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Shop till You Drop: Bulgaria Gets a Mall
Updated: 2006-04-28

Shop till You Drop: Bulgaria Gets a Mall

Views and Records
By Matthew Brunwasser
International Herald Tribune

Bulgaria's first Western-style shopping mall, City Center Sofia, will open in the capital on May 12 with a six-screen cineplex and shops like Calvin Klein and Mango.

A second mall also is expected to open a few weeks later, the first wave of the 155,000 square meters, or almost 1.7 million square feet, of shopping center development in the pipeline for Bulgaria over the next two years, according to research by Cushman & Wakefield, the real estate agency.

While its neighbors cannot boast much shopping center space - for example, Romania has 15.2 square meters per 1,000 residents while the EU average is 171.1 square meters - Bulgaria has been the only European country to have none at all.

But the country's plans to join the European Union in January have energized its economy. Salaries here average only 335 lev, or $210, a month, but they have been increasing by 10 percent a year. The economy grew 5.5 percent in 2005, compared with 1.8 percent in the EU, and consumer bank loans have been increasing around 50 percent a year since 2001.

Equest Balkan Properties of Sofia, listed on the London Stock Exchange and with EUR 200 M, or USD 245 M, in equity, bought the almost- completed shopping mall in March for EUR 94 M.

The mall totals 44,000 square meters, with about 22,000 square meters of leasable retail area divided into 100 units, including three anchor stores - a six-screen cineplex, the Bulgarian Piccadilly supermarket chain and Technomarket, an electronics hypermarket. Slightly more than 75 percent of the space is rented.

"It will attract middle class, upper middle class and affluent Bulgarians, who until now have missed such a shopping and lifestyle center with all the services easily accessible," said Deyan Kavrakov, Equest investment manager in Bulgaria.

The Mall of Sofia, which plans to open sometime at the end of May, was built for a little more than EUR 50 M by Cinema City International of Israel, Aviv Construction and Public Works of Israel and Quinlan Private, an international real estate and investment advisory group based in Ireland. General Electric Commercial Finance Real Estate also bought into the project last September. Colliers, the exclusive leasing agent, said the mall reached 100 percent occupancy in January.

The enormous mall structure adds a splash of color and sparkle to its gray urban surroundings. Its 75,000 square meters includes 22,000 square meters of leasable retail space, divided into 130 shops; a 12-screen multiplex and an IMAX 3-D movie theater; 10,000 square meters of office space; and 22,000 square meters of parking.

"This is a necessary step. If you meet a major retailer who wants to come to Bulgaria, the first thing they ask is 'Is there a shopping mall? Where is my shop going to be located?' Until recently there was none," said Ivan Velkov, general manager of Colliers Bulgaria.

Until now, most international retailers have been located on main streets or one of the 23 "big box" outlets that first appeared in Sofia in 1999. Rents in storefronts range from EUR 50 to EUR 120 per square meter per month, compared with EUR 30 to EUR 60 in the Mall of Sofia, according to Colliers.

"The so-called strategic investors in the retail branch don't like to divert attention from their sales in order to deal with investment issues like whether to invest in a shop, build, expand or move," said Evgeni Kanev, director of financial advisory services in Bulgaria for KPMG, the worldwide accounting firm. He said experience had shown that large sales volumes cannot be made in small shops, but until now there had been no alternative.

"This is why commercial property developers believe this a such a big opportunity for a city with a population of 1.5 million," Kanev said.

The rush for retail is part of Bulgaria's new economic development. Romania, its northern neighbor, has a similar standard of living but a population about three times Bulgaria's. It got its first shopping mall in Bucharest in 1999.

While Bulgaria has taken longer than some of its neighbors to move beyond communist-era retailing, Yvonne Court, head of retail research and consultancy for Cushman & Wakefield in London, said it should be no exception to the rule that dramatic retail growth follows EU membership and the subsequent economic development.

"It will happen," she said. "It's just a question of when."

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