Rising competition

 

While retailers try to recover from the financial crisis and its negative effects on consumption, owners and investors in retail units are faced with a crucial moment - the long-awaited simultaneous completion of several projects in 2010.

By May this year, retailers have registered another annual decline of 10.4%, prompted by some discounts of domestic appliances,furniture and electronic goods. Sales of clothing and shoes have subsided by 7.1% for a month and 6.2% for the first five months of the year.  

In the meantime, three shopping centers are being developed in the city of Varna. This is said to raise supply by some 115,000 sq m of retail space which is more than quantity of retail units on the high streets in the four largest cities in Bulgaria (90,000 sq m according to Colliers International). New shopping centers should be completed in Plovdiv, Ruse, Stara Zagora and two in Sofia by the end of 2010. As far as demand is concerned, the expansion of retail chains like Peek & Cloppenburg, Spanish fashion company Inditex, French hypermarket Carrefour is still giving some security to projects. But the contraction of many Bulgarian retailers has forced developers to offer the best possible solutions to the problem – turnover-related rents, rent-free periods, which vary from 3 months to a year, completion woks that reduce tenants’ expenses.  

Three years ago, Varna offered basically the same rents as in Sofia. But now it rather features rents similar to the ones in Plovdiv – between 30 and 45 euro per sq m per month for units in shopping malls. Important tenants usually get units for less than 20 euro per sq m.
There are now offers that that were scarce two years ago. Yet, owners try to maintain high prices: in Varna a 32-sq m unit located on Knyaz Boris Blvd. can be rented for 110 euro per sq m; a similar unit on Sofia’s Vitosha Blvd costs 112 euro. Larger shops, however, feature cheaper rents - for example 80 euro per sq m for a 120-sq m unit on a major shopping street in Sofia. According to Colliers, 15.8% of retail units have changed their tenants.