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Slovenia

SLOVENIA
Overview
Slovenia is a very small market in Central Europe, with borders to
Italy, Austria, Croatia and Hungary. Its population of just over two
million is smaller than some of the larger European cities. However it
has enjoyed strong economic growth since gaining independence in
1991, which led to it becoming the first former Yugoslavian nation to
join the EU in 2004, after which it saw an influx of foreign retailers,
particularly from Austria. It then went on to forge further links with
other European nations by joining the Eurozone in January 2007.
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Slovenia’s GDP per capita rates stand well above most other Central and Eastern
European markets, bringing it more in line with some of the markets in Southern Europe.
GDP per capital is converging with the OECD average, and Slovenia is the wealthiest of
the accession countries.
Tourism has been progressively developing in Slovenia, and tourist activities are
developing faster than other economic activities.
The regional outlook in Croatia, Bosnia and Serbia is improving which will provide a
boost to Slovenia’s exporters. Serbs can now travel to Slovenia without visas and this is
expected to help increase tourism, and retail spending.
The Slovene retail market is illiquid and it has historically been difficult to acquire quality
retail space, but this is now easing due to the global financial crisis, and some weaker
retailers going out of business. The Ljubljana retail market will be improved with a pipeline
of new schemes.
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SLOVENIA
Economic Overview
ECONOMIC SUMMARy
ECONOMIC INDICATORS* 2009 2010 2011E 2012F 2013F
GDP growth -8.0 1.4 0.5 -2.0 -1.4
Consumer spending -0.1 -0.6 0.2 0 1.0
Manufacturing production -18.7 6.6 2.0 N/A N/A
Investment -23.3 -8.3 -10.4 0.6 3.0
Unemployment rate (%) 5.9 7.3 8.2 7.8 7.4
Inflation 0.9 1.8 2.0 2.4 2.6
US$/€ (average) 1.39 1.33 1.39 1.27 1.24
US$/€ (end-period) 1.44 1.34 1.29 1.20 1.21
Interest rates 3-month (%) 2.97 0.71 1.013 1.39 N/A
Interest rates 10-year (%) N/A N/A N/A N/A N/A
NOTE: *annual % growth rate unless otherwise indicated. E estimate F forecast
Source: Unicredit reports, Slovenian Statistical office, National Institute of macroeconomic analysis and development, www.
xe.com
ECONOMIC BREAKDOWN
Population 2.1 million (2011)
GDP 36.3 (EUR bn)
Public sector balance 24.7% of GDP
Parliament Social Democrats coalition
Prime minister Janez Janša
President Danilo Turk
Election date Autumn 2015 (Government)
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RETAIL SALES GROWTH: % CHANGE ON PREVIOUS yEAR
2009 2010 2011 2012F 2013F
Retail Volume -10.45 -0.36 1.78 -0.81 N/A
Retail Value -13.45 3.65 5.93 3.21 N/A
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SLOVENIA
Largest cities
LARGEST CITIES (2011)
CITy POPULATION
Ljubljana 272,220
Maribor 95,171
Celje 37,520
Kranj 36,874
Velenje 25,456
Koper 24,996
Novo mesto 23,341
Ptuj 18,164
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SLOVENIA
Retail Scene
MAJOR DOMESTIC FOOD RETAILERS
Mercator, Tuš
MAJOR INTERNATIONAL FOOD RETAILERS
Spar, Lidl, Hofer
MAJOR DOMESTIC NON-FOOD RETAILERS
Big Bang (electronics), Merkur (DIy)
INTERNATIONAL RETAILERS IN SLOVENIA
Inditex Group, DM, Muller, H&M, Swarovski, Marks & Spencer
FOOD & BEVERAGE OPERATORS
McDonald’s, Burger King, Coffee Shop Company
TyPICAL HOURS
MONDAy-FRIDAy SATURDAy SUNDAy
09.00-20.00 09.00-21.00 09.00-15.00 (only the largest
shopping centres)
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SLOVENIA
Retail Scene
Slovenia is the wealthiest of the EU accession countries with €18,558
average income per capita, forecast for 2013 by Unicredit Bank.
Home ownership is high at over 80% and because many homeowners
acquired their properties during the transition to a free market
economy at low prices, mortgage debt is low, at 13.7% of Slovenia’s
GDP, compared to 54% in the EU. Consequently there is a high level
of disposable income and many luxury and mid brands have good
market penetration.
Mercator is comfortably the largest retailer in Slovenia with
operations in a number of food and non-food sectors. It has also
expanded into a number of neighbouring markets, with expansion a
major driver of its decision to sell a stake in the company in 2011.
The strength of the market leader and the small market size has
limited investment from foreign retailers, although a number of nonfood
sectors have received investment particularly from the nearby
German and Austrian markets. Retailers include the Austrian Spar
organisation, Baumax, Stiefelkönig, Leder & Schuh and Kastler &
Öhler. Other leading names such as Charles Vögele, New yorker and
Sports Direct also operate in the market.
Typical shopping centres in Slovenia comprise malls of 20,000 to
55,000sq.m, anchored by a food retailer. The capital city Ljubljana
is unique in that approximately 50% of the available retail space
comprises converted industrial space, and is compromised in terms of
parking, depth and frontage. In the past 12 months new schemes have
come to market in Maribor, Krško, Kamnik and Nova Gorica. The
regional retail market is now saturated, although there is space for
new schemes in Ljubljana with generally poor quality retail space and
1.6 sq.m per inhabitant.
Slovenia is well served with retail warehouses in larger cities, but with
a limited offer elsewhere. The market is active and has seen retailers
entering from other countries such as Austria and Denmark with
homeware and DIy stores. It is not anticipated that the sector will
grow in the near future due to difficulties in finding suitable land and
poor availability of debt.
There are no factory outlets in Slovenia. Two projects are planned
but are currently on hold due to insufficient pre-leases and difficulties
in obtaining debt. Slovenes travel to Zagreb in Croatia and Palmanova
in Italy for factory outlet shopping.
E-commerce is developing slowly in Slovenia, although there is
no publicly available information on consumer volume. Anecdotal
evidence suggests that websites such as Next and Gap are popular
with mothers who like the better choice and prices. Slovenes
are tech savvy and 73% of homes have internet access, with 20%
accessing the internet via mobile devices.
It is possible to enter the Slovene retail market direct, though many
also franchise and enter via concessions/shop-in-shops.
Foreign companies can buy real estate in Slovenia, providing they
are from the EU, or have reciprocity. There are no restrictions
on foreign companies renting property, but they are sometimes
penalized with higher rents as landlords cannot charge them VAT,
which can cause a clawback from the tax office in some cases.
Current legislation protects both landlord and tenant. There is no
security of tenure, and leases are renewed only by agreement. Most,
but not all, leases are indexed to the Slovene or Austrian consumer
price index.
It is difficult to obtain good quality retail space in Slovenia as the
market is illiquid. There is a waiting list for all good malls. All malls
are owner operated and most would benefit from professional
asset management and marketing. It will become easier over time in
Ljubljana as the pipeline schemes come to market.
Although it is possible to occupy new retail space within a few
weeks, it is more realistic to expect that on average it will take
12 - 18 months from initializing the property search to taking
occupation of an existing property. This includes time for considering
location options, the identification of buildings or sites, negotiating
leasehold or freehold terms and drafting of the appropriate legal
documentation.
NEW ENTRANTS
TO THE MARKET
Silvian Heach
Bennetton
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yves Rocher
Jones
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SLOVENIA
Key Features of Lease Structure
KEy FEATURES OF LEASE STRUCTURE
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Lease Terms Retail leases in Slovenia are typically for 5 to 10 years. Break options are not common. In the absence of a clear agreement in the lease, the tenant has no legal
right to break so long as the landlord fulfils his obligations. Rent reviews are not customary, but leases are often indexed to the Slovene or Austrian CPI. The
authorised use will depend on the terms of the lease, which will also state the degree to which this may be varied by the tenant.
Rental Payment Rents are typically payable monthly in advance. Turnover/percentage rents are charged in most shopping centres. A security deposit is generally required of
around three months rent. Premium payments were previously common place in the retail market at times of rising rents and limited supply, but less so now that
the market has softened.
Rent Review Rent reviews are not customary. The rent can be increased or decreased by agreement between Landlord and Tenant when renewing leases.
Service Charges,
Repairs and
Insurance
Property Taxes and
other costs
A service charge is usually payable in multi-tenanted buildings and covers management fees, security, cleaning, landscaping, internal maintenance of common
parts, external maintenance and insurance, servicing of elevators, water, heating, air conditioning, management fees and property taxes. It excludes internal
maintenance and insurance of rented accommodation, utility charges and VAT. The landlord is responsible for external/structural matters in shopping centres
(charged back via service charge) or tenant (except in multi-let buildings). The tenant is responsible for internal matters. Insurance for common parts is also paid
by the landlord. The tenant usually pays for internal insurance directly. Most shopping centres also charge a marketing contribution.
Local authorities charge so-called Indemnity for usage of land (property tax). This is payable on all properties. Each Municipality sets the value of Indemnity
individually and it depends on the size of the premises, infrastructure on the site, location, and designated use of the land. In some cases Municipalities include
parking areas and other outdoor areas. This property tax is sometimes paid by the Landlord and recovered through service charges, and sometimes directly by
the Tenant. VAT at 20% is charged on rental payments but is usually recoverable by most tenants (tax advice should be sought).
Disposal of a Lease Sub-letting is only possible under the terms of the lease with the landlord’s approval. Assignment rights can be included in the lease with the landlord’s
agreement. At lease end, the tenant is responsible for re-instating the premises to the same condition as at the start of the lease, subject to normal wear
and tear. All tenant improvements must be approved by the landlord subject to the alteration covenant in the lease and the fact that approval should not be
unreasonably withheld.
Valuation Methods Shops are valued by the sq.m using ISO 9836, but because rent reviews are not customary, and because there is little vacant retail space in Slovenia, valuations
are not often required.
Legislation The general provisions regarding leases are stated in the Obligation Code (OJ RS No. 83/2001);
The Office Buildings and Business Premises Act (Zakon o poslovnih stavbah in poslovnih prostorih) also regulates leases of business premises; and Law on
commercial buildings and business premises (ZPSPP) OG SAS no. 18/1974
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