site.btaRetail Parks in Bulgaria Increase in Area by 50% in 2023

Retail Parks in Bulgaria Increase in Area by 50% in 2023
Retail Parks in Bulgaria Increase in Area by 50% in 2023
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Retail parks are experiencing extremely rapid growth both in Bulgaria and throughout the Central and Eastern Europe region, and the market is heading towards saturation in the medium term. By the end of 2023, their volume in the region has increased by nearly 11% compared to 2022, with their total area reaching 8.35 million square metres. Although the operating areas in Bulgaria are a relatively small part of this volume. 511,000 sq. m, the growth of the market is significantly above the average in Central and Eastern Europe. In 2023, operating retail parks increased their area by more than 50%, shows data by the business real estate consulting company Cushman&Wakefield Forton.

The significant growth in this segment of the commercial space market is due to the extremely high activity on the part of developers, as well as delayed development and the low base supply. Retail parks under development are more than shopping centers, which reinforces the trend of lasting interest in this format on the part of investors, merchants and consumers, commented Georgi Muhovski, deputy manager of Commercial Real Estate at the company.

Muhovski said that in recent years there has been a strong interest in retail parks in the region, which is expressed not only in the construction of new areas, but also in the introduction of new concepts. While in Bulgaria still focuses on classic operators, such as affordable fashion and shoe stores, supermarket, electronics, furniture, DIY shops and more recently food spots, in developed markets now also offer cinemas, hotels, shared office space and more.

Since the pandemic, the perception of retail parks by consumers has changed significantly. They are perceived as practical places for shopping, while malls focus on the consumer experience and entertainment, summarized Muhovski, noting that the expansion of this segment is good news for the commercial real estate market.

The potential risks that rapid growth brings must be recognized and managed, Muhovski said, singling out the  lack of know-how, cash flow management, underestimating or overestimating the potential of a project. From the retailer's point of view, the main risks are from "cannibalization" between sites and the ever-deepening problems with finding and training staff, the authors of the study indicated.

Cushman&Wakefield Forton data shows that the average density of retail parks in Central and Eastern Europe is 92 square metres per 1,000 inhabitants. Active investments in the segment are rapidly changing these indicators, especially in rapidly developing markets such as Bulgaria. At the end of 2023, the density of retail parks in Bulgaria was 75 square metres per 1,000 inhabitants. Bulgaria is already ahead of Poland, where this indicator is 66 square metres per 1,000 inhabitants, but remains among the countries with the lowest density. The leader is Hungary, where this indicator is 172 sq. m per 1,000 inhabitants, and in neighboring Romania it is 94 sq. m per 1,000 inhabitants.

Online trade

After the rapid expansion of online trade in the post-pandemic year 2021, when the sector recorded a real growth of 43% in Bulgaria, in 2022 this indicator decreased to 12.4%, reported the authors of the study. In 2023, it went down to 8.3% after adjusting for inflation. At the same time, the turnover of physical shops in malls and retail parks remained stable.

The data on online trade in the European Union indicate that after 13.6% growth in 2021, in the next two years, inflation lead to adecline by -5.4% and -1.3%, respectively.

"After the rapid growth of online sales, the market has visibly sobered up and the hybrid models between online and physical objects have proven to be the most sustainable model in recent years," pointed out Muhovski.

He added that a deterrent factor for the rapid growth of online commerce was partly logistics, as many brands still experience problems with shipment processing centres. Many of the big international brands successfully combine physicaland online shopping through formats such as click&collect (the ordered goods are collected from the store) and exchanges and returns in the physical stores.

Muhovski noted it is the effective collaboration between offline and online trade, as well as digitalization in the sector, that will play a decisive role for the future of the retail market.

/MY/

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By 03:34 on 13.04.2024 Today`s news

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