Retailers Flocking to CEE’s Robust Economic Growth and Consumer Spending

Amidst the recent release of its third-quarter financial results, NEPI Rockcastle, a prominent player in the European retail real estate sector, highlighted the escalating disposable incomes in Central and Eastern European (CEE) markets.

These growing incomes are surpassing those in more established Western European economies, fueling a vibrant surge in consumer spending within a region characterized by a scarcity of modern retail infrastructure.

As Europe’s third-largest listed retail real estate company in terms of portfolio size, NEPI Rockcastle is at the forefront of owning, operating, and developing shopping centers across CEE.

The company reports a robust increase in net operating income, attributed to the expansion efforts of both international and local retailers in the region. These retailers are keen on tapping into an expanding demographic of affluent consumers and benefiting from the potentially higher profit margins offered by these burgeoning markets.

Speaking at the esteemed MAPIC retail trade fair held in Cannes, Marek Noetzel, NEPI Rockcastle’s Chief Operating Officer, underscored the buoyancy of retail markets across CEE post-pandemic.

He emphasized that economic growth and consumer spending in major CEE markets notably outshine their Western European counterparts.

This favorable climate has translated into increased turnovers and improved margins for tenants within NEPI Rockcastle’s nearly 60 shopping centers spread across the region. Additionally, it has attracted new international retail players to these markets while encouraging existing brands to expand their presence.

NEPI Rockcastle’s latest financial report, released on November 16, 2023, reveals a notable 23 percent surge in net operating income, reaching €365 million for the nine months leading up to September 2023 compared to the same period in 2022.

This substantial growth is primarily attributed to robust tenant sales performance and the strategic acquisitions executed in 2022. During the initial nine months of 2023, NEPI Rockcastle inked 882 new lease agreements and lease renewals, covering over 188,200 square meters of space.

Impressively, 42 percent of this leasing activity, measured by gross lettable area (GLA), constituted entirely new leases, with international brands securing 58 percent of the freshly leased GLA.

A standout among the new lease signings is the world-renowned fashion giant, Inditex, which selected NEPI Rockcastle’s latest development, Promenada Craiova, situated in central southern Romania, as the location for its debut 4,200-square-meter Lefties store—the brand’s inaugural presence in the Central and Eastern European (CEE) region.

Additionally, over 40 international brands have opted to expand their footprint in the region by choosing Promenada Craiova. This lineup includes prominent names such as Bershka, Calvin Klein, Massimo Dutti, Mohito, Peek & Cloppenburg, Stradivarius, Tommy Hilfiger, Under Armour, and Zara, all of which are venturing into Craiova for the first time.

Promenada Craiova encompasses an expansive 80,000-square-meter retail complex, comprising a 53,250-square-meter GLA shopping center, an adjacent 10,350-square-meter GLA retail park, and a 16,000-square-meter GLA DIY store owned by Dedeman. The mall witnessed an overwhelming response from shoppers on its inaugural trading day, with a staggering 55,000 visitors flocking to explore the offerings from the 120 brands debuting at the site.

Over the past couple of years, NEPI Rockcastle has welcomed several international retailers into its portfolio, expanding its diverse range of offerings. Notable additions include:

  1. Primark: The renowned Irish value retailer ventured into the NEPI Rockcastle fold by inaugurating a 3,800-square-meter store within the Bonarka shopping center in Krakow, Poland, last year. It is set to mark its debut in Hungary by launching its first store in Arena Mall, Budapest, scheduled for 2024.
  2. Lovisa: Originating from Australia, Lovisa made its entry into the NEPI Rockcastle landscape with a 60-square-meter store debut in Mega Mall, Bucharest.
  3. Epantofi and Modivo: These digital-native brands, representing Epantofi, a Polish online footwear retailer, and Modivo, one of Europe’s prominent online retailers of clothing, footwear, and accessories, opted to establish their physical presence by selecting Mega Mall as their launchpad, collectively occupying 1,800 square meters of retail space.

Moreover, NEPI Rockcastle’s existing international brands are witnessing robust growth in the region. Noteworthy developments include:

  1. Zara: The esteemed Spanish brand embarked on a trajectory of expansion by enhancing and enlarging its stores at Paradise Center in Sofia, Bulgaria, and City Park Constanta in Romania, employing its latest retail concept. Additionally, Zara set foot in Promenada Craiova, further solidifying its presence in the region.

  2. In recent expansions, British retail giant JD Sports marked its presence in Eastern Europe by launching new stores in Mega Mall and Shopping City Timisoara, situated in West Romania, as well as in Focus Mall Zielona Gora, Poland.
  3. Meanwhile, German fragrance retailer Douglas expanded its footprint in Romania by establishing new outlets in Shopping City Deva and Shopping City Targu Jiu, catering to the growing demand for perfumery products in the region.
  4. The sportswear segment witnessed notable developments with leading brands Adidas and Nike opening new stores in Promenada Craiova, Romania, and Bonarka City Center, Poland. As Bonarka undergoes refurbishment, the final phase of renovation is slated to commence in Q1 2024.
  5. Adding to the mix, popular fashion brand Mango unveiled a fresh store in Paradise Center, Bulgaria, further enhancing the retail landscape in the region.
  6. Regional brands are also on the expansion spree, with Polish label Reserved making strides by debuting in Paradise Center, Bulgaria, and revamping its outlet in Serdika Center, Bulgaria. Additionally, Reserved extended its presence by inaugurating new stores in Karolinka Shopping Centre and Galeria Wolomin in Poland, as well as Ploiesti Shopping City in Romania.
  7. Moreover, fashion off-price retailer Half Price expanded its reach across Eastern Europe with new store openings in key locations such as Mammut Shopping Centre in Budapest, Bonarka, Karolinka Shopping Center, Alfa Centrum Bialystok, and Focus Mall Piotrkow in Poland, and Shopping City Sibiu in Romania.

Sinsay, the fashion retailer, has expanded its footprint by opening new stores in prominent locations such as Ozas Shopping and Entertainment Centre in Vilnius, Lithuania, and Braila Mall in Romania.

Meanwhile, 4F, a leading sports clothing retailer, is rapidly scaling its presence across the region. The brand has recently secured four new locations, including City Park Constanta, Shopping City Deva, Braila Mall, and Ploiesti Shopping City. Additionally, 4F has undertaken the refurbishment and expansion of its existing store in Mega Mall to better cater to its growing customer base.

Commenting on these developments, Marek Noetzel, NEPI Rockcastle’s Chief Operating Officer, emphasized the attractiveness of the CEE markets compared to their Western European counterparts.

He noted that the forecasted double GDP growth in the CEE region in 2024, along with stable operating costs and robust household income, presents compelling opportunities for retailers and tenants to expand their presence and capitalize on the region’s dynamic retail landscape.

Jann Confield
Jann Confield
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