Hi

There was an interesting article in the latest copy of the Romanian newspaper, The Diplomat newspaper about the rise in the number of shopping malls expected to open in cities around Romania this year. The article signals the rising affordability not just in Bucharest but in regional cities such as Cluj-Napoca, Baia Mare and Iasi among others.

What is interesting is to see the investors in some of these shopping malls – particularly the large fund management companies looking towards markets such as Romania to improve the performance of their property funds.

Large retail developers are now realizing that the typical Romanian now wants more and can afford more.

“What they expect in Madrid or Paris, they now want in Bucharest or Cluj-Napoca …… Westhill’s Ploiesti-based mall, due for 2010, will include a climbing wall and possibly ice skating, while tennis courts, indoor and outdoor swimming and a gym are all under consideration. “People want to spend money on leisure,” says Panculescu, commercial director Westhill Romania.

Important also is the tenant mix in these new retail centres – these will be attracting high street tenants: “Debenhams and Marks and Spencer have already opened in Bucuresti Mall and Plaza Romania. More stores in this format will come on-line by 2010 – but with direct investments rather than through third-party franchises. “There are companies from Germany and other EU countries looking to enter the market,” says Ali Ergun Ergen, general manager, Baneasa Shopping City.”

The article confirmed what we have believed about spending power in Romania that although spending power is much less than Western European markets it is increasingly annually.

Although Romanians are spending much less in-store than their European counterparts, compared to the average declared salary, they are enthusiastic consumers… In Europe, the average amount spent per visit is around 230 Euro and in Romania it is 50 Euro, according to Euromall. “But this goes up every year,”

Also reiterated is our view that Romanians like to consume and like to buy good quality goods which is reflected in their desire to live in new well designed residential developments

“You can’t construct a shopping mall with low value material,” says Havar. “You cannot cheat the people in Romania, it would be a mistake to even try it.” Romanians are ostentatious compared to many shoppers in Eastern Europe. The average time a European spends in a mall is around 1.5 to two hours – this is higher in Romania. They enjoy luxury brands and the chance to consume. Comparisons have been made between the Romanians, Russians and Italians and their conspicuous show of wealth. They are not like the Germans.


Below is the full article

A list of the shopping malls to be open in the years 2008, 2009 and 2010, those that are still pending and cities that are still on the look-out for malls is included in a link under the paragraph “Consumer Nation” – that’s also worth a look

http: / /www .thediplomat .ro /features _1207 _2 .php


Noreen

Hello Noreen,

I'm almost certain you are waiting for my comments!

It's a good article for sure. If you want a more detailed analysis write to Euan.Blake@eu.jll.com and ask for a copy of the recent Jones Lasalle investment report on Romania which was published this month and looks exclusively at shopping centres. It's very well written and having been published this month is on the mark.

The report makes some notable comments about Cluj:

'The county of Cluj has one of
the most dynamic economies in Romania and attracts the highest
level of foreign investments. Cluj-Napoca with almost 300,000
inhabitants is the largest city and home to one of Romania’s
important IT and financial services centres. Siemens, The Linde
Group, Nokia and Ericsson are all based or will shortly open their
facilities there.'

Talking about shopping centre developments in terms of per square metres in relation to population the report notes:

'At a city level the picture is somewhat different. By 2008, Bucharest
will have 217m2 per 1,000 population, still significantly below
Warsaw (500m2) and Prague (400m2), and also below Budapest
(300m2). In contrast Cluj will have 404m2 per 1,000 population,
similar to Prague, where the opportunity for new retail space is now
limited. At the other end of the scale, Galati will have only 80m2 per
1,000 population in 2008. In fact, the graph above shows that
most cities in Romania still have significant scope for further
development. It should also be noted that most of these larger
cities are likely to draw from catchments that extend way beyond
their city limits, as surrounding towns have little or no modern retail
facilities. In addition many of the planned developments are
unlikely to be completed within the scheduled time frame due to
shortage of labour in the construction sector, and some schemes
will not be built at all.
In summary, the shopping centre market in Romania is unlikely
to reach saturation in the medium term – the only possible
exception being Cluj.'

This caveat on Cluj is of course in relation to it's current population and does not take into account the explosion that is happening. But by the end of 2008 Cluj will have nearly double the shopping space when compared to Bucharest.

Going back to the article you cite I must agree entirely with the assertion that Romanians like to mix shopping with leisure. Two minutes from where I live you will find the huge Iulius Mall set beside a lake and skating rink. On the top floor of part of the building you will find www.worldclass.ro ....which means a high class gym and a large swimming pool. It's wonderful to be able to swim 1000 metres before the sops open and after they close. The same concept applies to residential developments: give Romanians a gym and pool on their doorstep and it will add a big premium to the sell price.

Best wishes

Charles



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