While limited retail investments deals were closed in Q3 2012, it is estimated that this will be temporary and that retail will comprise a healthy proportion of deals across the region over the year, according to Colliers International’s latest research “Eastern Europe Retail Market Snapshot Q3 2012”. Rents and yields largely remain stable with the Russian market on the one hand and on the other markets Sofia, Bratislava and Zagreb reporting the highest and lowest levels on the rent scale respectively.
Low but Prominent Supply
There has been a slowdown in project completions across the region. Retail developers appear to be reacting to weak consumption and retail trade by postponing or re-phasing development plans until overall market conditions improve. Although the active pipeline for the region has fallen from mid 2012 highs to below 2 million m2, this will add extra 13% of space to market when completed.
Temporary Retail Investment Dip
Despite only three retail investments deals being recorded in Q3 2012 out of a total of 41 deals which the two took place in Czech Republic and the other in St. Petersburg, Colliers estimates that this dip will take up by the end of the year taking into account the number of deals in motion across the market set to close in Q4.
Rents in Stable Mode
High-street rents show very limited change across main markets, with only narrow increases changes in Moscow and decreasing signs in Kiev. Prime Headline High Street Rents in Athens remained stable to €150/m²/month without any key money requested. A similar stable picture has emerged in both the Traditional Shopping Centers (TSC) and Specialized Shopping Centers (SSC) markets, which was also the case in Athens.
Dimitris Voutsas, Director Retail Services Colliers International Greece commended: “Shopping malls the preferred format of foreign and local retailers because they offer more secure environment and lower vacancy rate compare to High Street”.
Even though the active pipelines experienced a drop of 225,750 m² compared to Q2 2012, the 1,994,000 m² of space under active construction represents a high level of new stock to enter the market. Moscow and Kiev are the locations driving this pipeline with 1,034,850 m² and 354,000 m² respectively. Sofia is another potential major supplier of space with 207,000 m² in the active pipeline. These markets represent 85% of the current pipeline figure.
Dimitris Voutsas further comments: “Over the next 12 months, differing fortunes are forecasted for the major cities of Eastern Europe with regards to rents. In Athens, we foresee a decrease in the high street rent, while on the other hand rents for the traditional shopping centers will remain stable.”