Compared to 2010, which was characterized with a record supply of new shopping centers, no significant retail schemes have been completed since the beginning of 2011, according to the Q2 report of Forton International.
The current shopping center stock stands at almost 560 000 sqm GLA.
Pipeline supply remains challenging with over 237 000 sqm of retail space under construction.
If all of the projects are completed successfully,the total shopping center stock in the country will increase by 42% to nearly 800 000 sqm or 107sqm/1000 residents.
However, further delays and cancellations are possible even with some of the projects already under construction.
Currently the retail market is more tolerant towards retail schemes with a larger entertainment component, according to Forton International, a Bulgarian consultancy which is a local partner of Cushman & Wakefield.
Retail sales continue to struggle although turnovers have shown improvement from the previous quarter.
However, a serious year-on-year decrease of around 30% is noticeable in the segment, with the highest decrease endured by fashion and sport retailers, according to the consultancy.
On the tenant side, mainly FMCG chains and international retailers remain active, taking advantage of the challenging market environment to negotiate favourable long-term lease conditions.
In general the FMCG retailers are more prone to developing smaller formats (convenience stores) rather than hypermarkets.
Prime high street rents have remained stable over Q2 2011.
A certain decrease was observed in shopping center rates as a result of both rental concessions and new lease agreements signed at lower rent levels.
The estimated average fall is about 9-11% on a quarterly basis and approximately 20% compared to the same period last year.
There are indications that rents are gradually stabilizing around their current low rates, which is a positive trend in view of the constant fall observed since the beginning of 2009.
Still, a moderate subsequent fall in rents can be expected in some subsectors due to relocation of tenants or lease renewals. No increase in shopping center provision is expected over the entire year.
Forton has pointed out that the investment market has improved in terms of completed transactions.
Retail transaction volumes for the first quarter exceeded EUR 115 million - a significant improvement on both the previous quarter and the same period in 2010.
According to Forton, in June one of the prime shopping malls in Bulgaria (Mall of Sofia - 23 600 sqm retail space) was acquired for approx. EUR 105 million.
In the town of Stara Zagora, a retail park with anchor tenants Mercator, Aiko and Mobbo was sold to Bluehouse Capital for EUR 11 million.
Forton's data further shows that prime shopping center yields remain unchanged at around 9% for a fourth quarter in a row.
Despite this, investment interest is tentative and focused on prime schemes (retail parks or shopping malls) with strong recent performance and sustainable rental income.