Retail parks are undergoing very rapid expansion both in Bulgaria and the entire CEE region as thorough market saturation becomes rather a medium- than a long-term prospect. The stock in this part of the Old Continent grew 11% in 2023, reaching 8.35 million sqm. While Bulgarian facilities account for just 511,000 sqm of the total volume, the rate at which such projects are developed in the country significantly exceeds the regional average. Last year, the stock of operating retail parks in Bulgaria expanded by over 50%, according to data from commercial real estate consulting firm Cushman & Wakefield Forton.

“The high rate of expansion observed in this retail market segment reflects intense entrepreneurial activity, as well as a low starting base and frankly belated development. It is worth noting that the retail park pipeline in the region significantly exceeds that of shopping centers. This confirms the enduring interest in this format by investors, retailers, and consumers alike,” comments Georgi Muhovski, deputy manager Retail Space at Cushman & Wakefield Forton.

In the CEE region, strong interest in retail parks has been observed in recent years, according to Muhovski. This manifests itself not only in the construction of more new space but also the introduction of various new concepts. While in Bulgaria, the mix remains generally aligned with classical operators like fashion and shoe discounters, a supermarket, electronics, furniture, and DIY stores, and more recently food courts, on developed markets there are concepts offering movie theatres, hotels, shared office space, and many others.

“Since the Covid-19 pandemic, consumers’ perception of retail parks changed considerably. These facilities established themselves as practical places for shopping, whereas malls transformed into locations for better consumer experience and entertainment,” sums up Georgi Muhovski.

In his opinion, the expansion of retail parks is good news for the commercial real estate market.

“Yet, potential risks stemming from rapid expansion ought to be accounted for and managed. Among them, lack of know-how, sub-optimal cash flow management, as well as under- and overestimation of project scale are key. In addition, professional property management could help set an appropriate mix of stores and improve maintenance and communication with tenants,” he added.

From a retailer’s perspective, risks involve cannibalization between stores, the deepening shortage of personnel, and issues with staff training.

RETAIL PARK DENSITY RISING AT A RATE WELL AHEAD OF THE CEE AVERAGE

In 2023, the average density of retail parks in the CEE region was 92 sqm per 1,000 inhabitants, according to Cushman & Wakefield data. Intense investments in the segment are rapidly changing this indicator, especially in fast growing markets like the one in Bulgaria. At the end of last year, retail park density in the country amounted to 75 sqm per 1,000 inhabitants. In this respect, although still at the lower half of the CEE ranking, Bulgaria is ahead of Poland where density stands at 66 sqm per 1,000 inhabitants. Hungary tops the ranking in the region with density of 172 sqm per 1,000 inhabitants and in neighboring Romania density stands at 94 sqm per 1,000 inhabitants.

ONLINE RETAIL GROWTH SLOWING DOWN WHILE TURNOVER AT BRICK-AND-MORTAR STORES STAYS STABLE

Following the rapid expansion of online retail in the post pandemic 2021, when the segment achieved real growth of 43% in Bulgaria, in 2022 growth slowed to 12.4%. In 2023, this indicator decelerated further to a single digit – 8.3% excluding the effect of inflation, according to statistics. Meanwhile, last year the turnover of brick-and-mortar stores in shopping malls and retail parks remained stable.

The state of online retail was somewhat worse in the EU, where growth of 13.6% in 2021 was followed by a real decline of 5.4% and 1.3% in 2022 and 2023, respectively.

“After the rapid growth of online sales, the market visibly sobered up and omnichannel concepts combining online and brick-and-mortar stores established themselves as more durable models in recent years,” noted Georgi Muhovski.

In his opinion, key factor inhibiting further rapid growth of online retail is in part the logistical train as many brands still experience problems with parcel processing hubs and last mile delivery. Many of the large international brands successfully combine online shopping with formats like click & collect and replacement and return of deliveries in physical stores.

According to Georgi Muhovski, the effective collaboration between offline and online retail as well as the digitalization in the sector will play a key role in shaping the future of the retail market.