Author: pmb

Malls will need to re-invent themselves in order to survive as the shopping is becoming more and more digital.  No longer shopping centres are  primarily about shopping. Now, when consumers visit malls, they are looking for experiences that go well beyond traditional shopping.  The e-commerce revolution and the rise of digital technologies are fundamentally reshaping consumer expectations and shifting the function of stores toward useful and entertaining customer experiences. As these trends advance across the global stage, they are forcing mall operators to rethink how they conceive and operate their properties. Malls need to move in a different direction, away from commoditized shopping experiences and toward a broadened value proposition for consumers.

The concept of Retailtainment is now put on focus. Shopping online is easy, fast, and convenient. Retailers need to find new, creative ways to drive traffic to physical stores, and that’s where retailtainment can be an effective strategy. Retailtainment can be a great way to build community while differentiating the mall from the competition.

Innovative malls are incorporating value-added elements that attempt to recast the mall as the new downtown, including concerts, arts centers, spas, fitness clubs, and farmer’s markets. These services provide a level of leisure and entertainment that can never be satisfied online.

The digital transformation of retail presents new opportunities for malls to engage consumers. There are certain primary ways in which malls are leveraging technology.  Retail centres are extending their relationships with customers to before and after the mall visit. This is about engaging customers through compelling content and creating deeper bonds with them through social media and proprietary sites and apps, as well as loyalty programs. Social media can be used, for instance, to create buzz about new tenants or solicit ideas from consumers about ideas for new stores.

The period was marked by high occupier activity both in Sofia and the countryside. The stable market result in new store openings both in Sofia and the regional cities.

Following full refurbishment, Plovdiv Plaza mall opened in November with 35,000 sqm GLA, and Zara, H&M and IKEA among the anchor tenants. This is the first new delivery for the last 2 years. With this contribution, the shopping center stock countrywide reached 773,000 sqm while density slightly increased to 108.4 sqm per 1,000 inhabitants. Back in Plovdiv, the real estate company Gazit Globe transformed a former Praktiker store into a retail park. Another one was opened by a local developer in the south part of the city.   The next opening, scheduled for March 2019, is Delta Planet Varna. The new shopping center will have a GLA of 38,000 sq. m.

The sport goods chain Under Armour opened a first Bulgarian store in December 2018, the Body Shop opened three locations in Sofia. In the home improvement segment, IKEA and JYSK strengthened their positions with new outlets in the secondary cities. The coffee chain Starbucks also continued expanding with openings in Sofia, Burgas and Plovdiv in the last quarter of 2018.

Occupier activity results in a increase of rent levels which are expected to continue in 2019. As of the end of 2018, they rent levels reached €34/sqm for a premise of 100-150 sqm at prime location in a big shopping center in Sofia and €52/sqm for a similar premise on a main street in Sofia.

The demand for retail space in shopping centers remained stable in Q4. The vacancy outside of Sofia fell from 10.95% to 10.8%, if the effect of Plovdiv Plaza is excluded.  The vacancy in Sofia stood flat at 14.7%. Plovdiv Plaza opened with occupancy of ca. 60% and contributed to the higher overall vacancy in the country – 14.1%, compared to 13.1% in the previous quarter.

Investment market also marked activity during the period. The purchase of Bulgaria Mall and Infinity Office Tower was the sole shopping center transaction in the fall of 2018. The new owner is the Spanish Squircle Capital investment fund.  Prime yields remain stable at 7.25%, expected upward trend in the short term.

Have you ever tried to renegotiate your lease agreement?

You probably suppose that because you are an existing tenant, you do not have the right to ask for the same things a new tenant might negotiate. But, that isn’t the case. It doesn’t matter if you are a new tenant or you have been a tenant for years; you should always consider these five key items when renegotiating a lease with your landlord.

Ask for a rent reduction on your lease

To achieve a rent reduction obviously depend on market conditions, but there could be an opportunity to ask for a reduction in your rent.  The best way to ask for a rent reduction is to provide updated market overview and examples. Sent a letter to your Landlord with summary of the market indications, articles and links to other comparable properties in the area.

Ask for Rent Free period

To ask for a few months rent free really depend on the length of your lease agreement. Don’t ask for too long period, because it will cause a cash flow disruption to your landlord. A few rent free months during the summer months will help bring your average rate down.  Although rent free periods usually apply in at the start of the lease, you might try to achieve them at other points during the lease term.

Ask for fit-out contribution

A fit-out contribution is a lease incentive that applies to a tenant’s fit-out.  For example, a tenant may negotiate to be reimbursed for certain sum for fit-out costs instead of asking for a rent-free period or rent reduction. When you negotiate payment for fit-out works, ask your Landlord about all details: will the payment be made on a reimbursement basis or will you be required to submit all your invoices to your landlord as they come through. Most  landlords will choose to pay fit-out contributions on a ‘reimbursement’ basis, provided that their tenant has signed long-term lease agreement.

Readers of this article are encouraged to consult professional advisors prior to acting on any of the material contained in this article.  Please contact Property Management Bulgaria Retail for further details.

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