Malls Replace Shopping Streets, Analysis Shows

Malls Replace Shopping Streets, Analysis Shows

Malls have replaced shopping streets and during the discounts season clients will mainly go to big shopping centres, according to the latest report on the Bulgarian real estate sector development conducted by UniCredit analysts.

Group analysts expect another price drop of shopping area rents. The increase in the vacant office buildings areas will persist and energy-efficient buildings will be in highest demand by business, analysts think.

"Rents in Sofia's shopping streets, which already suffered from the opening of malls in the recent years, will continue to drop," experts forecast.

"The report concludes that at the moment the monthly prices per square metre in the main shopping streets in Sofia vary between 35 and 60 euro (according to the location), however, the tendency is towards further reduction and it is getting more and more difficult to find new tenants for the vacated premises.

"The delay in the building of some projects (and the suspension of those at planning stage), triggered off by the world financial crisis, affected the market favourably," analysts think. "The completion of all planned shopping centres would have caused a glut on the market of such areas," the analysis points out.  "No mall was opened in Sofia in 2009, but last year the opening of two big complexes - Serdika Center and The Mall - reversed the tendency."

"Thus within a couple of months the malls' shopping area doubled reaching approximately 200,000 sq.m. Additional increase is expected in 2011 with the planned opening of Mega Mall that will add further 25,000 sq.m. of shopping area. The total shopping area in the country as of end-2010 exceeds 500,000 sq.m.

"Despite tenants' pressure, for the time being the mall rents remain relatively stable at levels between 7 and 35 euro per sq.m. depending on the size of the store. The rental prices are stable as the current average vacant areas percentage remains small to moderate in Sofia's operating malls. However, these prices may be challenged in the future as new areas are commissioned.

"As for offices, energy-efficient buildings will be in demand," experts say. "Despite the crisis, office areas, especially in Sofia, continuously increase. Last year alone the new office areas increased with more than 200,000 sq.m. This logically leads to a lower occupancy rate and hence lower rents.

"Analysts see potential for development in that segment only for those office buildings which have good energy efficiency and thanks to it can offer their owners a good investment return rate of average rental levels around 12 euro per sq.m.

"The expectations reflected in the analysis are that international investors in real estate will turn their attention precisely to such high-quality projects."

The construction of new offices will considerably slow down in 2011 and 2012, the analysis states.

 Logistics projects will also suffer from stalemate. "However, unlike the malls and the office buildings, the supply of new areas in logistics parks reacted faster to the decreasing demand."


"In 2010, new logistics projects were started only by companies that needed them. In the sector though there were practically no speculation-targeted projects.

"As regards logistics parks, a paradox is seen - there are no actually good industrial areas and none are being built as unoccupied areas increased sharply - around 8.5 per cent in 2010 compared to slightly above 4 per cent in 2006.

"According to data from mid-2010, the quality logistics areas are let out against a monthly rent of around 4 euro per sq.m., and such in older buildings can be found at 1.50-2.50 euro per sq.m."

Source: BTA

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