baltic states and belarus real estate market review - Colliers

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Real Estate Market Review 2011 | Latvia Retail Market Vacancy Rates and trends in Riga - decrease City Vacancy as at January 2010 Vacancy as at January 2011 Trends for 2011 Riga 9.6% 9.1% shopping centres that have the highest customer flow and average expenditure per purchase. At the same time, the landowners of the most successful shopping centres are also becoming “picky” and choose the most interesting and attractive tenants in line with the overall concept of the store. Most of the newcomers to Riga market in 2010 have opened premises in newly opened Galleria Riga: such as Piazza Italia, Italiarredo, Assos, Home Fashion, Mon Cheri, Viviana Conti, and Deha are represented in this centre. Many small cafeterias expanded their chains in 2010 and will continue doing this in 2011. In general, the catering business was active in 2010: several restaurants and public eating places were looking for expansion possibilities. The street retail segment was also rather active in 2010. The demand for street retail was high for the top street locations throughout 2010 and this trend is forecasted to continue in 2011. The most desirable street retail locations were in Terbatas and Barona streets. Riga’s main street, Brivibas, was also an attractive retail location, especially on it’s central stretch. Other appealing retail locations were in Gertrudes, Dzirnavu, Marijas and Chaka streets. However, supply of vacant premises in these streets is becoming scarce as premises are being taken up. The most popular tenants are in catering business - a number of new cafeterias and bakeries have opened in Riga’s streets. RENTAL RATES Asking rent rates in shopping centres remained rather stable in 2010 as the largest corrections took place a year earlier. Small retail units with up to 100 sqm show the highest demand. Rental rates for small units vary from EUR 20 to 40/sqm/month. Asking rates for anchor tenants are EUR 3 - 9/sqm/ month. Schemes where rent is not fixed but is paid as a percentage of turnover have gained further popularity in 2010, particularly in the newly opened Galleria Riga. Tenants are continuing to negotiate lease terms and asking for rent discounts, however landlords are not as flexible as they were a year ago in providing discounts. Landlords were not ready to sign agreements with discounted rent for more then 1 - 2 years and in 2011 the period of discounts will be over, it will be time for new round of negotiations. Street retail rent rates remained stable during 2010 as the largest decreases took place a year earlier. VACANCY RATEs During 2010 the vacancy rate in Riga shopping centres saw some fluctuations: in the beginning of 2010 the vacancy rate was 9.6 per cent before falling to 6.4 per cent by mid-year due to strong take-up in the first half of 2010, such as Multikino in Riga Plaza shopping centre. Vacancy has increased again to 9.4 per cent towards the end of the year due to the opening of Galleria Riga with vacant space. In general vacancy varies from 0 per cent to 40 per cent depending on how successful the concept of shopping centre is, its location, accessibility and the management team. Vacancy Rates Dynamics in Riga Shopping Centres 40% 35% 30% 25% 20% 15% 10% 5% 0% Jan 2007 Jan 2008 Jan 2009 Jan 2010 Jan 2011 Rental Rates and Trends in Riga Shopping Centres * - asking rental rates (EUR/sqm/month) excluding VAT and operating expenses - stable Unit Size Rates* in 2009 Rates* in 2010 Trends for 2011 Large retail unit (anchor tenants) 5 - 7 3 - 9 Medium retail unit (150 - 350 sqm) 10 - 25 15 - 25 Small retail unit (up to 100 sqm) 16 - 40 20 - 40 Street Retail Rental Rates and Trends in Riga * - asking rental rates (EUR/sqm/month) excluding VAT and operating expenses - slight increase City Location Rates* in 2009 Rates* in 2010 Trends for 2011 Riga Kr. Barona, Raina Bvld, Brivibas, Gertrudes 10 - 30 10 - 30 Riga Old Riga 7 - 25 7 - 40 CONTACTS: DENISS KAIRANS - d.kairans@colliers.lv l MARIJA KAPELKA - m.kapelka@colliers.lv Colliers International | p. 12
Real Estate Market Review 2011 | Latvia Retail Market Tendencies AND FORECASTS ◊ ◊ ◊ Household consumption, as forecasted by Swedbank economists, is expected to grow by 2.5 per cent in 2011 and 4.5 per cent in 2012. The forecasts are moderate due to the fact that household consumption will be undermined by tax increases and higher inflation over the next years. As the unemployment will continue its fall through 2011 consumer confidence will increase. Household consumption is also expected to pick up, leading to improvement in retail market indicators, such as rent rates and vacancy. Rent rates are forecasted to remain stable or show slight increase as economic growth picks-up. The period of discounts provided several years earlier is expected to end in 2011. ◊ ◊ ◊ The vacancy rate is expected to decrease slightly due to overall market recovery and a limited increase in retail stock. The latest forecasts from Experian suggest that Latvia is set to see domestic demand grow in excess of 50 per cent over the ten-year period, which will support strong retail sales growth in the market. First two “Cash and Carry” retail projects will be opened in Latvia (in Riga and Valmiera) in 2011. This has become possible due to changes in legislation. “Cash and Carry” is a form of trade in which goods are sold from a wholesale warehouse operated either on a selfservice basis, or on the basis of samples. Customers settle the invoice on the spot in cash, and carry the goods away themselves. ◊ The demand for street retail will remain high on the high street locations and in leading shopping centres. CONTACTS: DENISS KAIRANS - d.kairans@colliers.lv l MARIJA KAPELKA - m.kapelka@colliers.lv Colliers International | p. 13
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