During 1HY2011 one of the most dynamic segments in street retail was catering business. Activity in the sector has doubled since 2010 with more than 10 restaurants, cafes and bakeries opening their doors for customers. Many of existing as well as new players in catering market were actively looking for expansion possibilities or new suitable premises. The rotation of tenants in this market segment was also high: unsuccessful concepts leave the market and new players are eager to enter.

Overview

First half year of 2011 in retail market segment in Riga can be characterized as promising and dynamic with many activities from the tenant side and transactions taking place. This is supported by positive data in official statistics. For instance, retail monthly turnover has demonstrated a stable yearly increase of 1.3 per cent over the five month period, number of employed persons during 1Q2011 has grown by 3.1 per cent (y-o-y) and real net wages have stopped shrinking. In case this trends trend continues in the second half year of 2011 with incomes stabilizing, it will cause consumer purchasing power to grow and facilitate further improvements in retail market.

Supply

During 2011 two retail objects have opened their doors for customers in Imanta: RIMI shopping centre Damme and first stage of Prisma retail centre. These are the only properties that were commissioned in retail market during 2011. As a result, total GLA of shopping centres in Riga increased by 22,700 m2 and amounted to 637,500 m2. One retail project comprising Gross Leasable Area (GLA) of 5,000 m2 is currently under construction in Riga: Homburg shopping centre in Zolitude that will have grocery supermarket Maxima as anchor tenant. Supply in prime street retail locations becomes scarcer as very best premises are gradually being taken up and let to tenants.

Demand

During 1HY2011 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 1HY 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. Activity in the sector has doubled since 2010 with more than 10 restaurants, cafes and bakeries opening their doors for customers. For example, Bibliotēka on Tebratas street 2, Zilā govs on Meistaru street 21. 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 mark 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 prestigious parts of Barona, Terbatas and Brivibas streets adjacent to the old Riga.

Rental Rates

According to Colliers International data, during 1HY2011 rental rates in shopping centres have stabilized and some increase is evident in most popular retail objects.

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 1HY 2011 by 2.2 percentage points and equalled 6.9 per cent. Vacancy in most popular shopping centres has reached sustainable level of 1 per cent, while less successful SC have vacant areas at average level of 20 per cent.

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 1HY2011 was evident in catering business and development of new hypermarkets. One hypermarket is currently under construction and is 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 or increase slightly. One of the influencing factors changing price dynamics is the fact that it will be more difficult for tenants to negotiate with landlords on discounts, as it was done in 2009 and 2010.

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