Although the shopping centers in Belgrade do not lag behind similarfacilities abroad when it comes to innovative methods of construction, originalarchitecture and design, they still don’t represent the realization of thebasic idea of convenient and cheap shopping like they do in the “West”. Inaddition to the fact that the prices are pretty high for that type of retailfacilities, the customers are also complaining about big crowds, that is, lackof parking space, seats in coffee shops and restaurants, queues in front of dressingbooths and cash registers. According to real estate experts, the reason forthat lies in the fact that Belgrade lacks minimum 80,000 square meters ofshopping centers, that is, two or three facilities like Delta City and TC Ušće. Once thatnecessary free space is created through their construction, the rents willdrop, as well as the prices of goods in the outlets. Serbian capital city todayhas about 90 square meters of retail space in shopping centers per 1,000citizens, which is below the average when compared to the neighboring cities – Sofiahas 100 square meters, Bucharest has 150 sqm, Zagreb has about 350 sqm, whileBudapest has 430 square meters per 1,000 citizens. Having that in mind, viewedin the medium term, Serbian capital city offers significant potential fordevelopment of modern shopping centers.
(Delta City)
Similar is the situation in other cities in Serbia because, according toKing Sturge’s estimates, our country currently has about 237,050 square metersof retail space and, having in mind the number of citizens, it lacks about150,000 square meters.
The potential of Serbian retail space market was recognized by both domesticand foreign investors, which at one moment resulted in numerous announcementsand plans for construction of facilities all around our country, which is,roughly estimated, about 300,000 square meters of new retail space. However,many such projects remained at the level of attractive headlines in thenewspapers, and it is difficult to foresee when their realization will takeplace. On the other hand, we should not neglect the fact that, even in the yearof the crisis, our retail space market was entered by several new names such asMr. Bricolage and Kika, while Merkur opened itslargest facility in Karaburma and Mercator continued expanding its chain.
(TC Ušće)
How will the shopping map of Serbia look like?
According to the announcements from the biggest investors - Big Centers, PlazaCenters, Delta Invest, MPC Properties, Pluto Capital, Mercator, Tuš, VondelCapital, these companies do not give up their development plans, but they pointout that the deadline for their realization may be extended. After Belgrade,the first on the investment map of foreign investors are Novi Sad and Niš, whileKragujevac was the most interesting in 2007 and 2008 with 12 announcedprojects. These big cities are followed Subotica, Šabac, Leskovac and Čačak.
(Plaza Kragujevac)
Some of the most significant announced projects in Serbia are Plaza Kragujevac (65,000square meters), PlutoLeskovac (11,400 sqm), Park City Novi Sad (12,000 sqm), Delta ParkKragujevac (23,000 sqm), MPC Niš (22,000 sqm), BIG Novi Sad (RetailPark concept at about 32,000 square meters), Pionir Shopping Centar in Niš at 10,000sqm, and the first factoryoutlet should be built on highway E-75 by Black Oak Development, while thecenter will be run by GVA Outlets, the leading European company in the field ofoutlet centers. Opening of the facility that is situated half way betweenBelgrade and Novi Sad is scheduled for the end of year 2010.
Crisis walked into shopping centers before consumers did
According to Ivan Todorović, the Retail Space Sector Manager in King Sturge,the reason for decceleration of the realization of investments is the globaleconomic crisis.
(Ivan Todorović)
- Significant drop in sales in shopping centers was registered at globallevel during 2009, which had a negative effect on all future investments, notonly in Serbia, but also in the surrounding countries. All around Europe theowners of shopping centers were lowering rents because of bad sales results, andthose experiencing the biggest problems were even offered the possibility topay only the necessary expenses, without basic monthly rent – Todorović explainsfor eKapija.
In Todorović’s opinion, other important reason why the investments are lateis the project funding by business banks, which is often conditioned by thesigned pre-contracts for 70% of the shopping center’s capacity.
- That is a very demanding condition because majority of tenants do notoperate well and every future expansion represents a risk. Even the approval ofloans to tenants is brought into question because they have to investsignificant amount of money in opening their retail space, while banks do notreact positively to such requests.
(Jelena Jevremović)
The Retail Sector Consulting Department Manager in Colliers International, JelenaJevremović, says that an additional problem when renting an outlet representsthe fact that large shopping center do not sign contracts for less than fiveyears.
- It is clear to you that such moves are risky in the period of thefinancial crisis and everybody waits for some more favorable moment – says Jevremović.
Vladimir Mijatović, the Retail Space Sector Director in CB Richard Ellis, addsthat the modern shopping centers of Western type primarily attract eminentinternational companies, either directly or through franchising.
- Since the financial crisis has global character, many companies havetemporarily discontinued realization of their international plans for expansionand they wait for economic and financial indexes to become less unsafe. Once afavorable situation is created, we can expect the expansion of businesses ofthese companies in Serbia to continue and the long-announced brands to enter Serbianmarket – says Mijatović.
(Vladimir Mijatović)
- Opening of TC Ušće enriched the offer in Serbia with new brands that havenever been present in our market - Salsa, Glow, Lolipop, Prenatal, etc. DeltaCity, as the first real shopping center, attracted significant number of newinternational companies and, thus, contributed to the growth of presence ofinternationally acknowledged brands in Serbia from 14 to 17%, which put Serbia inthe 47th place on the global list. We expect that percentage to groweven more, but we can not say when because even the investors themselves do notspeak about that – says Mijatović.
From Kaluđerica to Novosadski Road – where will citizens of Belgrade shopin 2012?
According to experts, there are only several adequate shopping centers inBelgrade - Ušće, Mercator, Delta City and Zira.
In Ivan Todorović’s opinion, Belgrade lacks two larger regional tradecenters at about 40,000 square meters or three smaller ones of up to 30,000square meters, which should be strategically positioned at various locations, outsidethe zone of New Belgrade.
(Zira)
- Serbian capital city also lacks one “retail” park at 30,000 square metersas a discount shopping destination, and such centers are characterized by a bignumber of visitors and the “value for money” slogan - says Todorović and pointsout that the plans for construction of such facilities already exist.
One of the long-announced and the most attractive projects in Serbiancapital city is shoppingmall in Rajićeva Street, which should be opened in spring 2011 at thelatest.
According to Jelena Jevremović from Colliers International, which is the leaseagent for retail space in the future center, that facility will offer minimum20,000 square meters of retail space and enrich the offer in the very center ofBelgrade.
(Rajićeva)
- Colliers has not started the lease process yet, but potential tenants arevery interested. That will be a real city center and an inevitable shopping andtourist destination.
Another interesting project that will make the citizens of Belgrade happy isIBC Power Center, which is conceived as a “retail” park that will be situated atthe exit from Belgrade, next to the road to Novi Sad. The date of commencementof its realization is still unknown.
(Point Shopping Center)
Special attention of the public has recently been drawn by company Immo Point,which started construction of Point Shopping Center at9,000 square meters in Belgrade’s settlement Kaluđerica. Verano Group hasannounced the commencement of construction of a big shopping center near Trošarina,which will have three underground levels, a garage, ground floor and twoaboveground floors and occupy the surface of 73,000 square meters. Thisshopping center is planned to comprise a multiplex cinema, a bawling room,fitness and wellness center, as well as an outdoor food court.
(TC Trošarina)
Also, much is expected from the completion of renovation of the chain ofdepartment stores RobneKuće Beograd, of which total surface is 230,000 square meters. They aresituated all around Serbia and offer approximately 76,000 square meters ofretail space in the most attractive locations in Belgrade.
Vladimir Mijatović also mentions the Plaza Centers projectin Višnjička Street at 100,000 square meters, which will consist of two levels withstores and one level for entertainment, a cineplex with 10 halls, a slot club,fantasy park and fitness center, and a five-level parking lot.
(Plaza Višnjica)
We should also mention future China Trade Center inBelgrade, which will occupy the surface of 53,000 square meters and have 430outlets upon the completion of the second phase of construction, while thethird phase will bring additional 70,000 square meters. Investor Diplon has, sofar, invested 15m EUR in construction. In the second phase, which will befinished prior to end of 2010, another 10m EUR will be invested, while totalinvestments at the end of the third phase will reach 35m EUR.
(China Trade Center)
The development plans of Delta Holding in the shopping center industry arecurrently on hold, although that company announced big projects at Autokomandaand in other locations.
When it comes to attractive locations for future centers in Belgrade, JelenaJevremović says that the most important are Višnjica, Port Beograd,Autokomanda, Voždovac, that is, all the locations alongside high-frequencyroads.
How much is square meter of shoes?
- The rental fees in Belgrade-based shopping centers are higher than in thecities in surrounding countries, primarily due to lack of competition and highinterest rates that are the condition for the project funding - says IvanTodorović.
- The rents will be changed the moment the critical mass of free space is reached.The rents for retail space dropped by 15 to 20% at average, and many tenantsare announcing even bigger decrease this year.
(Knez Mihailova Street)
Vladimir Mijatović explains that the amount of rents for the best retailspace in modern shopping centers depends on both size of the leased space and thetenant’s activity, and it ranges between 35 and 60 EUR per square meter onmonthly basis.
- Viewed in the short term, prices will not be changed significantly becausethese centers still attract big number of potential buyers. Tenants in existingshopping centers of large format mainly register large turnovers, so that thedemand for outlets is stable, while the rate of available space is low. The retailerswhose ratio of the amount of registered turnover to the amount of rent is noteconomically justified are quickly replaced with new ones. Decrease in size ofrented space makes it possible for existing tenants that achieve bad results toimprove them, while free space is used for the entrance of new tenants. In thatway, the lessor ensures adequate amount of average rent in the shopping center.
Jelena Jevremović is of the same opinion and she says that the latestresearch done by Colliers International showed that the prices of rents foroutlets in shopping centers in Belgrade reflect stability thanks to the leasecontracts that are signed for a longer period of time and based on the fixed rentalfee. Rents in the primary and secondary city zones are stable. In lessattractive streets outside the city center, rental fees dropped by 15-20%. Inthe primary shopping zone (Knez Mihailova Street, Terazije, Kralja Milana Streetand neighboring streets) rents range between 100 and 200 EUR per square meter,and similar is the situation in the secondary zone where the rate of unleasedspace is also very low, while the rental fees range between 40 and 100 EUR persquare meter.
According to the research done by Colliers, rents in other zones in NewBelgrade and the streets outside the city center dropped by 15-20% and rangebetween 15 and 50 EUR per square meter, while the rate of free space in thesetertiary zone is higher and amounts to 5-15%.
(XYZ outlet, TC Ušće)
The statistics for European countries show that the highest monthly rentalfee for outlets in shopping centers is in London - 245 EUR per square meter, thenin Berlin and Geneva - 160 EUR per square meter, and Paris - 150 EUR per squaremeter. In the Balkans, the highest monthly rent is asked in Athens - 100 EURper square meter, Belgrade and Bucharest - 80 EUR per square meter, Budapest –60 EUR, Sofia – 40 EUR, Zagreb - 38 EUR, etc.
- We should have in mind that the prices in main streets in each city are highand that hardly any outlet in such zone makes good profit, that is, it is notthe most profitable store of the tenant, but serves as so-called flagship store,which represents the place for showing the brand and creating the target group.The money is made in the outlets in shopping centers because they guarantee a bignumber of visitors. Our main street is much different and it is notwell-developed. There are too many rented outlets that are “in preparation” - saysJevremović.
(N sport, TC Ušće)
How do tenants think?
Jelena Jevremović says that every tenant, depending on the goods it sells, makesa precise mathematical calculation before deciding to rent some space.
- Let’s show that on the example of an outlet at 100 square meters and afashion tenant. The tenant knows exactly how many square meters are requiredfor a storage space, and that is mainly between 10 and 15 square meters. Dressingbooths occupy between 7 and 8 square meters, while the surface occupied byshelves and the rest of exhibition space is also subtracted from total size ofthe outlet. Therefore, the tenant knows exactly how much retail space is at hisdisposal and how many articles, depending on what he sells, he can exhibit.
(Čumić Alley)
Let there be no crisis
Over the last three or four years, retail trade development in Serbia hasexperienced bloom because both domestic and foreign investors have recognizedour country as an undiscovered market in southeast Europe whose maincharacteristics are big demand, low rate of free space and stable prices ofrent. Our authorities are also interested in development of that industry,which is a necessary condition for creation of measures for attractinginvestors, especially when it comes to the laws and regulations that willfavour the rights of investors in regard to building land, types of ownership,conditions for issuing building permits and deadlines.
- Serbia’s opening towards EU will enable the arrival of new brands in thecountry and increase the need for shopping centers. What was interesting in 2009is the growing trend of the retail concept of outlets. Repositioned Immocenter inthe form of ImmoOutlet was reopened in the third quarter of 2009 and the listof its tenants was completely changed. Some time earlier, investor Italtesopened outlet center Piazza Roma in the borough of Surčin, at the surface of 2,000square meters - says Vladimir Mijatović.
According to Ivan Todorović, the good news for the retail space market inSerbia is the announcement that Ikea will have the location and startrealization of the Ikea Shopping Center project this year.
- Also, several companies have decided to appear independently in the marketof Serbia in 2010 and 2011. Among them are German Kaufland supermarkets,Diecmann, the European leader in footwear production and sales, Rieker, Obi withdo-it-yourself (DIY) concept, and several other very interesting companies - saysTodorović.
He confirms the interest of foreign investors and says that manymultinational companies have contacted King Sturge to establish a partnershipwith Serbian companies.
- We monthly receive few requests and questions concerning finding adequatefranchise partners for companies such as BHS, Hard Rock Caffe, Jules, Parfoisand others - says Ivan Todorović.
Therefore, if we are optimists, the recipe for development of the retailspace market in Serbia is simple: we only need to be a bit patient and wait forthe crisis to pass because we already have the most important ingredient –investors’ interest in investing in our country and the readiness of theauthorities to make that possible.
T.S.
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