The stock of contemporary shopping mall space in Bulgaria doubles in the first six half of 2010 with the opening of five new shopping malls, reaching 452,000 m² in total. At the same time, the increasing competition on one side, and the decreasing propensity of consumers to spend on the other, place significant pressure on retailers. This is according to Colliers International's retail market overview for the first half of 2010 in Bulgaria.
The dynamic development of this market segment caused a change in retail vacancy levels. Two of the key shopping malls in the capital - The Mall and Serdika Center - opened with more than 90% occupancy, while for the rest of the shopping centers, vacancy levels have increased moderately, with no mall being exempt.
The opening of new shopping malls affected the performance of the main High Streets. Brands are concentrating in the malls, where rental rates are lower, pushing overall vacancy to 10% in Sofia. The most stable High Street in terms of movement is Plovdiv. Although it has relatively high vacancy levels (14%), this is mainly driven by one single closed shopping centre on the High Street. There is a relatively low level of availability on the High Street in Bourgas and Varna with approximately 3% and 5% respectively.
According to Colliers' report, the demand for contemporary retail space is driven primarily by European and Turkish brands through regional franchisees directly.
"The trend of increasing vacancy on High Street is likely to last for the next 6 months, however it will thus become more accessible, and with more incentives from the landlords there is a good chance of a comeback for this format in the midterm. In order to remain competitive relative to the shopping, High Streets need upgrading and unification of the fragmented ownership we are currently witnessing," comments Iglika Yordanova, manager Retail Services at Colliers International.
Rental rates in shopping malls continue to fall in the first half of 2010 with 5% in Sofia and Varna respectively, while in Plovdiv and Bourgas the average fall in rental rates is 15% and 19% respectively. High Street sees an average decrease of 20% across all submarkets. "The situation in Bulgaria is not different from the worldwide trends. Premier High Street rents fall in almost every region of the world. Although retailers remain cautious towards future expansion, the ones with a strong balance sheet are quickly gaining the confidence to expand into markets previously viewed as too expensive or difficult to penetrate, such as Eastern Europe," adds Iglika Yordanova.
The big-box segment is marked by the continuing boom of the discounters, the active development of consumer electronics companies and the opening of the first big outlet center in Bulgaria. Another format, gaining momentum is the retail park, though with a slower pace compared to the shopping malls. There are several schemes under active construction in Sofia and three projects are expected to be ready by the beginning of 2011.
Colliers International's experts emphasises that the retail segment will continue its development in the next six months. The planned opening of five new shopping mall projects (in Plovdiv, Varna, Ruse and Stara Zagora) will add 126,000 m² of contemporary stock to the market. "Although most of the newly completed retail space in Sofia has generally been absorbed so far, a surplus in markets such as Varna, Ruse and Stara Zagora is expected based on the economic slowdown and the fact that available retail space significantly exceeds potential retail demand," says Ms. Yordanova.