Second wave of projects floods the shopping mall markets

The new retail centers will be more spacious and diverse and will offer more entertainment options

By 2009 Bulgaria is expected to experience a real boom in shopping center development. By that time Sofia will have 185 square meters modern shopping space per 1,000 people, tripling the current stock, according to a research by Colliers International on the retail property markets in Bucharest, Belgrade and Sofia.
Shopping centers are projected to become one of the most dynamic real estate market segments but there are still some issues, which need to be addressed. The global credit crunch also made an impact on the sector even though on a smaller scale. However, experts assume that the Balkan region is not to witness oversupply on the market and stricter requirements will probably make quality projects discernible.

Serbia, Romania and Greece
Dejan Racic, Executive Director of Serbian developer Delta Real Estate, considers that in the next 5-7 years to come Belgrade will have 10 shopping malls developed. There is currently only one in Serbia’s capital. The country lacks foreign investment and local companies dominate as a result of the political instability and the risky market.
"The time for malls and more shopping and entertainment places in Serbia has come," Mr. Racic said. He added malls will be developed not only in Belgrade but in Novi Sad and Nis as well.
And while Serbia is witnessing the start of shopping center development, Romania finds itself in quite a different situation. The country boasts the biggest shopping center market in Southeast Europe at the moment (161,600 sq m stock). The forecasts of Colliers International provide that 177,000 sq m of retail space will be developed in 2008 only.
Javier Solis, Commercial Director at Riofisa, a Spanish company with two projects in Timisoara and Brasov, Romania, assumes that the shopping center market in Romania is more saturated than the Bulgarian one. "It is pointless to invest in such projects as there are significant risks of oversupply and many investors fear of failures", he added.
Jerome Loubere, of Greek retailing company Marinopoulos Group, regards the climate in Greece as a rather different one. Greeks have long since preferred open-air retailing and still use small retail units available in all neighborhoods. "There are only 3-4 malls in the country but there are no stimuli to develop more of them."

A new tide of malls
The first tide of mall developments has already abated but competition is rising. The new shopping centers will have success if certain improvements are done. Eli Egosi who participated in the project of Mall of Sofia and is now consulting two other schemes, stated that new concepts were needed for future malls. Shopping centers are expected to become more spacious and a number of new retailers are about to enter the market. Moreover, a wider scope of entertainment options should be developed for customers to prompt them not only to shop, but to spend their time in better ways. The second trend that has to be pursued closely concerns locations. Shopping centers should be moved out of town so that to provide more space and greater number of parking spaces.
Javier Solis also supports this concept. New projects are not all about being innovative and vanguard. They also need to feature good locations and accesses as this is what would bring the clients in.

Global credit crunch
Financial institutions have tightened their regulations and tend to demand more information about projects and investors as the global credit crunch has started to take its toll on the sector, experts say. "This is also the result of the market saturation. But if projects have good locations, they will be financed because quality projects are needed to make profits," Eli Egosi commented.
On the whole, the region is thought not to be affected by the crisis. In Mr. Racic’s opinion, Serbia finds greatest problems in land acquisition and financing certain projects.

Market issues
Infrastructure stands as major issue that has to be faced. "Generally, investment environment should be mended. Yes, the situation is more than clear - jobs are created, lending is increasing but investors also have their own needs", Egosi said.
Javier Solis: "One of the setbacks we ran into in Bulgaria is actually receiving construction permits. However, the sector is becoming more professional and its growth potential is clearly visible. Romania started its shopping mall development two years before Bulgaria did, but the latter is also making progress and performing better than before."
Asked how many malls could the country handle and whether oversupply is likely to occur, real estate professionals are unanimous that the market is the driving force. "If a mall has been properly developed, it will attract people. Revenues and returns will not be high, but there will still be potential for development," Eli Egosi added. He also pointed out that if there were 20 malls in Bulgaria, these would not be too many. The important thing is not to be constructed simultaneously, to be in different geographic locations and to provide diverse products. "Yet, another thing to take into account is that if a mall proves to be unsuccessful, it might be redeveloped", he added.
Serbia is in a similar situation. "There are 30 malls in Warsaw (population of 2.5m), which are not considered too many. This means that the Serbian market might accept at least 10 more projects", Mr. Racic believes.


Dejan Racic: "A project could succeed if it would have avoided the so called doubling effect. The marketing mix is essential but the countries in the region lack it. For that reason our second project in Serbia is striving to achieve that."

Javier Solis: "Despite the global credit crunch, the market has begun to follow its natural course of progress. Two years ago banks were knocking on our doors to fund our projects, which didn’t make much sense. They tend to be more conscious now when they provide loans, which will make quality projects discernible."

Eli Egosi: "Infrastructure and engineering infrastructure are the major setbacks that have to be overcome. Investors face huge problems while the government does not provide any help."

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