After many years of skyrocketing rents for commercial spaces, and heavy bets on mall-type projects, the rents are now plunging to bargain prices while retailers redraft their expansion plans and developers put off their projects.
What is in sight for local retail market and what players have the power to change the course of things, were some of topics on “Passion for retail” seminar agenda, organized by Eurobuild Central & Eastern Europe.
In early February, the Polish developer Echo Investment received the construction permit for the shopping center Korona in Brasov, a 150 mln euro investment. The project has a gross surface of 153,000 sqm on four stories and will be officially opened next year.
“This is retailers’ momentum and we, as developers, must admit this. They are ahead of the game and take advantage of this situation, and bargain the rents. However, they must grasp the fact that this situation will not last for ever. Retailers are those who wipe out projects, forgetting that the rent is borne by the both parties – developer and tenant”, said Catalin Florea, Leasing manager at Echo Investment.
As for the high level of rents in retail market, Charlie Henry, investment director of GVA Asco Properties, says it was normal given the narrow offer. “We see a similar situation in office market”
“Rents in Romania are extremely high compared to other countries in the region. Therefore, the decline was normal. Developers can’t say that the decrease was not in sight, because the rents couldn’t go any higher than that”, Charlie Henry explained.
The level of rents, he said, is far from stable, whereas they will stabilize within three-four years when the space offer is wide enough. Until then, the advantages of the crisis in Romania consists in the fact that the market is cleansing and only good projects will be continued, considering that many of the projects announced were poorly designed.
“In terms of design, you see a flaw in the shopping center market. All real estate players must relapse to the basic principles of the market, back to basics – it’s an important rule when things get out of control. It was a game we had to play, but now it’s over”, said Anthony Willats, director of Chapman Taylor Romania.
Last year we enjoyed the party, but now we have to wake up
Radu Merica (photo), director of ECE Projektmanagement Romania that planned to develop a mall within Sema Parc, says this year will be completely different from what we have seen so far: the land is cheaper, construction prices start falling and developers will have to admit the mistakes they have made.
“Last year was a great party and everybody was happy, but now we have to wake up and see what’s left, apart from the terrible hangover. Many developers will admit the mistakes they have made and will rethink strategies. Other retailers will slow down or even put on hold their expansion, because they know what’s in the cards for them”, said Radu Merica, head of ECE Romania and chairman of Chamber of Commerce and Romanian-German Industry.
ECE Projektmanagement assumed management of Colloseum shopping center at the end of last year, for which the construction works will be conducted by Romanian-based Nova Imobiliare in north-west Bucharest.
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