THE COMPLICATED economic situation and concerns about the future may be curbing retail sales in Slovakia, but are not preventing the opening of new shopping complexes. In October, a new shopping centre opened in Bratislava and more projects are in the pipeline. It also appears that Slovakia will finally have its own factory outlet, with two new projects underway, less than 20 kilometres apart. Experts predict that only one of them will survive.
Even though Bratislava is regarded as saturated in terms of retail premises, the ceremonial opening of the Central shopping centre, coupled with special discounts to mark the occasion, drew more than 50,000 people to the centre on October 18, its official opening day.
The project, by Immocap Group, dates back to 2005 and construction was launched in 2009. Central houses 150 shops, restaurants, cafes, a post office and other services on 36,000 square metres over four floors. In addition to the shopping centre itself, the €200-million development will feature offices, a fitness facility and a hotel.
However, the total retail area is not the only indicator of saturation. Other factors, which significantly affect the development of the retail market and its further growth are, for example, the purchasing power of the population and the volume of available income after costs of living are deducted as well as the size of the given city.
“Bratislava is saturated and at the moment it needs stabilisation, which has been indicated especially by retailers,” said Matúš Furman, consultant of retail team of Cushman & Wakefield, a provider of real estate services in Slovakia, adding that they are contemplating any further expansion with caution.
Robert Bernath, consultant of the retail space division at Colliers International in Slovakia envisions construction of, for now, one last shopping centre, which will serve the western part of Bratislava. The Penta Investments company is preparing the 65,000 square metre Bory Mall project, to be built close to Dúbravka and Devínska Nová Ves.
“After this project is complete, the retail market for shopping centres will be saturated,” said Bernath, adding that the possibility to expand would end for many tenants. “We expect construction of smaller retail parks along roads with heavy traffic that link the city with the suburbs.”
But outside the capital, cities like Trnava, Poprad, Prešov and Košice are, in terms of modern retail space, considered underserved.
“Smaller cities in Slovakia have growth potential in the retail sector, but here we face the problem that most international brands do not enter cities with populations below 50,000 because their expansion policy does not allow it,” said Furman, adding that in some cases the limit might even be 80,000 citizens. In such cases, however, brands can enter regions via franchising partners.
Cushman & Wakefield estimated that over 54,000 square metres of shopping centres would be built in Slovakia over 2012. When calculated per capita, Slovakia has more shopping centres in terms of square metres than the Czech Republic. While there are almost 210 square metres of shopping centres per capita in Slovakia, in the Czech Republic there are only just over 200 square metres.
The reasons for this are due to differences in the way the retail markets developed in the two countries, Jan Kotrbáček, the head of the retail team at Cushman & Wakefield in the Czech Republic, wrote in a company press release on October 16, 2012. “In the Czech Republic shopping centres as well as shopping parks were already being built in the 1990s. Retail premises are divided here into these two shopping formats. However, in Slovakia mostly shopping centres were built and thus, in relation to the population, they create a denser network. Shopping parks started to be built in Slovakia only in the period before the crisis.”
František Paračka, the head of the retail team at Cushman & Wakefield in Slovakia, agreed that in Slovakia almost all big towns except Trnava, Poprad, Banská Bystrica and Prešov, are saturated with new shopping premises.
“Compared with the Czech Republic, where developers head first into cities with at least 50,000 citizens and only then focus on smaller cities, the trend in Slovakia is different,” Paračka wrote. “In Slovakia there have been built and continue to be built new shopping centres in smaller cities with only 30,000-40,000 citizens, as for example in Liptovský Mikuláš, Levice, Zvolen, Spišská Nová Ves and so on.”
Paračka added that while some brands view a low population in smaller cities as a barrier, many international brands take into consideration the fact that Slovaks spend more money on fashion than Czechs and thus they may open shops in smaller cities in the end.
According to Cushman & Wakefield, in 2013 new shopping centres will open in Levice, Zvolen and Banská Bystrica with a total space of 37,730 square metres. In Bratislava the opening of Pharos Park is also expected.
Bernath added that the retail market in Slovakia is currently stagnating, while good locations with reasonable rents and benefits for tenants are preferred. An inflow of new brands of international retailers might spur new development on the Slovak market.
“This is also a challenge for bigger and older shopping centres, which should bring for clients something new and thus be competitive with more recently built shopping centres,” said Bernath, adding that it is necessary to mention marketing activities, like weekend events, consumer competitions, club cards and various discounts.
Two outlet centres planned
A fierce fight between two planned outlet centres - which will be located only about 20 kilometres apart - for a position on the market is expected to continue in 2013.
While Ipec Group plans to open its D1 Outlet City near Senec in the spring, Realiz plans to open its One Fashion Outlet near Voderady in October.
Construction of D1 Outlet City started in February 2012. The first phase, with a €13-million price tag, should provide 10,000 square metres of shopping space. When completed it will provide a total shopping area of up to 23,000 and will be part of a regional centre of business, entertainment and housing, called D1 Park.
The outlet will be managed by the Dutch company Stable, the developer announced in mid October.
Realiz launched construction works in the fall of 2012 and plans to invest €30 million in the first phase of the project, providing 15,000 square metres of shopping area. When complete, the three-phase project, with a price tag of €65 million, will offer about 130 shops over 36,500 square metres.
Experts warn that only one outlet centre may win and remain on the market.
“Only one project will be successful,” said Bernath, adding that it will be the one that opens first.
Iestyn Roberts, CEO of Freeport, which already operates 20 outlets across Europe and will manage One Fashion Outlet, agrees that only one outlet centre will survive.
“The best run and the best located outlet will attract all the shops, all the stock,” said Roberts in early November at a press conference on the One Fashion Outlet, highlighting that not only the number of potential shoppers but also the amount of shops supplying an outlet with unsold stock would decide the success of the projects. “It is almost certain that there is not room for two.”
But he believes that a gap of some months between the planned openings would not make a big difference.
“I am not sure whether a few months makes much of a difference; if they are two years ahead, maybe,” said Roberts, who was responsible for Parndorf, the outlet centre in Austria close to the Slovak border which opened back in 1999. “We have seen [cases where] more than one outlet opened in another city in this region, for example in Budapest, and only one outlet survived there.”
Slovakia finally ready for factory outlet
“We believe that the Slovak market is now ready for an outlet development,” said Roberts, while the strategy of his company is to develop at least 10 other outlets in major cities across Europe. “The key thing for running a successful outlet is actually a successful full-price shopping sector.”
He added that in spite of the crisis a significant number of new shopping centres have opened in Bratislava over the last few years.
“Each of these centres has been well leased with quality shops,” said Roberts. “Each of those shops will be generating not only profitable sales for their owners, but also surplus stock which needs to be sold. Thus the central reason for having an outlet centre in Bratislava is the increasingly successful full-price sector, which is generating stock which needs to be sold professionally.”