Central and Eastern European (CEE) countries face significant demographic changes within the next decade that will impact the region’s retail markets, according to CB Richard Ellis’ (CBRE) latest research report, Retail Demographics: Concern or Opportunity?
Like much of Western Europe, most CEE countries face the long-term demographic challenges of stagnating or declining and ageing populations. Demographic change will present both opportunities and challenges to those active in CEE retail markets for the long-term, but as the impact of these changes will not be uniform either by country or region, it is imperative that industry players understand how this change will affect individual markets in the region, in order to position themselves to take advantage of the resulting opportunities.
Demographic changes affecting CEE are similar to those affecting broader Western European markets, although in some cases the impacts in CEE will be more severe. Jos Tromp, Head of CEE Research & Consulting, explained: “Bulgaria, Ukraine, Russia and Romania all face significant population declines and are forecast to shrink by more than 15% by 2050 according to United Nations projections. Emigration, lack of immigration, low birth rates and poor public health are among the primary reasons for these declines. Internal migration, like in Western Europe, is also changing the face of regional demographics in CEE. Capital cities and large regional cities in the region should be able to better retain their current populations because they will be able to attract young people with work and lifestyle opportunities, while more rural and industrial regions will find it more difficult to maintain their current populations.”
CEE retail markets have developed in the last decade with a relatively clear correlation between provision rates and GDP per capita. This means that capital cities and large regional cities in Central Europe currently have among the highest retail provision rates in CEE, while poorer, more rural regions in Poland and Romania have among the lowest provision rates. Rapid quantitative growth since 2000 in CEE retail markets has increased competition between retail schemes in most markets. Tromp commented: “There are now few untapped retail markets of moderate size across CEE, making it more challenging and riskier for retail players to try to reach a market first. As the amount of consumer spend a retail scheme can attract is the primary determinant of its success, demographic changes and their effect on consumer spending will play a more important part of the conceptualization and planning of successful shopping centers across CEE in the medium- to long-term.
“The CEE retail market as a whole is much more mature than it was 10 years ago, with fewer obvious retail opportunities available. CEE capital cities have better longer-term demographic prospects than most regional markets and also have higher consumer spending levels and a more sophisticated consumer base to support new types of retail space. Smaller cities in CEE will still offer opportunities, but will require thorough assessment based on the local economy, demographic trends and the state of the existing retail market.”
The recent economic downturn, keenly felt in CEE, accentuated the fact that market conditions have changed significantly. Tromp explained: “While CEE retail markets will continue to offer opportunities for growth to investors, developers and retailers, the last year has shown that further expansion of the retail market will have to be more sophisticated and tailored to reach markets with the greatest potential.”
Hungary’s demographic outlook is relatively typical for CEE. “We face both population and ageing concerns, but a precipitous population decline is not forecast.” - added Gábor Borbély, Senior Analyst at CBRE Hungary. ”Budapest serves as the only real focal point of the country with ca. 30% of Hungary’s population living in the capital’s region. This draws young and educated workforce to Budapest area, which helps increase its population and purchase power.” (press release)