Construction, Good for Business, Latvia, Markets and Companies, Real Estate, Retail

For instance, retail monthly turnover has demonstrated a stable increase of 1.3% y-o-y over the five month period, number of employed persons during Q1 2011 has grown by 3.1% (y-o-y) and real net wages have stopped shrinking. In case this trends trend continues in the second half year of 2011, it will facilitate further improvements in retail market.

Supply

In spring 2011 new Rimi shopping centre Damme has opened its doors for customers in Imanta. This was the only property that was commissioned in retail market during H1 of 2011. As a result, total GLA of shopping centres in Riga increased by 15,000 m2 and amounted to 629,800 m2. Two retail projects comprising GLA of 12,700 m2 are currently under construction in Riga: Homburg shopping centre in Zolitude and Prisma Hypermarket in Imanta. Both these retail centres will have grocery supermarket as anchor tenants: Maxima and Prisma respectively.

Supply in prime street retail locations becomes scarcer as very best premises are gradually being taken up and let to tenants.

Demand

During H1 2011 overall demand for retail premises in shopping centres remained positive and exceeded levels of previous year. Many brands, such as Camicie & Cravatte (clothing and accessories), Madara (cosmetics), and Oasis (women fashion clothing) have decided to open new stores and expand. Several new brands, such as Piccolo (kid’s shoes) entered retail market in H1 2011. Kid’s clothes brand Okaidi that previously had closed shop in Riga reopened new one.

Total leasing activity was high in street retail during first six months of 2011. One of the most dynamic segments in street retail was catering business. Existing cafes and restaurants as well as new concepts were actively looking for expansion possibilities or new suitable premises. The rotation of tenants in this market segment is also high: unsuccessful concepts leave the market and new players are eager to enter.

Another niche of street retail players are fashion stores targeting lower income customers.

Second-hand store chain Humana was very active with opening three new outlets in Riga and one outlet in each Jelgava and Daugavpils.

Most demanded street locations in Riga for perspective tenants are Barona and Terbatas streets, popular is prestigious part of Brivibas street adjacent to the Old Riga.

Rental rates

Rental rates during H1 2011 have stabilized and some slight increase is evident in successful shopping centers.

Street retail rates have also slightly risen to EUR 12-30 for most popular and demanded locations outside Old Town and EUR 10-25 for locations in Old Riga. Since vacancy in most successful locations has reached sustainable level, rental rates are expected to grow.

Vacancy rate

Total vacancy rate in shopping centres decreased during H1 2011 by 2.2 percentage points and equaled 6.9%. Vacancy in most popular shopping centres has reached sustainable level of 1%, while less successful SC have vacant areas at average level of 20%.

Trends and forecasts

• Retail market segment can be characterized as active and dynamic. Official macroeconomic statistics allows for stable forecasts in its development for the next 6 months.
• Advanced activity in retail during H1 2011 was evident in catering business and development of new hypermarkets. Two hypermarkets are currently under construction and are expected to be commissioned during next 12 months.
• Demand for premises in both street retail and shopping centres is expected to remain stable.
• As vacancy in successful shopping centres dropped to near-zero level, rental rates in these locations are expected to grow. Rents in less popular retail objects are expected to remain stable.