Supply overview

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.

 

Rents overview

Euro equivalent rents remain highest in the Russian market with prime high-street rents at €510 (US$638) m²/month in Moscow and at €258 (US$323) m²/month in St. Petersburg. At the other end of the scale there are  Sofia, Bratislava and Zagreb markets with the lowest rates at €38 m²/month, €40 m²/month and €45 m²/month respectively.

 

Sean Briggs, Managing Director, Retail Agency, Eastern Europe said:

It is clear that the Russian market is one of the pre-eminent retail destinations in Europe. Moscow and St. Petersburg together with other regional cities provide many opportunities for western retailers looking for new markets. The strength of the market is also demonstrated by the first wave of Russian retailers moving west into new retail destinations.

Investment Overview

Only three deals were closed in Q3 2012, two of which were in the Czech Republic. Whilst this represents a significant proportionate dip in form, it will be temporary and retail will comprise a healthy proportion of deals across the region over the year. Yields have remained largely stable,

with only Warsaw seeing a hardening of yields down to 6% for prime shopping centres, and 7% for prime high street locations.

 

Pipeline overview

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. Unsurprisingly, Moscow and Kiev are the locations driving this pipeline with 1,034,850 m² (Moscow), 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.