Street Retail Leasing Spree
As the economy develops quickly and purchasing power rises, big retailers have been very successful, new stores have opened their first outlets, and banks have competed for larger market coverage, opening units in the city's hottest spots.
Continuing the trend witnessed last year, demand for street retail units came mostly from banks, pharmacies and gambling operators.
The most important aspect of this market segment is the fact that all areas are seeing high demand and, as a general rule, spaces that enjoy a good location and become available are leased almost instantly.
Magheru – Balcescu – Bratianu and Victoriei Avenue are still the prime retail districts of the city, attracting the best tenant mix and the most visitors. In the first six months of 2005 Campel, Lancel, Musette and Miss Sixty secured spaces on Victoriei Avenue. On Magheru Blvd. travel agency Marshall Tourism bought a space close to Romana Square, whilst Little Big and Yokko also leased spaces in the same area. On Bratianu Blvd, the most representative new tenant is Kenvelo.
Due to the limited availability of space, rents for prime retail units increased. For the first time, a store offering over 150 sqm was leased at 130 Euro/sqm/month, rent registered so far only for very small units. We expect rents to continue growing.
Secondary retail areas continued to improve their tenant mix, with new Nissan and Suzuki showrooms opening on Stefan cel Mare Road, whilst Big Time fast-food and a casino have chosen Mosilor Avenue. Rents have grown on average by 25% since the beginning of the year, and this trend will continue.
Peripheral areas remained the object of high levels of interest, as the retailers' battle for city-wide coverage is far from being over. If 2004 saw an increased interest for areas such as Pantelimon (Delfinului), Drumul Taberei (the loop), Iuliu Maniu, Crangasi and Colentina (Doamna Ghica), this year the search for space has moved on even further to locations such as Rahova, Alexandriei, Giurgiului, Brancoveanu and Titan. For example, Sensiblu, Eurofarmacia and Helpnet already secured spaces on Rahova Avenue. Most of the spaces in these areas were rented for no less than 10 Euro/sqm/month, and the trend is upward.
As far as supply is concerned, no significant improvements were noticed. It is limited to the existent old stock, some renovated and refurbished space, plus space that is added through office buildings that include retail space on their ground and first floors.
Overall, rents have increased as a direct result of the difference between demand and supply; the first six months of the year seeing rents growing by 20-45%. Until additional space is offered for rent, the good spots will continue to be in very high demand, a fact that, on one hand, will limit the arrival of international clients to the market, and, on the other, will allow landlords to demand higher prices. We expect a 10-15% growth in rents until the end of the year.
Banks continued to be the most active players on the market, continuing their search for best spots in all areas. The average requirement measures 100-120 sqm and features easy access, excellent visibility, parking possibilities, high levels of traffic, one-level display only, large frontage, etc. For these reasons, every major crossing in the city attracted banking units like a magnet.
The interest spreads from the center to the periphery, banks trying to cover all areas. It has been noticed that usually the large banks start the trend by opening units in uncovered locations, while medium and small sized banks follow.
In the first half of the year Raiffeisen Bank opened a new two-level branch on prime artery Bratianu Blvd.
Libra Bank, BRD and Alpha Bank established branches on Stefan cel Mare Road, while Ion Tiriac and BRD banks choose Dorobanti Avenue. Banc Post secured space on Rahova Avenue, while Raiffeisen, Citibank and BRD leased proper locations for their activities on Giurgiului Road. Banca Transilvania opened units on Stefan cel Mare, Pantelimon, Lacul Tei, Berceni, Calea Giurgiului and Lucretiu Patrascanu.
The fact that 10 major banks present in Romania planned to open around 130 units in Bucharest this year gives an idea of the demand coming from this industry. They already secured spaces for more than half, and business development managers declare that more branches than initially planned could be opened if they find good locations.
As there are still areas not covered, the expansion will continue with new locations to be targeted, such as Bucurestii Noi, Chitila, Pajura, Giurgiului, Alexandriei and Oltenitei.