Bulgaria Overview Bulgaria's rising status is luring new players and creating strong demand for retail Bulgaria's outlook never looked brighter Elie Issa The International Monetary Fund (IMF) The IMF also projects that unemploy• vised that the 2014 and 2015 data includes has raised its forecast for Bulgaria's 2015 ment will decline to 9.7 percent in 2016 estimates of reinvestment of earnings of GDP growth to 1.7 percent in the latest from 10.3 percent in 2015. Bulgaria's un• banks only, at this stage. edition of its World Economic Outlook employment rate fell to 9.2 percent in The Netherlands, which is known for at• (WEO), from the previously projected September from 9.3 percent in August, the tracting company registrations with low 1.2 percent from last April. Next year's state labour agency said. taxes, accounted for the largest seven- growth outlook was also revised up to Foreign direct investment (FDI) into Bul• month net direct investment inflow in Bul• 1.9 percent from 1.5 percent. garia increased 4.8 percent y-o-y to €907.3 garia of €620.2 million. million in January-July, preliminary central All the cited positive macro indicators ulgaria's finance ministry also raised bank data showed. Among the FDI com• show that Bulgaria is sustaining its recov• its this year's GDP growth forecast to ponents, equity investment climbed 7.1 ery following years of stagnation that dent• 2 percent from 1.4 percent projected percent y-o-y to €219.1 million in January- ed real estate investment in the country. Bin the spring, citing better-than-expected July, debt instruments rose 5.2 percent European Commission (EC) vice-pres• results from the first half of the year. The y-o-y to €594.3 million, whereas reinvest• ident Kristalina Georgieva said that Bul• country's economy expanded by 2 percent ment of earnings narrowed 2.5 percent y- garia presently ranks eighth among the y-o-y in Q1 and 2.2 percent y-o-y in Q2. o-y to €93.9 million. The central bank ad• EU countries in terms of absorption of EU 64 Retail Guide 2015 Bulgaria Overview The gap between rental levels in prime and non-prime shopping centres will widen further funds. This is the first time the country is operator Mobiltel (Mtel, a unit of Telekom "The goal is to firmly focus on success• among the top 10 and it is possible to fur• Austria) agreed to buy 100 percent of blizoo ful businesses in Romania, Czech Republic, ther improve its standing by the end of the Bulgaria, a leading local provider of cable- Poland, Slovakia and Hungary," an M&S year, she added. based triple-play services, from Swedish spokesperson was cited as saying. Add• Briefly, Bulgaria's rising status as an private equity fund EQT V. The third larg• ing that new stores will be launched in the emerging and rapidly expanding invest• est mobile operator, Vivacom, is also the Czech Republic and Poland over the next ment destination is obviously luring new former state-owned monopoly and still two years. players and consequently creating strong the largest player in the fixed-line segment. The closure in the countries affected is demand for retail, office and logistics space. Telenor entered Bulgaria in 2013, buy• set to begin in January next year. With a local IT sector growing by 2 per• ing the country's second largest wireless German discount grocery retailer Aldi, cent every year and an export-oriented operator, then named Globul, as well as however, is considering the Bulgarian mar• software market, Bulgaria counts on the the telecom retailer Germanos Bulgaria, ket, Capital Weekly reported. The retailer IT industry as one of "the fastest-growing for €717 million from Greece's OTE.Telenor has hired an unnamed international con• of all Bulgaria's industries," according to re• Bulgaria's EBITDA edged up 1 percent y-o-y sulting company to prepare a potential cent market data sources. to €60.6 million in H1 2015. The company's entry. The project is at an initial stage and Norway's Telenor, for example, which revenue rose 1.5 percent y-o-y, and the there is no final decision. owns Bulgaria's second largest mobile EBITDA margin declined 0.2 percent y-o-y In Eastern Europe, Aldi is present only in operator Telenor Bulgaria, is considering to 38.6 percent. The company's active cus• Hungary, Poland and Slovenia. the acquisition of a small bank or another tomer base narrowed by 6 percent y-o-y to Earlier in September, German retailer financial institution, in a bid to start offer• 3.8 million at end-June. REWE Group said it will withdraw its dis• ing mobile money services, Capital Weekly However, it is not all good news. UK count grocery store brand PENNY Market reported. This will be the first such service retailer Marks & Spencer has recently an• from Bulgaria. to be launched in Bulgaria. nounced it is pulling out of Bulgaria, Croa• More than sixty German companies have Such a move seems justified since the tia, Montenegro, Serbia, and Slovenia. expressed interest in investing in Bulgaria, company's two biggest Bulgarian competi• M&S has 12 stores (employing 106 peo• which is a serious change in their number tors are both in positions to provide richer ple) in these five South-eastern European compared to previous years.The news was product offerings. In July, the largest mobile countries, three of them in Bulgaria. revealed by the Bulgarian Economy Minis- Retail Guide 2015 65 Bulgaria Overview some large traders to diversify and opti• CLOUD SERVICES FOR THE RETAIL INDUSTRY? mize their network of stores. The most vis• ible of which was Retail Park Varna, where IKEA opened a 2,500 sqm first country Cristiana Fernbach - Senior Associate, centre for orders. Nearby, are already pre• Coordinator IP & Technology Practice sent toy chain Comsed and Decathlon. S.P.R.L. Menzer & Bachmann - Noerr Also in Varna, Praktiker began construction of a new store next to Technopolis with Cloud is considered to be the next big thing in the IT world. which both have a common owner. Cloud computing refers to the delivery of applications over In H1 2015, the retail market remained the internet. It may reduce operational and IT costs for re• unchanged in terms of new supply with tailers, reshaping their business in terms of scalability. Using the total stock of contemporary retail cloud retailers may profit from a limitless amount of process• space in Bulgaria totalling 783,260 sqm, ing power and storage capacity especially in peak sale peri• and for Sofia - 418,660 sqm, according to ods. The implementation of these technologies requires proper risk management strategies Colliers International. No new projects for ensuring the security and control of data. After the US-EU Safe Harbour set of regulations openings are expected to be launched by regarding data transfers from EU to US being invalidated by the European Court of Justice the end of the year, Colliers noted. this month, alternative models, like EU model clauses have to be considered in case of EU- Retail activity in Bulgaria will be stream• US data transfers. lined on repositioning of existing shop• ping centres (Galeria Plovdiv and City Centre Sofia) and unfreezing projects in development stage (Markovo Tepe Mall ter Bozhidar Lukarski at the official open• the shopping centre with the mediation of and Plaza West). ing ceremony of the 54th Kaufland store Forton / Cushman & Wakefield as the ex• Colliers, however, assessed key retail pro• In Bulgaria, which is also the chain's tenth clusive leasing agent, will be signed. jects in Sofia from three different perspec• store in Sofia. "The market for retail space enters a more tives. "One finding is that anchors occupy Lukarski noted that the expansion of mature phase that clearly stands out suc• approximately half of a shopping mall's Kaufland's activity in the country is an ac• cessful projects and those whose concepts gross leasable area, regardless of its size. knowledgment of the efforts of the Bulgar• are not working. While the first group The second perspective delves into the ian government to establish favourable shopping centres strengthen their posi• tenants'type of operations (local, interna• business environment and to lure quality tions, the remaining need a comprehen• tional or franchise) and their ratio in the investments. Kaufland has so far invested sive restructuring to continue to operate in respective shopping centre." BGN 1.2 billion in Bulgaria, operates 54 an increasingly competitive market," said The retail project with the highest share stores and provides employment to 6,000 Rosen Genev, Manager of Retail in Forton of international retailers, directly operating people, making it one of the largest em• / Cushman & Wakefiejd. on the Bulgarian market, is Sofia Ring Mall ployers in the country. Overall, the first half of 2015 passed with• (55 percent), followed by Mega Mall (46 Apart from these contributions to the out any new commercial projects being percent) and Serdika Centre (42 percent), Bulgarian economy, Kaufland also pro• launched, and the total market volume Colliers explained. vides the opportunity to 850 Bulgarian was 763,000 sqm. Rental levels for prime Despite the lack of new major opera• producers to sell their products in one of locations in Sofia malls remain stable at tors, retail market demand will continue to the largest retail chains in the country.This €20 per sqm. As to the prime high street Vi¬ grow due to the large supply, the reposi• creates preconditions for the establish• tosha Blvd, rents are stable at €44 per sqm, tioning of projects, or a change of expan• ment and maintenance of competition according to Forton.