MarketView Zagreb Retail Market

CBRE
MarketView
Zagreb Retail Market
2011
BR IEF P OLITICAL AND ECONOMIC OVER VIEW
Quick Stats 2011
Change from
2010
2009
GDP growth


Unemployment


Average wage


Inflation rate


FDI


Hot Topics – Economy
• After regular parliamentary elections
the Government was formed by the
center-left coalition
• If approved by the citizens on
referendum in January 2012, Croatia
will be a step closer to EU accession
• Majority of macroeconomic indicators
were relatively negative
• Tourism growth was extremely positive
2011 was a very dinamic year for the Croatian political scene. After ending EU
accession negotiations in June, Croatia’s EU Accession Treaty was signed on
December 9, 2011. If, as expected, majority of the Croats vote in favor of the EU
accession in a referendum to be held in January 2012, all EU member states should
ratify the Treaty until July 1, 2013 thus finally making Croatia an EU member state.
As a result of the regular parliamentary elections held on December 4, 2011, the
center-left coalition formed a new Government. Some of the main tasks the new
Government will have to face is to stimulate the economic recovery. In order to
maintain the credit rating it is necessary for the Government to present the budget
structure and deficit level, as well as to provide proof of firm commitment to the
implementation of the reforms.
Regardless of political developments that were considered as positive, economy was
stagnating. Following increasing unemplyment rate and difficult situation in labor
market throughout the whole year, which consequently had a negative impact on
consumer expenditure, as well as slowdown in exports of goods and negative
industrial output, GDP growth was relatively weak and below expectations.
Tourism underpinned 2011 growth. Recorded arrivals grew by 8.0% and nightstays
by 7.0%. Just below 91% of nightstays was realized by foreigners.
The global economic downturn and unfavorable developments in the environment
had an impact on the property market in Croatia. Average rents and capital values
accross all sectors decreased, while vacancy in majority of commercial projects
decreased. On the other hand, investment volume in non-distressed properties was
lower than in 2010, yet adequate if circumstances taken into account.
KEY ECONOMIC INDICATOR S
Indicator
2010
2011
2012
2013
GDP growth (constant prices, %)
-1.2
0.5
-1.0
1.5
Retail trade (real, yoy, %)
-1.8
1.3
-0.2
2.5
Industrial production (yoy, %)
-1.5
-1.6
-2.0
3.8
1.1
2.3
2.5
3.0
13.3
13.9
13.5
Consumer prices (avg, %)
Unemployment rate (ILO, avg, %)
11.8
Net wage (avg, HRK)
5,342
5,405
5,464
5,500
General government balance (% of GDP)
-4.9
-5.5
-4.5
-3.5
Goods and services exports (change, %)
8.9
3.2
3.3
3.0
Goods and services imports(change, %)
-0.7
-0.6
-2.4
2.3
FDI (mn EUR)
233
800
650
1,350
Inflation CPI (avg, yoy, %)
1.1
2.3
2.5
3.0
Tourism nightstays (change, %)
2.6
7.0
2.5
3.2
101.3
101.5
103.0
100.2
7.29
7.43
7.50
7.53
External debt (% of GDP)
EUR/HRK exchange rate (avg)
Source: Raiffeisen Research
© 2011, CBRE Group Inc.
CBRE
MarketView
Zagreb Retail Market
2011
R ETAIL MAR KET OVER VIEW
Quick Stats 2011
SHOPPING CENTERS
Change from
2010
2009
Rents


Yields


Stock


Leasing activity


Vacancy


HIGH STREET
Change from
2010
2009
Rents


Vacancy


BIG BOX RETAIL STORES
Change from
2010
2009
Rents


Stock


Hot Topics – Office Market
• Retail trade turnover lowered
• Shopping center supply exceeded
demand
• With new stock in pipeline shopping
center leasing activity was strong
• Even though take-up of high-street
premises was stable, vacancy increased
• Big-box retail sector remained stable
• All retail rents decreased slightly
• Decrease of investment volume in
Zagreb retail market almost 90%
lower if compared against 2010
•Retail Trade
Due to lower disposable income and negative economic environment, and
consequently lower consumer spending, retail trade turnover was relatively low in
2011, yet aead of the previous year. It may take some time before retail sales
reach 2008 levels.
•Shopping Centers
Construction activity in 2011 was strong and the shopping center stock varied
throughout 2011. Out of several new centers were under construction, Cvjetni in
the city center and Green Gold in CBD were opened in Q1 and Q4 2011
respectively. As a result of the economic downturn, Mandi Center in the eastern
part of the city closed in June. Several other centers suffered from impact of crisis
and occupiers seeking to reduce costs.
At the end of the year shopping center stock in Zagreb and its metropolitan area
stood at approximately 460,000 sq m (including Mandi Center).
Leasing activity was strong, mainly due to pre-leasing of Cvjetni, Green Gold and
City Center One East shopping centers, as well as because of new occupiers
entering several existing schemes.
Considering that new occupiers in existing shopping centers were mainly anchors,
average rents decreased to some extent.
•High Street
Zara and H&M opened their stores in the city center in Q2. Even though it was
expected that these openings would lead to increased interest and consequently
more high street activity, it did not. Weak activity consequently resulted in
downward pressure on rents and increase of vacancy.
Retailers who did show interest in occupation of high street premises, used the
circumstances to negotiate and demanded lower rents and additional incentives.
Prime high-street rent at the end of 2011 compressed by 10% if compared to
2010 year-end level.
•Big Boxes
Big box retail market remained stable. Except increase of supply, there were no
major changes of any other performance indicators.
•Investment Commentary
Investment activity in non-distressed retail properties in Zagreb area in 2011
dropped by almost 90% if compared against 2010 level. W.P. Carey & Co.
invested in development finalization of three big-box objects, out of which one was
opened in Sesvete district in Zagreb in August 2011.
•Outlook
New shopping center space delivered during 2011 was significantly below levels
witnessed in the previous years. However, a further increase of the stock is expeted
upon completion of City Center One East in Q2 2012. Rents and yields, as well as
demand and vacancy, should remain stable in the next 3 to 6 months.
It is expected that demand for high-street premises will remain low, but we do not
expect a further increase in vacancy. Decline in of rental levels might be recorded.
Big-box retail stock will increase in Q1 2012 after delivery of Lesnina store in the
western and Bricostore in the eastern part of the city. We expect all other big-box
performance measures to remain stable in the next 3 to 6 months.
© 2011, CBRE Group Inc.
Shopping Center Stock and Completions
Total stock ('000 sq m, year end)
Shopping center stock in Zagreb metropolitan area
stood at 460,000 sq m at the end of 2011, which is
around 3% more than at the end of 2010 due to
delivery of Cvjetni and Green Gold projects.
350
300
250
200
150
100
50
0
2009
2008
2010
2011
Prime Shopping Center Rents and Yields
Prime Rent (left axis)
Prime yield (right axis)
8,0
25
7,5
24
7,0
23
6,5
22
6,0
21
5,5
20
5,0
Q4 2011
8,5
26
Q3 2011
9,0
27
Q2 2011
28
Q1 2011
9,5
Q4 2010
10,0
29
Q3 2010
30
Q2 2010
OUTLOOK
400
Q1 2010
Even though several centers have been negatively
affected by the crisis, so far there has been no
significant distress in the shopping center sector
which may have led to forced sales.
450
Q4 2009
Average prime shopping center rent was around
23.40 EUR/sq m. Considering that new occupiers in
existing shopping centers were mainly anchors, and
some existing tenants were provided with certain
incentives, average rents decreased to some extent.
Furthermore, as many occupiers suffered impacts of
crisis, they attempted to renegotiate their leases and
sought to reduce costs. Landlords therefore made
certain concessions which eventually led to decrease
in effective rent levels in some of the schemes.
500
Q3 2009
On the other hand, as a result of the difficult trading
environment and increased competition some of the
schemes and retailers saw a decrease in
performance, which led to higher vacancy rates.
Only Mandi Center closing in June 2011 increased
the overall vacancy by over 3.5%.
Take-up ('000 sq m, year to date)
Q2 2009
Leasing activity was strong, mainly because of preleasing of Cvjetni, Green Gold and City Center One
East shopping centers, as well as because of new
occupiers entering several existing schemes. Some of
the new occupiers who entered the Croatian market
for the first time were H&M, Harvey Norman and
KFC. H&M opened three stores in Zagreb, in Cvjetni,
Arena Center and City Center One, and occupied in
total around 6,000 sq m. Harvey Norman opened
its first 9,000 sq m store in King Cross shopping
center in October and KFC opened a unit in Arena
Center in December 2011.
Completions ('000 sq m, year to date)
Q1 2009
MarketView Zagreb Retail Market
SHOP P ING CENTER MAR KET
• Completion of City Center One East in Q2 2012
should increase stock for additional 50,000 sq m.
• Construction of Supernova Buzin within the
southern city outskirts will probably continue, while
construction of IKEA project within eastern city
outskirts might start in H2 2012 at the earliest.
• By the end of 2012 shopping center stock should
reach 510,000 sq m, equivalent to a provision rate
of around 600 sq m/1,000 inhabitants, one of the
highest in SEE.
• Increase of competition and negative economic
atmosphere will most probably cause additional
downward pressure on rental levels.
2011
• Refreshing and bringing new anchors in many
schemes is expected by mid 2012.
• The fact that Croatia will become an EU member
in 2013 might give further comfort to investors and
increase investment volumes.
© 2011, CBRE Group Inc.
Shopping Center Stock and Prime Rent Forecasts
Shopping center stock
(‘000 sq m)
Average prime SC rent *
(change y-o-y)
2011
f. 2012
f.2013
460
510
570
-6.65%
-2.75%
-1.75%
* Average achievable rent in a prime shopping center
MarketView Zagreb Retail Market
Shopping Centers in Zagreb
Source: Google Maps and CBRE Reseach
• Shopping center stock at 2011 year end covered approximately 460,000 sq m (
).
• Pipeline under construction that shoud be delivered in 2012 and 2013 stood at 129,000 sq m (
• Planned IKEA shopping center should deliver additional 105,000 sq m in 2014 (
).
).
2011
© 2011, CBRE Group Inc.
Prime High Street Rent
Situation along the high street in Zagreb changed
significantly during 2011.
90
When H&M and Zara opened their stores in Q2,
they made Zagreb city center strongly anchored for
the first time. H&M opened within Cvjetni, while Zara
occupied a fully refurbished 3-storey bulding on Ilica
Street.
80
The expectations that H&M and Zara would be
footfall-drivers for all other retailers and put an
upward pressure on retail activity did not materialize.
Many occupiers, mainly bookstores and smaller
domestic retailers, therefore had to leave their highstreet premises, which hence raised vacancy.
60
Furthermore, high-end fashion brands Armani,
Dolce&Gabbana and Escada, that had been present
in the city center for years, decided to close their
stores.
85
75
70
Q4 2011
Q3 2011
Q2 2011
Q1 2011
Q4 2010
Q3 2010
Q2 2010
Q1 2010
Q4 2009
Q3 2009
Q2 2009
65
Q1 2009
MarketView Zagreb Retail Market
HIGH STR EET MAR KET
Zagreb High Street Map
When a large number of high-street premises
became vacant, tenants interested into occupying
them used the oportunity to gain favorable rents and
other lease terms and conditions. The average highstreet rent therefore dropped by 10% if compared to
2010 year-end level.
New tenants or the ones that expanded along the
high street were mainly coffee shops, bakeries and
banks. However, several fashion, footware and
sportsware retailers opened their stores as well,
some in vacant premises but majority within Cvjetni
project, the already mentioned small-size shopping
center on the Floral Square.
In order to boost turnovers, The Best Shop magazine
initiated Late Night Shopping events in the city
center. The idea was to organize the one-evening
event once each quarter during which buyers would
be able to shop after usual close of business, namely
between 8 pm and midnight, and all that at seriously
discounted prices. Retailers’ satisfaction was proved
by over 150 shops participating in the last Late
Night Shopping in December.
Even though a number of retailers were showing
interest in occupation of high street premises during
the first three quaters, take-up activity almost
disappeared by the end of the year, thus leaving a
notable number of units vacant. We expect leasing
activity to pick up again in 2012.
OUTLOOK
• We expect high-street rents to drop slightly and
duly stabilize in the next 6 months.
2011
• It is expected that presence of H&M and Zara as
anchors will spur interest in the high street from
other international retailers.
• The fact that Croatia will most probably become
an EU member in 2013 might give further comfort
to retailers, and thus increase take-up activity.
© 2011, CBRE Group Inc.
Notable High Street Retailers and Brands*
• Accessoires, Accessorize, Adidas, Basler, Benetton,
Calamar, Camel Active, Croata, DB05 (Carlo Pignatelli,
Dior, Emanuel Ungaro, Kenzo), Diesel, Dolce&Gabbana,
Dorothy Perkins, Dsquared, Ecco, Elena Miro, Gaastra,
Gabor, Geox, Gerry Weber, Guess, H&M, Hallmark
Babies, Heruc Galeria, Hugo Boss, Image Haddad,
Intersport, Intimissimi, Je*s, L’Occitane, Lacoste, Levi’s, Liu
Jo, Mango, Marella, Marina Rinaldi, Max Mara, Men’s
Point, Miss Selfridge, Monari, Monsoon, Moschino,
Müller, Mura, Murphy & Nye, Mustang, Naf Naf,
Navigare, Nike, Office Shoes**, Palmers, Patrizia Pepe,
Peko, Penny Black, Pepe Jeans, Porsche Design, Prenatal,
Replay, s.Oliver, Scotch & Soda, Sisley, Skiny, Sonia
Rykiel, Stiefelkönig, Swarovski, Tag Heuer, Terranova, The
Core (Bally, Etro, 7 For All Mankind, Ralph Lauren, Polo
Jeans Co., Sportmax), The Core Denim, Timberland,
Tintilinić***, Tommy Hilfiger, Tommy Hilfiger footwear,
Topshop, Tosca Blu, Tous, Triumph, Trussardi Jeans,
Victoria’s Secret, Vivienne Westwood, Wolford, women’s
secret, X nation, Zara
* Some of the listed tenants occupy premises in Cvjetni shopping center
** Adidas, Brazilians, Clae, Converse, Grandene, Heelys, Kitten, Marc Ecko, Nike, Rocket
dog, Skechers, Supra, Timberland, Zoo York
*** Local retailer; baby equipment, toys, children's clothing and goods of various brands
• Bauhaus
• Lesnina
• Baumax-X
• Lidl
• Billa
• MD Profil
• Getro
• Mercator
• Gramat
• Merkur
• Interspar
• Metro Cash & Carry
• Kaufland
• Pevec
• Kika
• Plodine
• Konzum
• Velpro
OUTLOOK
• Delivery of XXXL Lesnina (furniture and houseware)
and Bricostore (DIY) will add additional 53,000 sq
m to the big-box stock in H1 2012.
Big-box retail market in Zagreb is the most developed
in Croatia. A large part of the big-box retail stock is
owner-occupied. Some ratailers, however, lease the
premises, either since their entry to the Croatian
market or as a result of recent sale-and-lease-back
agreements.
Majority of the existing stock is situated within two
large city outskirts, Žitnjak in the eastern and
Jankomir in the western part of the city. All premises
are in proximity of the main traffic artery in Zagreb,
Slavonska Avenue – Ljubljanska Avenue. Big-box units
occupied by food retailers and hypermarkets are
located throughout the whole city, generally in close
proximity of the main roads.
According to the occupiers’ line of retail business, the
big-box retail stock could be roughly divided to
• hypermarkets,
• do it yourself (DIY),
• No major changes to retail warehouse rents and
yields is expected in the next 6 months.
• furniture and homeware, and
• The forthcoming accession of Croatia to the
European Union could make Croatian market
more interesting to new retailers thus increasing
big-box construction and take-up activities.
Our research shows that big boxes in Zagreb
occupied by the largest DIY, and furniture and
homeware retailers covered approximately 250,000
sq m at the end of 2011. Two large schemes were
under construction; XXXL Lesnina in Jankomir district
within the western city outskirts, and Bricostore within
the eastern outskirts. Their delivery is expected in H1
2012. Even though information on areas of many
stand-alone food-retail-chain units was not available,
we estimated it at another 250,000 sq m.
The Main Big-Box Retail Hubs in Zagreb
MarketView Zagreb Retail Market
BIG-BOX R ETAIL MAR KET
The Largest Big Box Occupiers
• combination of the abovementioned.
Source: Google Maps and CBRE Reseach
2011
© 2011, CBRE Group Inc.
MarketView Zagreb Retail Market
CBR E GLOBAL R ESEAR CH AND CONSULTING
This report was prepared by CB Richard Ellis Croatia Research Team which
forms part of CBRE Global Research and Consulting – a network of
preeminent researchers and consultants who collaborate to provide real estate
market research, econometric forecasting and consulting solutions to real
estate investors and occupiers around the globe.
For More information regarding this
MarketView, please contact:
Emina Čuturilo
Senior Surveyor
Valuation Advisory
CB Richard Ellis d.o.o.
Zagrebtower
Radnička 80
10000 Zagreb
t: +385 1 6187 352
e: [email protected]
2011
Disclaimer
CBRE Limited confirms that information contained herein, including projections,
has been obtained from sources believed to be reliable. While we do not doubt
their accuracy, we have not verified them and make no guarantee, warranty or
representation about them. It is your responsibility to confirm independently their
accuracy and completeness. This information is presented exclusively for use by
CBRE clients and professionals and all rights to the material are reserved and
cannot be reproduced without prior written permission of CBRE.
© 2011, CBRE Group Inc.