Why are outlets in Serbian city centers empty and does it pay-off to invest in commercial properties?

Source: eKapija Wednesday, 26.10.2022. 02:59
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Illustration (Photo: Unsplash/Eric McLean)Illustration
It has begun during the coronavirus epidemic when one-by-one, the outlets in Serbian cities started closing down. Empty business premises and “To Let/ For Sale” signs graced the center of Belgrade and other cities in Serbia, and even the centers of attractive tourist destination.

The general impression is that the situation today hasn`t improved. Inflation, energy crises and the overall uncertainty in doing business have been another blow for tenants of those premises. Does it pay-off, then, to invest in commercial property nowadays? Are rents increasing and which outlets are the most wanted? What about the retail space in shopping centers? And finally, what does the picture of eerily empty outlets in city centers across Serbia tell us? These are some of the questions we tried to to get answers to.

eKapija`s interviewees assure that the retail outlet market recovered from the pandemic crisis. According to them, the shopping center market is quite saturated now but the investors` interest for the construction of retail parks isn`t diminishing. The data of the CBS International confirm that the total offer of retail space in Serbia is 1,1 million sqm, out of which 35% are retail parks and that 25 Serbian cities have at least one retail park.

But when it comes to empty outlets in city centers, our interviewees don`t have the same views. Some of them noticed the higher number of free outlets and business premises, whereas others claim that additional square meters are sought in the central city zones. What they all agree on is that the prices are not dropping.

Republic Geodetic Authority: 9% more premises sold than last year

There were 1,765 purchase and sales of business premises registered in the Republic of Serbia in the first half of 2022 which is an 9% increase compared to the same period in 2021. This number includes outlets, offices, business premises without a defined purpose, business apartments and storage and warehouse space.

The most business premises sold were in Novi Sad ((241), Raska municipality (146), New Belgrade (142), Cajetina (90), Medijana municipality in Nis (64), Vracar (52), Zvezdara (52), Stari Grad (49) and Palilula (45) municipalities in Belgrade and Subotica (41).

The prices ranged from EUR 50 per sqm to EUR 12,240 per sqm. The surface area sold ranged as follows: up to 30 sqm – 33% of data, from 30 sqm to 60 sqm – 30% of data, from 60sqm to 150 sqm – 22% of data and over 150 sqm – 15% of data.

In the third quarter of 2022, the most expensive square meter of office space was sold in the Belgrade municipality Stari Grad for EUR 10,110. It has the surface area of 179 sqm and in turn, it is the highest contract price of office space of EUR 1,810,000.

Additional outlets sought in main city zones

What do the empty outlets in the center of the Serbian capital tell us? According to Dusan Miletic, the Director of Brokerage Operations at CBS International, they certainly don`t give a true representation of the demand. He says that as far as retail space in Belgrade goes, after the recorded decrease in activity in 2020, then in 2021 and even more in 2022, the market recorded results from before the crisis which is influenced by the increased business activity and the number of tourists who are an important target group for outlets in the pedestrian zones.


– A few empty outlets that are currently available in the center of Belgrade don`t paint the true picture of the market, considering the fact that additional outlets are still sought in the main and highly frequented city zones. For instance, the percentage of available outlets in the attractive city locations which are in high demand such as Knez Mihajlova Street, Kralja Aleksandra Blvd, Makenzijeva Street, Pozeska Street, Glavna and Prvomajska Streets in Zemun and even some locations in Borca, is less than 2%. Outlets can be empty for various reasons but the most common one is the problem with ownership, and until that`s sorted out .they can`t be available on the market. Also, it happens that a place was let out but it stays empty until the necessary documentation for adaptation and reconstruction is acquired, Miletic points out.

Total offer of retail space is 1.1 million sqm

When it comes to rent rates, there are minor oscillations compared to the pre-pandemic period, whereas there`s a marked growth in sales, our interviewee says.

– The purchase of business premises both in the retail space sector and the office space sector has become more attractive during the pandemic because individual investors and companies started investing more and buying their own office space, Miletic reveals.

He says that mostly foreign and domestic retail chains which open supermarkets,drugstores, pharmacies, game of chance shops, fashion stores, fitness centers and others are interested in outlets in the city streets locations. The surface area of the leased out outlets ranges from smaller outlets with the surface area between 60-80 sqm and bigger ones with the surface area up to 400-700 sqm. Still, the most interesting are locations that are busy, visible, frequented and densely populated.

Retail parks make up 35% of retail space in Serbia (Photo: kikovic/shutterstock.com)Retail parks make up 35% of retail space in Serbia


– In addition to street locations, retail parks definitely stand out as an attractive format that has positioned lately as one of the favorite places for shopping. Lower initial investments, shorter period of construction, and the possibility of building in phases are the key motivators of the increasing investors interest for retail parks. On the other hand, a one-stop shopping, the ease of access, spacious parking places and and a wide array of affordable goods are the reasons shoppers are drawn in by this shopping format. At the moment, retail parks make up 35% of the total offer of retail formats in Serbia which is 1.1 million sqm. There is at least one retail park in each of 25 cities in Serbia and more are announced. Per number of transactions, Novi Sad, Cacak, Kragujevac, Nis, Jagodina and some smaller towns stand out.

Clients demands are changing

On top of standard client demands that refer to location, visibility, frequency of passersbys and rent rates, since the start of the pandemic, tenants insist on certain contract clauses which directly relate to possibble pandemic continuation, Miletic explains.

– Those are exit options and previously defined reduction of rent costs in case of introduction of new emergency measures. Additionally, tenants tend to avoid the annual indexation which would be adjusted according to current MUICP values (Monetary Union Index of Consumer Prices), Miletic explains.

He reckons that investing in commercial property pays off and that the purchase of outlets in the main city zones ensures shorter payback period than the purchase of apartments.

– That is the reason that, aside from purchasing outlets for individual business operations, most of them are bought to be leased out and generate long-term revenue. When it comes to individual outlets in the most attractive commercial zones, the owners rarely decide to sell their properties because of outstanding lease revenues. In comparison, investors want to purchase outlets in the early stages of construction of residential complexes, because the offer is bigger and the payback period is much shorter than investing in other properties.

Average rent in shopping center in Belgrade 26-28 euros per sqm

The Head of Property Management and Retail, CBRE South Eastern Europe , Ivana Maksimovic states that in the last three years, the total retail space in Belgrade expanded to around 150,000 square meter of new space, primarily through opening BW Galerija and BEO Shopping Center.

She says that despite the increased offer of retail space and the impact of the pandemic, the rent rates in the first class shopping centers have remained stable in the previous quarters as well.

Rent in shopping centers can go up to around EUR 100 per sqm (Photo: zhu difeng/shutterstock.com)Rent in shopping centers can go up to around EUR 100 per sqm


– In any case, the rent prices are the highest in the shopping centers in Belgrade, where the average monthly rent is between 26-28 euros per sqm of leased space. The rent for certain outlets, situated on well-frequented locations within these facilities can even go up to EUR 100 per sqm depending on the size and type of business activity. The demand for retail space is still stable because new brands which are currently expanding their network are entering the market, Maksimovic says.

Shopping center market is saturated


Maksimovic adds that the shopping centers market is quite saturated at present but that investors are still interested in building retail parks across the region, despite the Covid 19 pandemic.

– The specificity of the concept and the mix of tenants in those facilities has proven more resilient in the past 18 month than in other retail spaces such as commercial centers. When it comes to Serbia, investors are focused on the construction of retail parks on secondary and tertiary locations, whereas many existing retail parks are increasing their capacities by adding extensions in order to expand the existing offer. The monthly rent prices in retail parks have also remained unchanged and they are between 9-11 euros per sqm, our interviewee reveals.

She finds the cause of empty outlets in the center of Belgrade in the synergy of various factors and changes that occurred in the past years.

– There are numerous reasons, from moving the business center of the capital to New Belgrade to lack of parking space in the very city center and even the lack of adequate retail space in this part of town. The changes in buyer`s habits who seek to finish several obligations in one place, and find better offer of goods and services there with easy access to the facility has led to customers turning to shopping centers and retail parks first, Maksimovic explains.

Remote shopping

One of the major changes is the rise of online shopping. Our interviewee points out that the growth rate of internet shopping in Serbia in 2020 compared to previous year was 25 %.

– The share of internet shopping in the overall retail transactions in the SEE region has been steadily growing for a number of years now. In the last five years , it rose from 9% to 15% and in four years time, according to CBRE predictions, it will be 20%. Speaking of Serbia, the share of internet transactions was 3% back in 2016 and it was 6% in 2020 and 2021. It is estimated that by 2026 the share of internet shopping will be 10 % out of total retail transactions in Serbia, says Maksimovic.

Pandemic changed customers` habits (Photo: Georgejmclittle/shutterstock.com)Pandemic changed customers` habits


She adds that in addition to the rise of internet shopping, the last few years also marked the growth of retail shopping, with the exception of 2020 due to fight against Covid-19.

– The last two years brought many changes in operations, regardless of the sector of industry. Among those who suffered greatest blows were all retail outlets, mainly shopping centers, but like we have seen, the retailers have adjusted quickly to the circumstances and introduced innovations into the retail environment. The present macroeconomic environment will bring new challenges. However, it is expected that the traditional and internet retail will develop further and parallel to each other, since they are compatible not only from the customer`s viewpoint but from the retail chain`s viewpoint too. Combination of different sales channels, form of sales and customer returns guarantees comfort and individual approach to customers, and efficient use of storage space so that every retail chain can find their ideal business formula, Maksimovic concludes.

The impact of inflation and energy crisis


Not long after the pandemic abated, inflation and energy crisis emerged, hitting most industries hard. Did that have a negative impact on the market of commercial properties and did the rent prices change? No and yes, says Bojan Jevremovic, Leasing Director - Office Portfolio at MPC Properties and points out that the current geopolitical situation is a challenge to all industries, though more in terms of predicting possible effects than any actual problems.

Regarding interior design, we see the biggest difference in higher cost of materials and equipment needed and there are considerable deviations that reflect on the cost of construction and the overall costs the tenants pay for interior equipment. Since MPC business portfolio is almost at 100%, we are not seeing any other side-effects regarding the energy crisis and inflation, says Jevremovic.

He says that the potential negative impact will have a domino effect on all participants, but taking into account the situation on the market with very small share of available space and high demand, the side-effects of increased rent is dominantly contingent upon that parameter.

– The demand for space is high, and the prices have gone up even before this geopolitical situation ,with a tendency for slower growth considering there are only a few announced busines projects for the next period. We also shouldn`t forget about the quite large inflow of companies from Russian and Ukrainian markets which also have a significant influence on the share of available space, and the prices of rent as well, Jevremovic states.

Regarding the size of the space, properties with higher number of square meters are sought out more than before in the last few years. Our interviewee points out that today, it`s completely normal to receive many offers for spaces with over 1000 sqm. The company`s record is 25,000 sqm with a single tenant.

Companies who are also the biggest tenants prevalently operate in the IT sector. They are followed by “shared service” and “call” centers that provide services to a certain part of the population in Serbia. The present trend will surely continue seeing as the R&D centers of large companies are positioning on the domestic market and they employ workers from abroad, which is also a recent trend, partly caused by the available and quality workforce from unstable regions, Jevremovic conscludes.

High number of closed shops

In time to come, if there is a serious economic stagnation the demand for commercial properties could plummet, Jasmina Gavrilov Drazic, Public Relations Manager for 4zida real estate portal. For now, he fact is that there is a considerable number of outlets for least which still isn`t affecting the drop in office space rents.

– The rent price for outlets and other commercial properties is growing, at the similar rate as other real estate prices – old apartments, new apartments, property for lease or sale. What is obvious, however ,in the real estate market is the increase in available outlets and office space, most of those for lease. Some retail owners closed their shops because they couldn`t deal with rise in taxation and the rise of prices of raw materials, goods and , rent and bills and leasing revenue and couldn`t cover the growing expenses. Moreover, some companies continue working from home and some of them canceled the part or even the entire space they rented, Gavrilov Drazic explains.

As far as desirable attributes of outlets that are easy to lease out, the golden rule is still - location.

– For this type of commercial property it`s important that they are on an attractive location, that is, in the busy city areas. Location followed by the size of an outlet, dictate the price for the most part. Outlets that have a storefront or a balcony and a yard are especially sought, and yard are important if you`re talking about hospitality business, said Gavrilov Drazic.

Marija Dedic



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