plovdiv under construction Piccadilly in Varna. Trimontuim Center 51 000 Plovdiv design phase/on hold Both prime rents and yields in the retail property sector Sun City Center 29 000 Burgas on hold are expected to remain stable in the short term. Despite Strand Burgas 30 500 Burgas design phase/ on hold the fact that yields are relatively steady in the sector, Galleria Burgas 36 500 Burgas under construction investment transactions are being agreed on a case by City Mall Stara 20 900 Stara on hold case basis depending on the sustainability of the Zagora Zagora Mall Pleven 20 000 Pleven finished /on hold properties and the tenancy contracts rather than following specific investment trends. Grand Plaza 37 500 Ruse design phase/on hold Danube Mall 15 000 Ruse on hold Bulgarian Retail Market – Q1 | 2011 SIGNIFICANT Q1 2011 SALE TRANSACTIONS Inna Velkova Purchase Capital Markets & Consultancy Project name City Submarket Buyer Sqm Price FORTON International Retail Park Europa Plovdiv retail parks 24 790 € 20 million Plovdiv Capital T: +359 2 805 90 11 Praktiker E: [email protected] Bluehouse Hypermarket & Sofia hypermarkets 10 400 € 10 million Capital www.forton.bg HQ Praktiker & Bluehouse € 14,7 Piccadilly Varna hypermarkets 4030 Capital million hypermarkets .