Retail Market in Georgia 2017
Total Page：16
File Type：pdf, Size：1020Kb
Retail Market in Georgia PREPARED FOR: 2017 CONTENT Executive Summary 3 Country Profile 4 Business Environment 5 Economic Outlook 6 Tourism Overview 8 Retail Trade 13 Tbilisi Retail Market Overview 14 Batumi Retail Market Overview 21 Kutaisi Retail Market Overview 26 Conclusions and Outlook 32 Appendix 1 - Real Estate Registration and Construction Permit 33 Appendix 2 - Primary Information Sources, Data Used for the Study, Definitions and Assumptions 36 Disclaimer 38 Colliers Georgia at a Glance 39 Colliers Global Stats at a Glance 40 2 Colliers International Georgia EXECUTIVE SUMMARY Retail floorspace supply accelerates and Tbilisi remains Georgia’s primary contributor In 2017, the total volume of retail floorspace in Tbilisi, Batumi, and Kutaisi amounted to 1.42 million sq m, reflecting a 12% increase when compared to 2016. The largest portion (79%) is found in the capital city. Though still dominated by bazaars, modern shopping centres continue to increase their share of the market year-over-year (y-o-y). According to the project pipeline, by the end of 2019, modern shopping centre floorspace will exceed that of bazaars. The grand opening of the much-anticipated Galleria Tbilisi shopping centre accounted for an additional 25 K sq m of space. Located in the heart of the city, the shopping centre offers variety choice of entertainment and leisure activities, such as cinema, bowling, food courts and fashion stores. The number of specialized shopping centres also rose by 110,000 sq m, due in large part to the opening of Tbilisi Sea Plaza. Batumi also experienced an increase in retail supply in the middle of the year, with the opening of Black Sea Mall and Metro City Forum which added another 20 K sq m total of modern shopping centre floorspace. In contrast with Tbilisi and Batumi, Kutaisi’s retail floorspace remained unchanged. Net take-up and the number of new entrants have increased In 2017, net take-up on Tbilisi’s retail market amounted to approximately 54,000 sq m, reflecting a 35% increase as compared to the previous year. This uptick was caused primarily by the opening of Galleria Tbilisi and the expansion of several brands. The fashion category holds the vast majority of the occupied area (31%), represented with new entrants such as H&M, CK Jeans, Lacosté, Trussardi, Karl Lagerfeld, Guess, and Armani Exchange. Expansion of the local DIY brand Gorgia accounted for an additional 8 K sq m in Gldani Plaza and City Mall Gldani. Batumi has seen a massive 12 K sq m absorption of retail area in modern shopping centres. The brand Carrefour opened their first location, while Goodwill opened a second branch. Before 2016, McDonald’s was the only international fast food retailer, but in 2017, several popular chains opened for business including Subway, Wendy’s, Dunkin’ Donuts, and Burger King. Increasing supply has affected performance indicators In 2017, weighted average rents fell slightly when compared to 2016. In modern shopping centres, the figure dropped to USD 14.6, and on high streets it fell to USD 28.7, due in large part to an increase in competition and large-scale absorption. On high streets, vacancy rates experienced a positive trend in Tbilisi and Kutaisi, while in Batumi there was an insignificant increase. Vacancy rates are decreasing in Kutaisi and Batumi, while being stable in Tbilisi The lowest vacancy rate in modern shopping centres was recorded in Tbilisi (15%), in spite of the addition of a new shopping centre. In Batumi and Kutaisi, the figure decreased when compared with previous years, but remained high at 29% and 30%, respectively. Vacancy rates experienced a notable increase on high streets of Tbilisi and Kutaisi, while in Batumi the growth was insignificant. 3 Colliers International Georgia COUNTRY PROFILE Background Georgia is the most active economic center in the region. With a liberal tax code, corruption free government, and significant opportunities for foreign investment, it provides a highly supportive business environment. At the crossroads of Europe and Asia, Georgia borders Turkey, Armenia, Azerbaijan, and Russia. The country KEY FACTS occupies an area of 69,700 square kilometers (sq km) and is home to a population of 3.7 million people. The country’s land borders run a length of 1,839 kilometers (km), while the Black sea coastline is 315 km. During last two decades, Georgia has implemented large-scale reforms that have led to political and economic transformation. It has strengthened its democracy and furthered its relationship with the European Union (EU). Georgia has also made business development within the country a top priority through encouraging 3.7million sq km entrepreneurship, attracting private investments, and shifting tax incentives, thereby positioning itself as an 69.7K attractive option to the international business world. With its unique cultural heritage and exuberant hospitality, Georgia’s tourism industry continues to grow and POPULATION AREA thrive, further bolstering economic growth. Government CAPITAL CITY OF GEORGIA TBILISI Georgia is a parliamentary republic. Parliamentary elections are held every four years. Georgia’s parliament is located in Kutaisi City and acts as the representative body for the country, exercising legislative power and OFFICIAL LANGUAGE GEORGIAN developing domestic and foreign policy. As an executive council of government ministers, Georgia’s cabinet is CURRENCY GEORGIAN LARI (GEL) headed by Giorgi Kvirikashvili, who is a member of the majority “Georgian Dream Party.” Based on accountability, citizen participation, technology, and innovation as its guiding values, today’s government GDP PER CAPITA, 2016 3864.6 USD continues to make European and Euro-Atlantic integration a primary strategic objective. UNEMPLOYMENT RATE, 2016 11.8% Legal Framework AVERAGE MONTHLY SALARY, 2016 375 USD The Georgian Constitution, adopted in 1995, lays out the structure of the national government and defines its authority and function. Georgia’s court system has three branches: the Courts of First Instance (District or City LIFE EXPECTANCY 72.7 years Courts), the Appellate Courts, and the Supreme Court. The Courts of the First Instance have jurisdiction over all civil, criminal, and administrative cases. Decisions from the Courts of the First Instance may be appealed to the Appellate Courts and further appealed to the Supreme Court. Labor Market Overview As an alternative to litigation, Georgian laws allow arbitration both in local as well as international arbitration institutions. Georgia is a member of the International Centre for Settlement of Investment Disputes (ICSID). Georgia’s labor force comprises approximately 1,998,300 people. The Public service hall in Georgia provides customers with state services including business registration and unemployment rate is 11.8%, which is lower than the 14.8% average property registration through ‘one-stop-shop’ principle that ensures efficient service delivery. over the last decade. As of December 2016, 14.9% of the working population are employed by public sector, while 85.1% work in the non- Property Ownership & Non-Agricultural Lands public sector. Georgia’s labor force is well-educated, multi-lingual and relatively low cost. In Georgia property rights are recognized and protected by the Law. An owner has the right to possess, use and dispose of his or her property. The rights of individual owners to possess, use and dispose of land are regulated by the land legislation. There is no restriction on non-agricultural land ownership in Georgia. According to the Heritage Foundation Index, Georgia has substantial improvement in property rights and is 11% above the world average. 4 Colliers International Georgia BUSINESS ENVIRONMENT International Rankings GLOBAL COMPETITIVENESS INDEX 2017-2018 Georgia has improved its status as a free economy thanks to its fiscal policy, regulatory efficiency, and open market policies. According to the World Bank’s Doing Business report 2018 , Georgia ranks 9th for ‘ease of doing business’ among 190 economies, 4th for ‘ease of starting business’, and 4th for ‘ease of registering property’. In 2017 Fitch Ratings has affirmed Georgia's Long-Term Foreign Currency Issuer Default Rating at 'BB-' with a Positive Outlook. Standard &Poor’s and Moody’s rated Georgia as ‘BB-’ and ‘Ba2’ respectively. Georgia has been among the top ‘most improved’ countries four times in the past 13 years. Registering a new business takes a maximum of two days and requires no minimum capital requirements. According to the ‘Heritage Foundation Index of Economic Freedom 2018,’ Georgia’s economy is categorized as Mostly Free, ranking 16th across 180 countries. Georgia remains the least corrupt country in the region. According to Transparency International, Georgia remains the top performer among the Eastern Partnership countries. Foreign investors in Georgia are guaranteed equal rights to those of Georgian citizens. After payment of taxes foreign investors are entitled to repatriate the earnings (income) gained from investments and other funds abroad. Tax Climate Source: World Bank, Colliers International In order to attract investments and boost economic growth, an Estonian-type tax model was adopted in 2017 that exempts undistributed earnings from profit tax, and instead taxes distributed earnings only. Georgia has a liberal EASE OF DOING BUSINESS 2018 tax code that includes only six types of taxes: Profit Tax (15%), Personal Income Tax (20%), Value Added Tax (18%), Import Tax (0%, 5% or 12%), Excise Tax (on selected goods), and Property Tax (up to 1%). Georgia has 9 Double Taxation Avoidance treaties with 52 countries. Georgia Lithuania THE WORLD CORRUPTION RANKING, 2017 Latvia Belarus Moldova Romania 46 Armenia 59 Bulgaria 71 68 81 Georgia Azerbaijan Romania Turkey Bulgaria Belarus 107 Turkey Ukraine 122 122 76 130 Armenia Azerbaijan Moldova Ukraine Source: Transparency International, Colliers International Source: World Bank, Colliers International 5 Colliers International Georgia ECONOMIC OUTLOOK Overview Georgian economy performed well in 2017; GDP growth picked up to 4.8%.This boost was largely driven by REAL GDP GROWTH double-digit export growth that worked to improve the trade balance.