Landlords and retailers went head to head this week at the International Council of Shopping Centers (ICSC) first Retail Real Estate Conference in Bulgaria, held in association with the Bulgarian Retail Association.
The growing shopping centre sector in Bulgaria is contributing to the economic development of the country and ICSC, the 60,000-strong global trade association of the shopping centre industry which provides members with educational opportunities and networking events, is supporting the ICSC Bulgarian National Committee to sustain this growing sector.
At the conference, a heated discussion took place between Jorgo Intziadis, Secretary General of the Bulgarian Retail Association, Vassil Raychev, Managing Director of retailer Shoes, Richard MacDonald, Chairman of Landmark Property Bulgaria which runs Burgas Plaza shopping centre and Shalom Mor, Chief Executive Officer of GTC Bulgaria.
Jorgo Intziadis outlined the problems faced by retailers in Bulgaria: lower consumer demand, rent commitments and the high purchase cost of branded goods resulting in higher costs to consumers. He challenged landlords to sharpen up their centre management teams and adopt turnover rents in order to ease the burden on retailers faced with a Bulgarian consumer who has less money to spend in the current economic crisis.
Richard MacDonald of Landmark Property Bulgaria said that his shopping centre had slashed the tenant rents by 40% to support them during the current situation, but he was not prepared to consider turnover rents.
He said: "We have contractual commitments to our bankers. Retailers must understand that landlords and retailers have different pressures, but they must not forget that we share the same objective: to run a profitable business."
Shalom Mor of GTC Bulgaria which is developing its first shopping centre in the country, said: "Developers must fulfil their commitments to financial institutions otherwise the centres will close."
Vassil Raychev, Managing Director of Shoes, added: "This is the first time that Bulgaria has faced such a retail crisis and we have to work together."
With much of a shopping centre's value being based on its rental income, any reduction means a lowering of the centre value benefitting neither landlord nor retailers so both must make the retail centre attractive to visitors. MacDonald argued that retailers should not just look to landlords to reduce costs but be prepared to negotiate lower purchase costs from their suppliers.
Richrad MacDonald added: "Some retailers will go bankrupt and some Shopping Centres will close".
Ivaylo Ivanov of Investa Property Solutions facilitated the conference. He said: "In these crisis times, Shopping Centers and retailers have to rapidly look for different options. Some of the Shopping Centers may convert to Schools, Museums, Public Library or even Scientific Centres. Some of the retailers may merge and close locations in order to save their core business."
Ozgur Yavuz, managing director of Investa Property Solutions and Chair of the ICSC Bulgarian National Committee, said: "Bulgarian retailers had an excellent opportunity to air their grievances at the conference but the lengthy debate threw up many strong arguments by retailers and developers on the panel and in the audience. After a heated exchange of views, each side accepted there was an alternative, valid point of view to their own. Bulgaria desperately needs this full and free debate to reach a stage where landlords and retailers recognise that whilst they will never be the closest of friends, they will achieve more by working together than through constant conflict."
The ICSC Bulgarian National Committee will debate this issue again at a further retail real estate meeting being planned later in the year.
Source: Nicky Godding Communications
