The retail segment was arguably one of the most affected among real estate markets in the initial phase of the pandemic, considering the lockdown during the state of emergency, but now Romania has been recording the third fastest recovery of non-food consumption in the European Union, after Lithuania and Denmark.
However, the overall impact and evolution remain uneven, say Colliers consultants, who point out that the rapid recovery has been driven mainly by online commerce and trade patterns in secondary or tertiary cities.
April 2021 saw an increase of 11.5% in non-food goods sales in Romania, relative to the peak recorded before the pandemic, based on adjusted data, respectively in January 2020, while in the European Union sales were on average 2% below the maximum level recorded at the beginning of last year. Lithuania and Denmark, both with increases of about 16% above the maximum level reached before the pandemic, are the only member states with better results than Romania
“The market data we have shows that much of this rapid consumption growth in Romania comes from two directions: online commerce, used mainly by residents of larger cities, which is about 50% above the pre-pandemic peak, and trade patterns in smaller cities, where there was not much diversity in terms of retail schemes until recently. However, we believe that large, dominant schemes will remain successful in the long run due to the generous mix of retailers and consumers’ preference to be able to be inspired by a shopping center before making a purchase, but also to be able to see and touch the products before buying them”, explains Simina Niculiță, Partner & Head of Retail Agency at Colliers.
Currently, Romania has a total modern retail stock of approximately 4 million square meters, of which over 2.7 million square meters is the available area for rent in malls, and the rest mainly in retail parks. An important indicator for the very good outlook in smaller cities lies in the split according to the number of inhabitants of the cities. Thus, in large cities (over 200,000 inhabitants) which have a total of around 4 million inhabitants (about 20% of the country’s population), according to official data, there are over 2.5 million square meters of commercial space, meaning about 63% of the total. So almost two thirds of the stock is concentrated in the top 10 cities in Romania, though looking at metropolitan region population would close this gap.
“The purchasing power in smaller cities is not the same as in large cities, which were the major focus of developers until a few years ago, but jobs and small entrepreneurs also exist there. In addition, quite a few smaller cities are satellites of large cities, and if there are several localities within a short radius, together they come to represent an area of attraction of over 100,000 inhabitants, similar to cities like Satu Mare, Suceava or Buzau. Also, many Romanians who regularly go to work abroad need access to a shopping center when they return home, even if it is a smaller one, a need also shared by their relatives remaining in the country. This migration of developers to smaller retail parks, located in somewhat bypassed cities until recently, has taken shape in the last two to three years, but trends have been reinforced by economic developments in the context of the pandemic. Thus, it seems that the next decade will belong to retail parks rather than malls in big cities “, points out Simina Niculiță.
Colliers consultants also note that impulse purchases have decreased significantly, and shopping sessions have become shorter, less frequent, but with a higher voucher value in most cases.
“In the long run, we believe that several categories of market players, landlords or tenants, will be winners: those with a significant market share, who can capitalize on their position accordingly, those who develop proximity projects, especially in areas emerging residential and small and medium-sized projects, as well as retail parks in cities with low coverage of modern retail systems”, concludes Simina Niculiță Partner & Head of Retail Agency at Colliers.
Over 80% of the new retail spaces expected in 2021 will be in the form of retail parks, including smaller strip malls, highlighting a market shift towards proximity-based schemes or those with a smaller financial footprint for the developer. This year, the total gross leasable area announced is up to over 150,000 square meters of new modern retail spaces, with the bulk of these coming from just two developers the Prime Kapital/ MAS REI joint venture – nearly 53,000 square meters from 3 new schemes (in Ploiesti, Sfantu Gheorghe and Barlad) and Mitiska – close to 25,000 square meters in 4 new schemes (in Baia Mare, Tulcea, Mediaș and Slatina).
A notable expansion this year in Bucharest is the Colosseum Mall, with over 16,000 square meters. Another novelty is the entry of a new player, Polish developer Scallier, which has secured several land plots throughout the country and promises 40,000 square meters of new retail spaces by 2022, and part of these are slated to come in 2021.