By the first half of 2010, retailers are expressing cautious optimism in the market, based on the latest report by Colliers International.
Rents have stabilized, mainly the tenants have the upper hand in terms of lease negotiations; apart from closings, there were also examples of new openings; also high streets are still very popular on the market, said Szabolcs Koroknai, associate director of retail at the Hungarian office of Colliers.
Following the negative developments of 2009, the fall in the turnover of shops has stopped, after a slight increase in Q2 which had followed the small decrease in Q1. The role of location for retail developments has once again become of prime importance. After their huge drop last year, rents did not on average fall any further in the first half of 2010, stabilizing at a level that is between 10–50% below its pre-crisis peak.
Many retailers continued to experience difficulties, and some have been forced to close their operations, such as shoe store chain Leonardo or the Armani Café on Andrássy út. Apart from closings, there were also examples of expanding chains and new market entrants. Examples for the former are drug store chains DM and Rossmann, and pet food retailer Fressnapf, which is expected to open up to 10 stores this year in regional centers, taking advantage of its opportunities by acquiring space in good locations at low prices. A new global player entering the local market was Starbucks, which after a long wait finally opened its first Hungarian coffee shop with the help of Colliers International in WestEnd City Center in June.
Only two retail centers opened in the first half of the year, the Alpha Park strip mall in Keszthely and the Family Center in Vác. For the remainder of the year, the biggest opening will be the Corvin Atrium in Budapest, with 36,000 sqm GLA, which will open in the fall. There are some other large projects underway in the capital, such as the KÖKI Terminal and Váci1, while some others have been postponed or cancelled.
The experience of the first few months of the Allee shopping center, which opened as the only major development of 2009 late last year, shows that existing, successful malls can better meet retailers’ expectations than newly opened ones, since they do not have to wait until turnover at the centers gears up.
“High streets Váci utca and Andrássy remain the number one targets for retailers, although rents have dropped in both locations by around 10% and 30%, respectively. Luxury brands are satisfied with their presence on Andrássy, and more new players can be expected here, which poses no problem from the supply side, as there are around 15 empty shops for rent,” said Anita Csörgő, director of retail at Colliers International.
Based on Colliers’s experience, retailers are very cautiously optimistic regarding their outlook, and many said they are planning to open new outlets in shopping centers to be delivered in the near future. Prime locations are still sought by retailers, but no longer at any cost since they are interested in leasing spaces only at lower rent levels than before. Overall, no major change in the discussed trends is expected in the second half of the year, but various realignments in tenant mixes at retail centers could take place. (BBJ)