Retail market stands at crossroads

What is the proportion of vacant retail spaces?

The number of retail void units coupled with the increasingly difficult tenant conditions shows that letting activity remains subdued and that it could be even worse, the research found.

“At this point, Calea Victoriei road has approximately 20 void units. A year ago, you could find two, three at the most. Between Romana Square and Unirii Square, there are over 14 vacant units and 4 between Perla and Dorobanti”, said Gabriela Nicolae (photo), senior broker at The Adviser’s retail department.

Moreover, the shopping centers in Bucharest have seen an increase in the vacancy levels to 5-10% in case of large shopping areas but it may very well climb to 60%.

“The reality is that the visibility remains low, landlords don’t have a clear forward-looking strategy. Many have to seek means and solutions that could help them fill the void floorspace or increase the number of visitors”, the consultant said.

How to let void units?

An option would be a temporary lease of the unit for six months or a year that would require a simple interior refurbishment, to enable immediate use of the premises, said the representative of The Advisers.

“The lessor will thus have flexibility in changing tenants and minimizing the amount of time required to change tenants. The next step would be the demarcation of the space in small units, because this kind of transactions calls for smaller surface.

Both shopping centers owners and those owning street retail spaces should focus on attracting brands or local designers and retailers.

“If we look at the Romanian designers having their own retails paces, their number is decreasing. For example the store of Mihai Albu on Magheru Street was shut down few months ago. Retailers should certainly take advantage of the low rents to try new concepts”, said the consultant.

Landlords should forget about the ten-year lease agreement

“At this point, landlords should think no more of ten-year leasing contracts and to consider financial offers based on percent or fixed-rent mixes. So far, this strategy has been rarely used by landlords and more often by anchor tenants”, the report shows.

The major change both landlords and tenants need to make is the change of approach. The sooner retail market players realize things are no longer as they used to be, the faster solutions will emerge.

“The factors underlying the differentiation of a retail space are the interior design, or the number of events aimed at promoting the center and at increasing number of visitors. Retail spaces should tell a story, should lure you to spend more time in there”, The Advisers’ consultant added.

The retail department of The Advisers is headed by Monica Barbu, the former director of Colliers International’s retail business.