{"id":6143,"date":"2011-02-22T07:47:42","date_gmt":"2011-02-22T05:47:42","guid":{"rendered":"http:\/\/http:\/\/www.iliaspapageorgiadis.ro\/en\/?p=6143"},"modified":"2015-01-26T20:16:44","modified_gmt":"2015-01-26T18:16:44","slug":"why-so-many-new-retail-projects-nowwhat-do-retailers-know-that-we-dont","status":"publish","type":"post","link":"http:\/\/www.iliaspapageorgiadis.ro\/english\/2011\/02\/22\/why-so-many-new-retail-projects-nowwhat-do-retailers-know-that-we-dont\/","title":{"rendered":"Why so many new retail projects now? What do retailers know, that we don\u2019t?"},"content":{"rendered":"<p style=\"text-align: justify\">\n\tYesterday we analyzed the fast that the Romanian Real Estate market will restart only by the new Retail and Commercial projects (you can find the analysis <a href=\"http:\/\/http:\/\/www.iliaspapageorgiadis.ro\/en\/commercial-%E2%80%93-retail-segmentsrestart-the-romanian-real-estate-market\/\"><strong><span style=\"text-decoration: underline\">here<\/span><\/strong><\/a>). And when we talk about the market of Real Estate, we should always keep in mind that this is the real locomotive of Romanian Economy as well. Exports are important, production as well, but Romanian economy needs Real Estate as a thirsty man needs water.\n<\/p>\n<p style=\"text-align: justify\">\n\tAs I explained to you yesterday, we suddenly heard about many new Retail and Mall projects, plus some malls too. I was discussing this issue with some friends of mine and their first reaction was quite natural: &quot;Why now?&quot;<!--more-->\n<\/p>\n<p style=\"text-align: justify\">\n\t<strong>Retail Parks \/ Malls: The largest Real Estate investments<\/strong>\n<\/p>\n<p style=\"text-align: justify\">\n\tWhen it comes to Real Estate investments, retail projects are among the largest ones,. While there are very few residential, industrial or office projects exceeding 30 million Euro, usually a Retail Park or a Mall easily surpasses the level of 50 million, amounting sometimes between 60 to 100 (!)\n<\/p>\n<p style=\"text-align: justify\">\n\tA Retail or Commercial project generate the highest volume of traffic, incomes and potential for the area where it will be established (assuming that it will be successful ofcourse).\n<\/p>\n<p style=\"text-align: justify\">\n\t<strong>The largest = the most carefully studied<\/strong>\n<\/p>\n<p style=\"text-align: justify\">\n\tWhen an investor places 50 &#8211; 100 million Euro on a land, hoping to transform this project into a &quot;cash cow&quot;, he is very careful with his moves. It is obvious that every investment should be treated carefully, but especially these ones do not only require care, attention and money, but also high level of expertise, as they are very complicated projects.\n<\/p>\n<p style=\"text-align: justify\">\n\tThis is why the first reason for a Mall or a retail park to fail is the lack of study (or the wrong study \/ approach of the project). This aspect includes the bad location, wrong catchment area and plenty of other (important) details. &nbsp;Most of international retailers need a serious amount of time in order to study a property and its potential, before they reply positive to any new investment project.\n<\/p>\n<p style=\"text-align: justify\">\n\t<strong>&quot;So, why so many new retail projects now?&quot;<\/strong>\n<\/p>\n<p style=\"text-align: justify\">\n\tThe developers and major retailers have studied the market over the last 2 years. Since 2009 already, they wanted to move on with projects, but the process was quite slow. But in the end things started to change, due to many different reasons:\n<\/p>\n<ul class=\"unIndentedList\" style=\"text-align: justify\">\n<li>\n\t\t<span class=\"list\"><strong>The land prices finally landed to reality<\/strong>. 2,5 years ago, the land prices had reached incredible levels. One of the effects was the actual blockage for the majority of projects. When we talk about a Retail project, the cost of land is specific and it can not exceed the budget. As the prices returned to more reasonable levels, serious investors took advantage of the opportunity, in order for them to buy &quot;the right property, at the right price&quot;.<\/span>\n\t<\/li>\n<li>\n\t\t<span class=\"list\"><strong>Banks \/ foreclosures pushed some deals to finalize<\/strong>. Tiago Mall in Oradea was bought through a foreclosure. The land in the center of Brasov was the result of a another auction, with the Romanian State selling in order to recover the former owner&#039;s debts. In other cases a bank pushed a transaction, by many different ways. All these needed a period to mature and they reached it during 2010.<\/span>\n\t<\/li>\n<li>\n\t\t<span class=\"list\"><strong>Expansion plans have to be fulfilled<\/strong>. When a company enters in a country, it creates its expansion strategy too. Tens of retailers consider this period as a very interesting one, in order to proceed with their expansion plans. This is why they are active and available to discuss for new projects too.<\/span>\n\t<\/li>\n<li>\n\t\t<span class=\"list\"><strong>Some kind of financing has become available, again<\/strong>. Instead of the closed doors they faced during 2009, developers and retailers saw better signs in 2010. Some of them managed to seal agreements directly with the headquarters of major European banks (present in Romanian market), while others obtained financing by following all kinds of different strategies. But the important thing is that things started moving again and now there is some available money to be invested.<\/span>\n\t<\/li>\n<\/ul>\n<p style=\"text-align: justify\">\n\t<strong>&quot;What do retailers know, that we don&#039;t?&quot;<\/strong>\n<\/p>\n<p style=\"text-align: justify\">\n\t&quot;So how come they decide to invest 1,5 billion Euro in Romania? The market here is dead, people don&#039;t have a lot of money, consumption is weak, sales fell during 2010. What do retailers know, that we don&#039;t?&quot; one may ask. There are two well known answers for this question, plus one more, which most people don&#039;t guess.\n<\/p>\n<p style=\"text-align: justify\">\n\t<strong>Romania will recover in the years to come<\/strong>\n<\/p>\n<p style=\"text-align: justify\">\n\t<strong>&quot;The worst is over. Recovery is about to come&quot;<\/strong>. When you invest tens or hundreds of million, you are obliged (by your self respect) to know what is coming up. You can never be 100% sure, but there is always a trend, a direction for the market. In our case the developers of such projects consider that the worst is over. &quot;Consumption is not expected to shrink. The recovery is about to come, in 2012 or 2013&quot;. Higher incomes will be directed to higher consumption as well. Higher consumption justifies more new investments.\n<\/p>\n<p style=\"text-align: justify\">\n\t&quot;And why now and not then?&quot; Because serious companies try to be ready at the right time, not at the last moment, probably losing the chance to take advantage of a possible rise.\n<\/p>\n<p style=\"text-align: justify\">\n\t&quot;And if recovery does not hit our door bell in the end?&quot; Then simply some people will have tough moments in order to reach their targets.\n<\/p>\n<p style=\"text-align: justify\">\n\t<strong>Romanian market is good for well structured companies, eliminating the smaller ones<\/strong>\n<\/p>\n<p style=\"text-align: justify\">\n\tWe all know that the small and medium companies of Romania have suffered the most during the last 2,5 years. Poor management, wrong mentality, endless obstacles, bureaucracy, huge loan interests etc have caused the increase of insolvencies last year.\n<\/p>\n<p style=\"text-align: justify\">\n\tWith the majority of weaker players out of the game, the stronger retailers have more market shares to capture. They have well structured companies, knowing what to do and how. This is why they start checking for expanding. And once they want to expand, developers want to build and provide them surfaces to rent.\n<\/p>\n<p style=\"text-align: justify\">\n\t<strong>High Street Retail is still immature to absorb a rise of demand<\/strong>\n<\/p>\n<p style=\"text-align: justify\">\n\tLet us assume that tomorrow morning we have 200 different clients wishing to open new shops. Will they find 200 good offers in the High Street Retail market? No. All these boulevards etc barely can serve a part of this demand. Why? Because this market is still immature. So this gives an advantage to Malls and Retail Parks, in order for them to replace the need for downtown stores around the country. Especially in the cases when the developer manages to secure a location in the center of the city (something impossible in the near past, but possible nowadays).\n<\/p>\n<p style=\"text-align: justify\">\n\tImportant: I have not written that High Street Retail has less potential than the Retail Parks and Malls. I just mentioned that it is still immature today.\n<\/p>\n<p style=\"text-align: justify\">\n\tNow I hope that you have better idea about the reasons that initiated many developers and retailers to bet again on Romania&#039;s future, investing hundreds of million Euro.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Yesterday we analyzed the fast that the Romanian Real Estate market will restart only by the new Retail and Commercial projects (you can find the analysis here). And when we talk about the market of Real Estate, we should always keep in mind that this is the real locomotive of Romanian Economy as well. Exports [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":59454,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[216,17,236],"tags":[],"_links":{"self":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/posts\/6143"}],"collection":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/comments?post=6143"}],"version-history":[{"count":0,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/posts\/6143\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/media\/59454"}],"wp:attachment":[{"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/media?parent=6143"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/categories?post=6143"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.iliaspapageorgiadis.ro\/english\/wp-json\/wp\/v2\/tags?post=6143"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}