Retailers and developers from across the Baltic States clashed yesterday at a conference organised by the International Council of Shopping Centers (ICSC)'s Baltic States National Committee in Vilnius.
After a 10-year period of rapid retail growth across Latvia, Estonia and Lithuania, retailers and shopping centre managers are facing an uncertain future as customers reduce their spending in the current difficult economic climate.
With fewer customers spending less, rapidly rising common and utility costs, and the need to spend more on marketing and advertising to boost footfall, retailers are looking to their landlords, the shopping centre management, to help them by reducing their rents and providing increased marketing support.
Are Altraja, Commercial Director of Sportland International, which has shops across The Baltic States, Russia and Finland, called on the industry to work together. He said: "Shopping centre management must work more closely with their retailers to support them through this difficult time. If they do not, it is likely that retailers will either close stores or reduce their size within the shopping centre."
Marcis Budlevskis, Director of Lease and Business Development at Linstow Center Management Ltd in Riga, Latvia and chairman of the ICSC Baltic States National Committee, which organised the conference, said: "The fundamental differences between retailers and their landlords were very evident at the conference, which was the first time that significant numbers of retailers and landlords had come together to debate the issues we are all currently facing.
"Landlords will always try to achieve maximum rental income from their properties, while tenants will use all the available arguments to reduce rents. The current state of Baltic economies has presented tenants with a new set of arguments, which will be used in negotiations with landlords in attempt to slash rents. It will be the task of each landlord to evaluate each such individual request. With the huge financial commitment and value of the shopping centres at stake, landlord' will not be able to satisfy the demands of all retailers', who are more flexible and to a certain extent, can expand and contract, according to the market.
"However, landlords will have to choose wisely in each individual case between accepting short-term rental discounts and refusing such support to retailer, thus, risking losses stemming from possible decisions of retailers to reduce the size of their shops or close some branches down completely. Therefore, to pull through the next few difficult years, we must all work together much more closely."
Mihails Morozovs the Managing Partner for the Baltic States and Belarus at Colliers International, noted: "The conference brought together most influential industry leaders from the region to discuss the further trends and possibilities of the retail sector. At the moment it's extremely important for all involved parties to support open dialogue regarding changes in the market, and take flexible position in terms of discussion future needs and plans. ICSC is the right platform to add value to this process, and take over the leading role in organizing round tables and seminars between the landlords, retailers, management and marketing companies.
"Despite surging inflation and the deteriorating financial standing of households which contributed to the slowing retail growth rates, the sector is still vibrant and full of new possibilities