Success Formulas For Shopping Centres in Romania

Success Formulas for
Shopping Centres
in Romania
Performance infuencing variables
www.pwc.com/ro
04
Executive Summary
10
Romanias Shopping Centre Market
06
Economic Context
22
Evaluation of Shopping Centres
and Defnition of Formulas for Success
Contents
PwC and Sonae Sierra |4
Rapid pre-crisis growth propelled
Romania into one of the fastest
growing economies in Europe,
which spurred high local and
foreign investment in a number
of industries, including retail.
However, the economic crisis coupled
with austerity measures taken by
the government in recent years have
had a signifcant negative impact on
Romanias business environment with
noticeable drops in the countrys GDP,
employment and income. 2011 marked
a return of moderate growth despite
lingering economic uncertainty.
Modern retail growth in Romania was
driven by higher demand due to change
in lifestyle, rising discretionary income
and higher indebtedness of customers.
Consequently, retailers expansion plans
resulted in a rapid increase of the
countrys GLA (Gross Lettable Area)
hinging on a high demand for
commercial space. In 2012-2013,
Romania is expected to extend its now
existing GLA , but the shopping centre
penetration will still lag far behind the
European average. Romanias modern
retail space is likely to further expand
hand in hand with the recovery from the
global economic and fnancial situation.
The GDP and GLA indicators are strongly
correlated in Europe. Countries with
higher GDP per capita show a higher
shopping centre penetration. The same
correlation is visible in Romania, too.
Most of the modern retail space is
located in Bucharest and other major
cities with high retail penetration and
above country average salaries, while
some counties/cities with lower income
level are noticeably underdeveloped in
terms of retail space.
Overall, small sized shopping centres are
the most numerous, large and very large
centres are mainly concentrated in
Bucharest. Shopping centres with a low
complexity, i.e. neighbourhood and
community centres, represent around
50% of the total number. Regional or
super-regional centres are located in
larger cities, mainly Bucharest. Recently
there has been a notable rise of power
centres, i.e. shopping centres that use
several high profle anchor tenants as
their main attraction.
Shopping centre development was
driven by a shortage of (modern) retail
space. The result was a fragmented
market. Out of 40 top-ranking
shopping centres analysed, 5 account
for approximately 38% of the total
turnover, but only for 21% of the GLA.
Moreover, competition has been
historically low, ensuring fnancial
success in most cases, despite a
relatively low focus on relevant success
criteria such as location, accessibility
for all means of transport, tenant mix,
management experience, catering and
leisure components or marketing.
However, our study shows that the best
performing shopping centres visibly
outperform the average score on all
analysed criteria. Smaller centres tend
to perform better for criteria such as
location and access for various means
of transport, but lack a wide selection
of catering and leisure options. Larger
ones perform better at the latter set of
criteria and they tend to have a more
diverse assortment mix, but show less
accessibility for various means
of transport.
The main success criteria resulting
from our analysis is professionalism
of the shopping centre management.
Historically, the management of most
centres focused on administrative
activities and revealed a convenient
and inexpensive approach, but as
competition intensifes and customers
are expected to become more demanding,
a professional approach to management
will become increasingly important. Since
professional management is deemed the
main success criterion, it is important to
understand how to defne it.
Executive Summary
5| Success Formulas for Shopping Centres in Romania
A professional management team
does not only care about collection,
accounting and proper operation, i.e.
security, cleaning, proper functioning
and maintenance of the technical
equipment, managing the marketing,
internet presence, PR, etc. On top of
these everyday tasks, professional
management is about supervising and
proactively managing the performance
of the business clients, i.e. tenants as
well as customers. In order to do so,
customers background, purchase power
and purchase behaviour need regular
examination, each tenants assortment
of goods and performance in comparison
to another need permanent and steady
monitoring, meaning that the targets
for marketing and/or tenant mix must
be pro-actively managed. A signifcant
trend will be the shift towards
experienced, professional managers
who can add value in terms of tailored
leasing contracts, tenant mix and the
creation of a strong shopping-centre
identity, shaping a destination and
atmosphere customers will long for
and enjoy.
Similarly, aspects such as character
and identity are expected to become
crucial in future retail developments,
with shopping centres becoming
increasingly complex. Shopping centre
management is expected to be
responsible for this change.
Moreover, evolving customer demand
and behaviour will increase the
importance of previously neglected
criteria such as appealing design
(exterior as well as interior), adequate
and user friendly parking space, quality
of public spaces, shopping centre layout
and ease of navigation in the shopping
centre. While new shopping centres can
beneft from this trend, it will be a
much stronger challenge to revitalize
existing shopping centres in order to
ensure their success in the medium
and long term.
The rapid pace of the pre-crisis
growth turned Romania into one
of the fastest growing economies in
Europe and attracted increasing
levels of foreign investment in
many branches of the economy.
Retail was one of the sectors that
benefted most from both foreign and
local investment. This was driven by
rising demand, in its turn sustained by
the diversifcation of customer needs
and behaviours, a rise in discretionary
income due to higher wages and the
high amount of private loans
contracted by consumers.
The economic crisis had signifcant
negative effects on the Romanian
business environment. One of the
underlying growth drivers before
the crisis was excessive consumption
sustained by consumer loans; with
the credit crunch, consumption fell
abruptly. Such an effect, compounded
by the economic impact of the austerity
measures taken by the government
in 2010 and 2011, cascaded into a
noticeable economic decline in
recent years.
Chart 1. Romanian GDP per capita in 2010 and GDP evolution (bn. EUR, %, EUR/capita)
959
799
769
502
439
328
204
101
Moldova
Ukraine
Bulgaria
Romania
Russia
Poland
Hungary
Czech Rep.
416
509
436 439
468
500
535
573
613
+5%
2015f 2014f 2013f 2012f 2011e 2010 2009 2008 2007
Gross average monthly salary in Romania (EUR) Gross average monthly salary benchmark (EUR)
2013f
121.8
3.4 %
2012f
120.7
2.1 %
2011e
119.0
1.7 %
2010
116.2
-1.6 %
2009
130.6
-6.6 %
2008
133.9
2010 2009 2008
7.3 %
EU - 27 average 24.40
Ukraine 2.18
Bulgaria 4.80
Romania 5.80
Poland 9.27
Hungary 9.70
Czech Rep. 14.20
Slovenia 17.30
Italy 25.70
UK 27.40
Germany 30.30
GDP/Capita benchmark (thousand EUR) Romanias GDP at market prices and year-to-year
real GDP evolution (bn. EUR, %)
101
204
328
439
502
769
799
959
Hungary
Czech Rep.
Moldova
Ukraine
Bulgaria
Romania
Russia
Poland
Net average monthly salary in Romania and real growth rate (EUR) Gross average monthly salary benchmark (EUR)
419.4
399.3
380.6
361.5
348.6
330.4
321.2
355.4
2015f 2013f
1.6% 1.8%
2014f
1.4%
2012f
1.2%
2011e
0.5%
2010
-3.7%
2009
-1.5%
2008
16.5%
133.9 130.6
116.2
127.1
136.0
146.1
157.2
169.3
4.2%
2012f
7.3%
2011
-6.6%
2010
-1.6%
2009
2.5%
2008
1.7%
2014f
3.5%
2015f
4.4%
2013f
EU-27 avg. 24,8
Bulgaria 4,9
Romania 6,3
Poland 9,7
Hungary 9,9
Czech Rep. 14,4
Slovenia 17,2
Italy 25,7
UK 26,3
Germany 31,2
GDP/Capita benchmark in 2011 (thousand EUR)
Romanias GDP at market prices and year-to-year
real GDP growth (bn. EUR, %)
Economic Context
Source: Eurostat, CNP, PwC analysis
Chart 2. Gross monthly salary in Romania and in selected SEE countries (EUR)
959
799
769
502
439
328
204
101
Moldova
Ukraine
Bulgaria
Romania
Russia
Poland
Hungary
Czech Rep.
416
509
436 439
468
500
535
573
613
+5%
2015f 2014f 2013f 2012f 2011e 2010 2009 2008 2007
Gross average monthly salary in Romania (EUR) Gross average monthly salary benchmark (EUR)
2013f
121.8
3.4 %
2012f
120.7
2.1 %
2011e
119.0
1.7 %
2010
116.2
-1.6 %
2009
130.6
-6.6 %
2008
133.9
7.3 %
EU - 27 average 24.40
Ukraine 2.18
Bulgaria 4.80
Romania 5.80
Poland 9.27
Hungary 9.70
Czech Rep. 14.20
Slovenia 17.30
Italy 25.70
UK 27.40
Germany 30.30
GDP/Capita benchmark (thousand EUR) Romanias GDP at market prices and year-to-year
real GDP evolution (bn. EUR, %)
169.3
157 .2
146.1
144.5
135.8
123.3
119.0 121.5
4.2%
2012f
7.3%
2011e
-6.6%
2010
-1.6%
2009
2.5%
2008
1.7%
2014f
3.5%
2015f
4.4%
2013f
EU- 27 avg. 24,8
Bulgaria 4,9
Romania 6,3
Poland 9,7
Hungary 9,9
Czech Rep. 14,4
Slovenia 17,2
Italy 25,7
UK 26,3
Germany 31,2
GDP/Capita benchmark in 2011 (thousand EUR) Romanias GDP at market prices and year-to-year
real GDP growth (bn. EUR, %)
101
204
328
439
502
769
799
959
Hungary
Czech Rep.
Moldova
Ukraine
Bulgaria
Romania
Russia
Poland
Net average monthly salary in Romania and real growth rate (EUR) Gross average monthly salary benchmark (EUR)
419.4
399.3
380.6
361.5
348.6
330.4
321.2
355.4
2015f 2013f
1.6% 1.8%
2014f
1.4%
2012f
1.2%
2011e
0.5%
2010
-3.7%
2009
-1.5%
2008
16.5%
Romanias GDP dropped by 6.6% in 2009
and by 1.6% in 2010. However, 2011
marked a return to growth, despite
persisting economic uncertainty due
to the emerging sovereign debt crisis
in the Euro area.
Although Romanias GDP/capita is slightly
higher than in some of the neighbouring
countries, like Ukraine and Bulgaria,
it still lags signifcantly behind the EU
average and more importantly, behind
many other countries in the CEE area,
such as Poland, Hungary and the
Czech Republic.
Employment conditions also underwent
a diffcult period, with unemployment
rising to double digit levels in some
areas. The harsher market conditions
in the private sector correlated with cuts
in the public sector wages caused average
Romanian wages to drop under the
2009 levels, and are not expected to
surpass pre-crisis levels until this year.
The same as GDP/capita, average salaries
in Romania are low, compared to most
CEE countries, but surpass Bulgaria and
Romanias non-EU member neighbours.
Source: National Bank of Romania, National Statistics Institute, CNP, PwC analysis and estimates
The Romanian consumer spending
per capita is signifcantly lower than
the EU-27 average and than most CEE
countries, indicating a strong potential
for further growth in the following
years, as we emerge out of the crisis.
Household consumption in Romania has
a skewed structure with food and
non-alcoholic beverages accounting for
43% of total consumption, compared to
only 13% the EU average.
The structure is explained mostly
by low income levels and is likely to
change as wages grow, with a higher
share allocated to entertainment,
catering, hotels, clothing and footwear
expenditure.
Chart 3. Consumer spending dynamics in selected CEE countries (thousand EUR, %)
Chart 4. Household expenditure type and consumption structure (%)
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
C
o
n
s
u
m
e
r

s
p
e
n
d
/
c
a
p
i
t
a

(
2
0
1
0
,

i
n

t
h
o
u
s
a
n
d

E
U
R
)
24
22
20
18
16
14
12
10
8
6
4
2
0
CAGR consumer spend (2004-2012)
Croatia
Serbia
Russia
Kazahstan
Ukraine
Belarus
Romania
Turkey
Macedonia
Slovakia
Slovenia
Poland
Hungary
Lithuania
Latvia
Estonia
Czech
Republic
Bulgaria
European Union (27 countries)
Consumer spend per capita (thousand EUR)
15%
24%
13%
6%
5%
5%
11%
9%
9%
Education
Healthcare
Other
Restaurants and hotels
Recreation and culture
EU-27
Alcoholic beverages & tobacco
Clothing and footwear
6%
5%
4%
1%
Romania
43%
8%
5%
4%
4%
3%
1%
1%
Food and non-alcoholic beverages
Housing, water, electricity & fuels
Communications
Transportation
Furnishings, household equipment
13%
3%
4%
3%
16%
10%
Taxes and contributions
Other
Investment
Household
production
1%
Consumption
70%
Note: CAGR consumer spend, or the Compound Annual Growth Rate for consumer spending is
the year-to-year growth rate of the consumer spending over the specied time period.
Source: World Bank, Eurostat, PwC analysis and estimates
Source: National Institute of Statistics, Eurostat, PwC analysis and estimates
Chart 6. Consumer and retail condence index in EU and Romania
Mirroring consumption trends, the
Romanian retail turnover recorded an
important contraction after 2008 but
stabilized in 2011. However, both food
retail and non-food retail continued to
show higher growth rates than the EU
average after 2007. Non-food retail
industry grew at a faster pace,
indicating changing consumer habits
and proving the potential for further
growth of this retail segment.
Food retailers were the frst to come to
Romania, while other segments started
their expansion later. The crisis changed
retail in two respects. First, many poorly
adapted and unstructured local retailers
and franchisees with only a few shops
disappeared from the market, due to
lack of effcient operational and
strategic business, which placed
surviving retailers in a favourable
competitive position.
Even with a reduced market potential
due to the decreased purchase power,
retailers streamlined over-proportional
business models, which left a higher
share to those of them who survived.
Secondly, international retail chains
started entering Romania directly
and no longer by franchising business
models. However, retail shows a positive
dynamic and, as mentioned above, it
represents a business area with strong
potential for growth.
Although Romanian consumers are
currently pessimistic, even more so than
in other countries, most retail segments
show a potential for growth in the
medium term. That is why retailers still
invest in expansion, taking advantage of
the relative low investment costs and,
probably more important, of the overall
reduced rent for retail spaces. While
results may be under pressure in the
short term, they are expected to improve
with the recovery of the economy in the
medium and long term.
Chart 5. Evolution of retails basic breakdown in Romania as compared to the EU average
(2005=100, seasonally adjusted series)
0
RO - retail of non-food
RO - retail of food
RO - total retail
EU 27 - total retail
110
2007 2008 2009 2010 2011
200
190
180
170
160
150
140
130
120
1.7.11 1.1.11 1.7.10 1.1.10 1.7.09 1.1.09 1.7.08 1.1.08 1.7.07 1.1.07 1.7.06 1.1.06 1.7.05 1.1.05
RO - Consumer
1.1.12
RO - Retail
EU - Retail
EU - Consumer
By size, shopping centres were
segmented into:
Small size commercial spaces are
centres with a GLA of less than
20,000 sqm;
Medium size commercial centres
have a total GLA between 20,000
and 40,000 sqm;
Large size centres have between
40,000 and 80,000 sqm;
Very large size shopping centres
have a GLA of more than 80,000 sqm.
In segmenting Romanian
and regional shopping
centre markets, the analysed
centres were grouped together
by two main factors: size,
expressed in total GLA
and type, under the ICSC
(International Council
of Shopping Centres)
classifcation.
Analysis Methodology
In order to assess the shopping
centres market in Romania we
developed a methodology based
on five main criteria:
Market environment, including key
demographics and concentration
or polarisation of competition in
the catchment area of the analysed
shopping centres;
Location in the host city and ease
of access for customers;
Operational effectiveness, driven by
the GLA utilisation, number and
diversity of tenants, quality of service,
entertainment and food courts;
Financial Performance, measured
through key indicators such as turnover
and revenue per square metre;
Management and marketing,
according to the defnition set in
the executive summary at page 4.
For each commercial centre analysed, we assessed and ranked centres based
on a range of criteria for success. The six key criteria for success are:
1. Location in the host city;
2. Access and easy reach for customers, measured by transport time,
transportation options and costs, etc.;
3. Assortment and tenant mix based on the diversity and quality of
anchors and merchants;
4. Catering and leisure based on the availably, quality and diversity
of entertainment and leisure options in the shopping centre;
5. Professionalism of centres management driven by the success of the
management team to improve operational effciency and maintenance,
marketing, commercialization and legal management of centres needs;
6. Marketing and online presence measured by the level of marketing
activities, both direct and indirect and by the centres presence on various
media channels, particularly online.
Each individual shopping centre in our sample was scored on a scale from 1 to 5
for each key criterion for success, where 1 represents poor performance and 5
represents very good performance on the relevant criterion (e.g. 1 - very poor
location, 5 - very good location).
The resulting scores were subsequently used to identify correlations between
each key criterion for success and the overall success of a shopping centre
(measured in terms of revenue).
By type, shopping centres were split into:
Neighbourhood centres are designed
to provide convenience shopping
for the daily needs of consumers
living in their immediate vicinity
or neighbouring areas. Most of them
are anchored by a supermarket or
a pharmacy.
Community centres refer to those
centres offering a wider range of
commodities (including clothing
and other goods) than neighbourhood
centres, which might also include
off-price retailers and a wider variety
or anchors.
Regional centres provide general
merchandise and services in full
depth and variety. Moreover, their
main point of attraction is given by
their anchors: traditional, mass
merchant, discount department stores
or fashion speciality stores.
Super-regional centres are relatively
similar to regional, but due to their
larger size, they have more anchors,
higher merchandise diversity and
they address a larger customer base.
Power centres refer to centres
dominated by a number of large
anchors, including discount and
off-price stores, warehouse clubs
and others. Such a centre typically
consists of several unconnected
anchors and only a minimum
amount of small speciality tenants.
The signifcant increase in total
shopping space development in
Europe after 2005 was almost
entirely driven by strong increases
in fast growing economies in CEE
and Turkey.
After reaching a peak in 2008, new
shopping space delivered in Europe fell
sharply in 2009 and 2010 on account
of the decline of retail space demand,
caused by a mix of reduced consumer
demand and a shortage of available
bank fnancing (mostly due to tighter
banking regulations in all countries.
Still, statistics show a more favourable
development for the coming years, with
new investments expected in CEE and
especially in Turkey.
Romania ranks 12th in Europe in terms
of expected growth of retail space, but
only 27
th
in terms of available shopping
centre space per 1,000 inhabitants, which
refects a still very low degree of modern
shopping centre space penetration.
Shopping Centre Development in
Romania and the European Context
Chart 7. New shopping centre space in Europe between 1990 and 2012 (million sqm)
+8%
2
0
0
7
8.1
2
0
0
6
8.0
2
0
0
5
6.1
2
0
0
4
4.2
2
0
0
3
5.1
2
0
0
2
4.0
Western Europe
CEE
and Turkey
2
0
1
2
e
5.7
2
0
1
1
e
6.8
2
0
1
0
5.4
2
0
0
9
7.5
2
0
0
8
9.5
2
0
0
1
3.8
2
0
0
0
4.3
1
9
9
9
3.9
1
9
9
8
3.5
1
9
9
7
2.7
1
9
9
6
2.6
1
9
9
5
3.4
1
9
9
4
2.7
1
9
9
3
3.1
1
9
9
2
2.3
1
9
9
1
2.3
1
9
9
0
2.5
-12%
Source: Crushman & Wakeeld, PwC analysis
Chart 8. Estimated European shopping centre pipeline 2011/2012 (million sqm)
Romania ranks 7th in Europe in terms of new shopping
centre space delivered in 2011/2012. Russia leads the
European countries with regard to the estimated shopping
centre development pipeline, showing slightly less than
double of the surface of the runner-up, Turkey which, in its
turn accounts for almost double of the second runner-up,
Italy. Russia and Turkey together represent almost 40%
of the pipeline, whereas Central and Eastern Europe is
estimated to sum up approx. 63% of new shopping centre
space in the 2011 - 2012 timeframe.
0.0
Switzerland
Estonia
Latvia
Finland
0.0
Bosnia Herz
Danemark 0.0
0.0
0.0
0.0
0.0
Belgium 0.0
Lithuania 0.1
Serbia 0.1
Grecee
Luxembourg
Spain 0.7
France 0.9
Italy 1.0
0.6 Poland
0.3 UK
0.3 Germany
0.3 Croatia
0.3
0.3
Russia
Portugal
3.1
Romania
0.2
0.3
Czech Rep.
Ukraine
0.3
0.3 Netherlands
Turkey 1.8
0.1
Norway 0.1
Ireland 0.1
Bulgaria 0.2
Sweden 0.2
Hungary 0.2
Austria 0.2
Slovenia 0.2
Slovakia
Source: Romanian Business Digest, Crushman & Wakeeld, PwC analysis and estimates
Chart 9. GLA allocation in selected CEE countries (% of national GLA)
Shopping centre GLA in CEE increased
by approximately 50% in the last three
years, reaching a total surface of
approximately 12 million sqm at the end
of 2010. Although impressive, growth
levels could have been even higher if the
global fnancial crisis had not limited
the developers expansion plans and
signifcantly pressured customer
purchasing power and confdence.
Poland has the highest GLA in CEE,
but the pipeline in other countries is
expected to change the allocation of the
GLA in this region. The GLA increased
rapidly in Romania, up to the second
largest GLA in the region, very close
to the Czech Republic. Although it is
diffcult to make a forecast, the GLA
in Romania is likely to grow faster than
in most of the other CEE countries.
Hungary
Czech Rep.
Poland
Romania
Slovakia
Bulgaria
2013f
100%
45%
13%
10%
18%
7%
7%
2010
100%
44%
16%
12%
16%
7%
5%
2007
100%
50%
18%
15%
9%
6%
2%
Source: PMR publications, Shopping Centres in Central Europe 2011
In most European countries, there is an
apparent correlation between economic
development and shopping centre space.
The population in countries with high
GDP per capita have a higher level of
discretionary income and a more diverse
spending structure, which results in a
more developed retail market than in
countries with lower GDP per capita.
The study shows that even at the current
GDP level, the GLA per capita is somewhat
lower in Romania than it should be; the
overall medium and long-term potential
is even bigger, because of the expected
gradual alignment of its GDP with peer
countries.
An important aspect for the development
of shopping centres is the level of rental
income, which varies between different
retail types, predominantly high street
locations and shopping centres.
The difference between the two types
can vary signifcantly from one country
to another, or even between cities.
While generally in Central and Eastern
Europe rental cost is higher in high-street
locations, shopping centre prime rent
levels in Bucharest are close to rent for
high prime street spaces. Two reasons
might have infuenced this development:
frst, the high demand for shopping
centres space in recent years and second,
the signifcantly lower quality of
available high-street space combined
with a very unattractive and customer
unfriendly high-street itself.
Chart 10. Correlation between GDP/capita and shopping centre GLA (sqm/1000 inhabitants, EUR/capita)
Chart 11. Main rental levels in selected CEE countries in Q3 2011 (EUR/sqm/month)
0
50
100
150
200
250
300
350
400
450
500
550
600
650
700
80.000 70.000 60.000 50.000 40.000 30.000 20.000 10.000 0
Ukraine
Bulgaria
Turkey
Russia
Romania
Belgium
GDP/capita (EUR)
Consolidating
markets
Mature markets
New & expanding markets
G
L
A

(
s
q
m
)
/
1
0
0
0

i
n
h
a
b
i
t
a
n
t
s
Spain
France
UK
Portugal
Finland
Denmark
Austria
Netherlands
Estonia Luxembourg Ireland
Sweden
Norway
EU-27 Average
Germany
Italy
Slovenia
Czech Rep.
Lithuania
Latvia
Malta
Hungary
Croatia
Greece
Poland
Slovakia
65
55
Romania
50
24
Bulgaria
65
170
Czech
Republic
35
92
Serbia
High Street Prime Rents
Shopping Centers Rents
85
Poland
78
100
Hungary
90
75
Croatia
32
Source: Eurostat, PwC analysis
Source: Cushman & Wakeeld, European Retail Report, November 2011
Evolution of Romanian Retail Stock
Chart 12. Evolution of the Romanian shopping centre GLA (thousand sqm)
2009
Added space (1000 sqm)
Total existing space (1000 sqm)
292
37 55
24
55 64
114
87
233
741
217
324
767
330
384
408
462
526
640
727
<1990 2011
1.701
2008 2007
1.918
2.243
2004 2000 1999
3.010
2010 2006
960
2003 2002 2005
Source: PwC analysis, Press releases
Since its transition from a
state-controlled economy
to a free market economy,
Romania developed into one
of the most active emerging
markets, attracting foreign
investors especially through
its dynamic retail segment.
The frst modern retail space was
opened in Bucharest in 1999 and
since then the pace of development
has been fast, reaching more than
1.7 million sqm in 2008.
Despite the slowdown of retail
caused by the economic crisis,
shopping centre GLA continued to
grow at an increasing annual rate,
reaching an estimated 3 million
sqm in 2011. Most of these new
openings started development and
secured fnancing before the crisis,
but the pipeline for 2012-2013
remains strong.
The largest share of modern retail space
in Romania is located in Bucharest. Such
an unbalanced geographical spread is
mainly caused by the gap in economic
development between Romanian regions.
Due to higher income levels and more
sophisticated customer behaviour, as
well as an important population,
Bucharest is currently the largest
market for modern retail.
Chart 13. Distribution of Romanian modern retail stock (% of GLA)
9%
8%
8%
6%
4%
South West
Center
South East
West
North West
North East
14%
South 53%
8%
Bucharest
92%
Rest of
Southern Region
Source: PwC analysis, Sonae Sierra estimates, Press release
Romanian shopping centres are
predominantly small sized. Large
and very large sized ones are located
in Bucharest and in a few other large
cities. Small size shopping centres
prevail in the rest of the country.
The relatively few very large sized
shopping centres sum up 27% of total
GLA, almost as much as the more
numerous small sized ones.
Neighbourhood and community
centres account for approximately
50% of the total GLA, having a
wider geographical spread than
regional and superregional centres.
However, the number of power
centres (16% of the national GLA
spread over all regions of the
country) rose in recent years.
Chart 15. Distribution of GLA per type of commercial centre (%)
23%
17%
16%
16%
Super-regional Centre
Regional Centre
Community Centre
Neighbourhood Centre
27%
Power Centre
Source: PwC analysis, Sonae Sierra estimates, Press releases
Chart 14. Distribution of GLA per type of commercial centre (sqm)
Small size
Medium size
Large size
Very large size
GLA per segment of commercial centre
100%
32%
21%
20%
27%
No. of commercial centres
by size segmentation (%)
100%
65%
18%
13%
4%
Source: PwC analysis, Sonae Sierra estimates, Press release
Neighbourhood and
community centres
represent approximately
50% of the total Gross
Lettable Area.
Chart 16. Regional breakdown of GLA to GDP ratio (sqm/1000 inhabitants, EUR/capita)
G
L
A

(
s
q
m
)
/
1
0
0
0

i
n
h
a
b
i
t
a
n
t
s
600
550
500
450
400
350
300
250
200
150
100
50
0
GDP/capita (EUR)
16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 0
VN
VS
VL
TL
TM
TR
SV
SB
SM
PH
OT
NT
MS
MH
MM
IF + B
IS
IL
HD
GL
DJ
CT
CJ
BZ
BV
BR
BT
BN
BH
BC
AG
AR
AB
Above average
Below average
Source: PwC analysis, Sonae Sierra estimates
On a regional level, counties with a higher
GDP per capita show higher retail space per
capita. Bucharest stands out with the highest
GDP (>15,000 EUR per capita) and the highest
GLA (560 sqm per capita). Quite remarkable,
since Timisoara, the second richest town in
Romania, has 60% of Bucharests GDP per
capita, but only 22% of Bucharests GLA per
capita. Arad is the runner-up in terms of GLA
per capita. Compared to Bucharest, Arads
characteristics are rather balanced and evince
approximately 45% of Bucharests GLA and
GDP level. There are some counties with very
few or no shopping centres, such as Calarasi,
Dambovita, Harghita and Salaj.
From a size perspective, very large size
commercial spaces are found almost
exclusively in Bucharest, while in all
other areas small size commercial
spaces are predominant. For example,
in the Central region of the country
small size spaces account for around
94% of the total GLA and in the South
West approximately 88%. Medium size
commercial spaces are more dispersed
geographically, but have the highest
proportion in Bucharest and the South
Eastern regions. Large size centres are
more common in Bucharest and the
Western area. The existing disparities
in the geographical distribution of
shopping centre space indicate that
some areas are underdeveloped, while
others show a high level of shopping
centre penetration.
An important condition for success for
future shopping centre projects will be
to identify and target those areas with
high or medium potential in terms of
revenues (i.e. high density and/or high
purchase power) but with low shopping
centre space. The detailed analysis
of the catchment areas will also call
for adaptations in terms of shopping
centre size, since small and medium
sizes are most likely to proliferate over
the next period. Large and very large
size shopping centres will remain
confned to Romanias largest cities.
Chart 17. Distribution of commercial space per region, by size (%)
0%
12%
17%
20%
35%
33%
20%
6%
12%
17%
10%
20%
8%
13%
20%
0%
20%
0%
Small size
Medium size
Large size
Very large size
West
60%
0%
South West
88%
0%
0%
South East
58%
Bucharest
25%
South
70%
0%
North West
67%
0%
North East
77%
0%
Center
94%
The distribution of the main shopping
centre types is more balanced.
Neighbourhood and community centres
are predominant in most regions, with
the exception of the Southern area,
where Bucharest with its superregional
and regional centres distorts the picture.
That is in no way surprising because
Bucharest has 4 times as many
inhabitants as the 2
nd
largest city
and thus, cries for superregional
attractiveness.
In recent years, power centres have
spread across all regions. Due to a
number of key developments in
Bucharest and in other cities, such as
Constanta, Pitesti and Braila, power
centres are currently slightly better
represented in the South East and South.
Up to 2008, the development of new
shopping centres in Romania was
increasingly seen as a favourable
business opportunity by both local and
foreign investors. Investment funds,
for example, showed massive interest
in pursuing new projects not just in
Bucharest, but also in other areas
of the country, with less coverage
in terms of shopping centre space.
From 2009 until 2011, there were
completed mainly those developments
that secured fnancing before the crisis
started. After the effects of the crisis
began to be felt in Romania, construction
works started for only a few new
shopping centre developments
(predominantly those developments
done by hypermarkets or based on a
forward purchase with a hypermarket).
It is the belief of the authors that the
crisis has had and will continue to have
a long-lasting infuence on the real
estate business. Due to the changes in
banking regulations, long term
investment loans will be limited to 50
to 60 % of the investment value, i.e.
the developer and investors will need to
contribute 40 to 50% of the investment
value by equity. Commercial real estate
faces a 400 to 700 bn fnancing gap,
mainly from bank deleveraging
1
.
This will have long term and signifcant
impact on the developers and tenants
strategies. Real estate investors will be
much more selective and will prefer high
quality projects in dominant locations,
which ensures the sustainability of
future income and value.
Chart 18. Distribution of commercial space per region, by type (%)
6%
15%
25%
29%
8%
20%
19%
12%
18%
33%
14%
20%
25%
31%
17%
14%
25%
29%
30%
25%
31%
50%
18%
25%
29%
20%
North West
8%
North East
12%
Center
25%
Community Center
Neighborhood Centre
West
10%
South West
29%
South East
8%
South
21%
Superregional Center
Regional Center
Power Center
1
Banks Deleveraging and Real Estate, Morgan Stanley Blue
Paper, 15th March 2012
The study of the 40 top-ranking
shopping centres shows that the
top 5 shopping centres account
for around 38% of total revenues
altogether, but only for 21% of
total GLA.
It is interesting to note that some shopping
centres show relatively low turnover while
having high revenues per sqm. That could
be explained by a variety of reasons, such
as the tenant mix or higher revenues from
secondary sources. On the other hand,
some high- ranking shopping centres have
relatively low revenues per sqm despite
high overall turnover.
Chart 19. Shopping Centres snapshot: turnover vs. GLA (mil. EUR, %)
Evaluation of Shopping
Centres and Definition
of Formulas for Success
GLA (000 sqm)
T
u
r
n
o
v
e
r

(
E
U
R

m
i
l
.
)
Top 5 centres
account for:
38% of revenue
21% of GLA
Next 15 centres
account for:
35% of revenue
35% of GLA
Bottom 25 centres
account for:
27% of revenue
44% of GLA
Revenues per GLA (EUR/sqm)
90
10
0
5
35
25
15
30
15 0 30
20
45 75 60
30
35
25
Top 5 centres by revenues per GLA
The top 40 shopping centres in terms
of turnover are mostly represented by
small or medium sized centres, with
a limited number of top performers
recording very high revenues.
Chart 20. Shopping Centres snapshot: size vs. revenue per sqm (EUR/sqm, GLA in sqm)
50
100
150
200
250
300
350
400
450
500
550
600
Small
size
Medium
size
Large
size
Very large
size
Best in
class
Above
average
Below
average
EUR/sqm
The shopping centre market in Romania
is still in an opening phase, far from
the mature markets, like the US or
Western Europe. Shopping centre
development has been driven by the lack
of or low penetration of modern retail
space and resulted in a fragmented
market. Competition levels have been
historically low, facilitating fnancial
success in most cases. Developers paid
little attention to quality criteria such as
assortment mix, parking space, design,
layout or overall customer friendly
environment. The perspective for high
and quick developer margins motivated
inexperienced investors with the
consequence that some centres perform
quite badly.
However, with the increase in competition,
the effects of the economic crisis and the
advent of more selective and demanding
customers, shopping centre operators
will fnd it increasingly hard to attract
revenues without focusing on the key
success drivers.
As described in our chapter Analysis
Methodology, for each shopping
centre in our sample we measured the
extent to which the identifed success
factors are addressed, by attributing
each of them a score from 1 to 5.
As shown in chart 21, there is a high
level of correlation between the overall
score obtained by a shopping centre
on the factors of our analysis and the
shopping centre success, measured
in revenues per square metre.
Chart 21. Impact of qualitative factors on shopping centre performance
0
50
100
150
200
250
300
350
400
450
500
550
600
650
1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
R
e
v
e
n
u
e
/
s
q
m
Average qualitative factors (average of all scores)
Signicant degree of correlation
Chart 23. Comparative results for best in class shopping malls vs. aggregate average (score)
Location
Acces
Completeness
assortment and tenant
mix
Catering & Leisure
Professionalism of the
centre management
1
2
3
4
5
6
Scale: 0 (low) 5 (high)
Best in class score
Average total score
Marketing and
online presence
Source: PwC analysis
Chart 22. Impact of key-success factors on shopping centre performance
Rank Factor Impact Remarks
1
Professionalism of management
Strongest correlation with overall performance
2 Assortment and tenant mix Critical impact on nal results
3 Access Relevant aspect for a shopping centres success
4 Location in the city Important differentiating factor
5 Catering & leisure Slight impact on shopping centres overall results
6 Internet presence Relatively low inuence on nal performance
In-depth analysis reveals the
hierarchy of key success factors
in terms of their infuence on
shopping centre performance.
Chart 23 presents a comparison between
the average of the 5 best-in-class shopping
centres (in terms of revenue) and the
average of the entire shopping centre
sample, from the perspective of each
individual success factor.
The analysis shows that the decisive
criteria in differentiating best in class
from the average pool of shopping
centres are the existence of professional
management, the completeness and
diversity of the tenant mix as well as
marketing and online presence.
Shopping centre
development has
mostly been driven
by the low penetration
of modern retail space
and resulted in a
fragmented market.
The average performance of the
reviewed shopping centres on each
key factor varies signifcantly in the
size segment. Small size centres
perform better at factors such as
access and location, while large and
very large ones offer better leisure
options as well as a more diverse
tenant mix.
These results should be viewed in the
light of location and access constraints.
Downtown shopping centres are
usually small, since space for large
buildings is usually not available in
downtown locations of Romanian
cities. Surface limits the diversity
of the tenant mix and in most cases,
such centres do not have a food court
or a cinema. However, they beneft
from a very convenient location and
easy reach by public transportation or
on foot, which ensures in turn higher
visitor rates. Locations further from
downtown show a high penetration
of work places, which justifes usually
high customer frequencies and
remarkable chance purchases.
Chart 24. Comparative results for shopping centres by size segments (score)
Small size
1
2
3
4
5
6
1
2
3
4
5
6
Medium size
1
2
3
4
5
6
1
2
3
4
5
6
Large size
1
2
3
4
5
6
1
2
3
4
5
6
Very large size
1
3
4
5
1
2
3
4
5
6
1 Location
Access 2
Completeness assortment
and tenant mix
3
Catering & Leisure 4
shopping centre management
5
6 Marketing and online presence
At the other end of the spectrum,
large and very large shopping centres
are usually positioned on the outskirts
of the cities, i.e. those centres are
usually accessed by car and less by
public transportation.
The tenant mix in these shopping
centres is nevertheless much broader
than in their smaller counterparts and
in most of the cases they have strong
anchors - hypermarkets, specialized
DIY stores or furniture retailers -
which turn them into regional and
super-regional centres, or even power
centres, attracting shoppers from the
adjacent regions as well.
Community centres have a similar
score profle to super-regional shopping
centres, while neighbourhood centres
resemble regional centres.
Super-regional centres usually suffer
from a poor online presence. Power
centres also have a relatively uniform
score profle, although with lower
average scores than other categories,
and substantially lower scores on
location and access, which is plausible,
as their size usually requires locations
far away from the city centre.
In the past, most shopping centres
were designed as regional centres,
serving a wide area, as they had little
or no competition. However, the fast
development of shopping centres
resulted in a much more competitive
environment. Both existing and
planned shopping centres need
permanently to adapt to specifc local
aspects, mainly the customers
purchase profle and behaviour.
The customers profle defnes a
sustainable tenant mix and the level of
entertainment. For existing shopping
centres refurbishment, GLA downsizing
or upgrading options should be
investigated seriously once the centre
performance goes down.
Chart 25. Comparative results for shopping centres by types (score)
1 Location
Access 2
Completeness assortment
and tenant mix
3
shopping centre management
5
Catering & Leisure 4
6 Marketing and online presence
Power centre
1
2
3 5
6
4
Super-regional centre
4
1
2
3
4
5
6
Regional centre
1
2
3 5
6
4
Neighbourhood centre
1
2
3 5
6
4
Community centre
1
2
3 5
6
4
Professionalism of the shopping
centre management appears to
be closely connected to the success
of the centre, both directly and by
infuencing other relevant factors.
In many cases, shopping centre
management teams are focused on
ensuring that maximum space is rented
out, occupancy rates remain high and
operational tasks are fulflled. That is a
convenient and inexpensive approach
and the low degree of competition in
the Romanian shopping centre market
has placed until now little importance
on other, more complex functions of
the shopping centre management.
However, as the number of shopping
centres increases and customers
become more educated and demanding,
shopping centre management will need
to become more proactive in order to
ensure continued success. On top of
the everyday tasks, a professional
management team supervises and
proactively manages the performance
of its clients, i.e. tenants as well
as customers.
In order to do so, customer background,
purchase power and purchase behaviour
need regular examinations (visitor rates
as function of time, amongst others),
a tenants assortment of goods and
performance (the turnover, amongst
others) in comparison to the others need
permanent and steady monitoring,
which consequently implies that the
targets for marketing and/or tenant mix,
shopping centre size and attractiveness
must be pro-actively managed, and
aspects that need improvement have to
be identifed. Additionally, a professional
management team with an international
background can have a better negotiating
position with retailers and be able to
achieve synergies in marketing and staff
employment.
Furthermore, a professional management
team fnds and implements effective
additional sources of income that
complement the centres typology
and offer. Throughout this process,
the management team fne-tunes the
effciency level of its operation combined
with Mall Income solutions that can add
economic beneft to the asset.
In this light, a signifcant trend in the
Romanian shopping centre landscape
could be the shift from shopping centre
administration towards a category of
professional managers who can bring
valuable contributions in terms of
rental contract design, tenant mix
and the creation of a strong
shopping-centre identity.
Professionalism of Management
The assortment and tenant mix
of a shopping centre are essential
to ensuring long-term success
and are compulsory to defne
the personality of the shopping
centre that should be well linked
to its targeted catchment area.
Specialist literature defnes the tenant mix
as a variety of stores that work together
to enhance the centres performance and
operate successfully as individual
businesses.
2
As shown by our study, this
factor has the second strongest infuence
on the overall performance. Shopping
centres recording high revenues per sqm
also tend to have a large and more diverse
mix of tenants. That refects evolving
customer tastes and preferences, mirrors
the existing household consumption
structure (see Chart 4) and pinpoints an
area of high relevance for the future of
shopping centres in Romania.
Well performing shopping centres need
to pay increased attention to their tenant
mix as a main lever for improving
proftability by providing the optimum
services to the community in which they
are located. Tenant mix design thus
ideally mirrors the range of products,
services, catering and entertainment
that appeals to the population in the
catchment area of the shopping centre
and gives the answer to all aspects of the
customer demographics, preferences,
lifestyles and income. Ultimately, the
tenant mix defnes which customers will
visit the shopping centre, but besides
providing appeal, the selected tenant
mix has to offer products affordable for
its target customer base.
Each Shopping Centre has its own
catchment area with a specifc purchase
power. In case the GLA in one category
is oversized, retailers belonging to that
specifc category tend to cannibalize
each other. On the other hand, in case
the GLA for a category is undersized,
visitors tend to shift to other retail areas
outside the shopping centres. Thus, the
effective allocation of the tenant mix is
indirectly linked to the tasks of the
management team.
As competition tightens, the tenant mix
will become a tool in the hands of the
Romanian shopping centre managers
enabling them to create a specifc image
and to differentiate from other shopping
centres nearby.
The experience of more developed
markets shows that anchors play the
most important role in the positioning
of a shopping centre, and these are
usually large retailers operating at
national or even international level.
However, smaller, local independent
traders that target local niches and have
an offer adapted to specifc tastes can
also shape differentiation.
However, in adopting such a strategy,
shopping centre managers must take
into account the ability of such smaller
retailers to pay the usually higher rents
associated to prime shopping centre
space. That may in turn involve
tailoring rent agreements to specifc
tenants, in order to ensure a diverse mix
of merchandise. Ideally, a customer
fnds everything he needs in a right
tenant mix.
Similarly, targeting previously
undeveloped areas in Romania will be
conditioned not only by adaptation with
regard of shopping centre size but also
by striking the optimum tenant mix,
adapted to the local customer habits and
purchasing power. Another trend will
be related to the development of niche/
specialized shopping centres, which
have a strong focus on selected
customer profles.
Assortment and Tenant-mix
2
Greenspan J, Solving the tenant mix puzzle in your
shopping centre, Journal of Property Management, 1987
Small size shopping
centres fare better in
terms of ease of access of
customers and location.
The location in the city and the
access to the shopping centre can
differentiate between a successful
and a less successful shopping
centre.
As expected, a critical factor for the
shopping centre performance is the ease
of access to the shopping centres, by
either car, public transportation or on
foot, which in turn is closely connected
to the shopping centres location.
The two are not synonymous and yet a
less attractive location (further from the
city centre) can still be easily accessible
(proximity to a subway station, near a
large residential area). A shopping
centre scoring well on these two factors
performs better and an easy access
attracts customers with the logical
consequence of increased revenues.
As already mentioned, our study shows
that small size shopping centres fare
better in this respect than large or very
large schemes, which are in most cases
located on the boundary or outside the
city. Presumably, a disadvantage in
location overlaps substantially with
the infuence of existing or non-existing
competition. Lack of competition allows
suboptimal located shopping centres
to perform satisfactory. The same
infuence can be attributed to the
exclusive presence of some very few
but extremely appealing retailers.
The access and location of a shopping
centre is infuenced signifcantly by
whether suffcient parking space in a
user-friendly quality exists. In crowded
areas, such as Bucharest, the absence
or insuffcient provision of parking space
is a very signifcant factor that can deter
customers from visiting the shopping
centre. This infuence will become more
dominant with increasing competition.
Since it is usually very diffcult to improve
or enlarge existing parking facilities, the
number of lots and quality of parking are
essential design challenges.
Generally, large centres tend to sell
for the weekly demand, meaning that
customers buy large quantities in order
to satisfy a weekly demand. In such a
case, accessibility by car becomes more
important than public transport or
pedestrian access.
Finally, as the market matures,
positioning differentiation among
Romanian shopping centres will surge
and their targeted individual offer will
be shaped for a stronger dominance in
their catchment areas. In-town location
will position for upscale customer and
edge-of-town / out-of-town locations for
mainstream and quantity sales driven
shopping centres.
Access and Location in the City
The centre marketing approach
and its online presence can
contribute to better positioning
and proftability.
As shown in chart 26, there is a
signifcant correlation between the
marketing of a shopping centre and its
fnancial performance. It is a relationship
expected to play a growing role in an
increasingly competitive landscape. Even
if marketing activities are not proftable
in themselves, they increase the publicity
of a centre and inform the customer about
offers, new tenants, unique activities,
etc., thus they generate additional traffc
and increase the sales of shopping centre
tenants. It is the belief of the authors that
a good marketing strategy supports the
performance of a shopping centre.
Currently there is a signifcant gap in
terms of online presence between
best-in-class shopping centres and the
average shopping centres subject to our
study. For many Romanian shopping
centres, a complex website is not deemed
necessary at this moment, as competition
remains low and customers are likely to
visit the shopping centre regardless of its
online presence. However, well
performing shopping centres have
websites providing information on their
location, opening hours, parking spaces
as well as a list of retailers.
The World Wide Web has signifcantly
changed our day-to-day life in the last 10
years and it will change retail in the next
years. Internet retail gained a remarkable
market share in the past and will
undoubtedly continue to thrive. It is quite
diffcult to predict how this development
will change the face of shopping centres,
but some tendencies have become
apparent. For example, some shops might
witness a shift in their main purpose,
from a direct sales function to showrooms
and consultation and exhibition hubs.
Nevertheless, the existence of shopping
centres is not endangered by the internet;
there will always be a demand for going
shopping. The bigger shopping centre
owners are currently developing web
applications that promote and support the
attractiveness of the shopping centre in
cooperation with the larger tenants.
It can be argued that marketing is an
important tool in shopping centre
differentiation, especially in more
competitive areas, such as Bucharest and
other larger cities. Its importance has
grown over the recent period and will
most likely evolve further, with the
increase of competition. Furthermore,
the existence of a well-designed website
enhances visibility of a shopping centre
and can contribute directly to the number
of visitors, by offering detailed
information about the opening hours,
offer and facilities, promotions or themed
events organized by the management.
Marketing and online presence
As expected, large and very large
schemes perform better than small
scheme shopping centres in respect
of catering and leisure. However, we
believe that this criterion should be
at the forefront of shopping centre
management concerns related to their
tenant mix.
Indeed, it can be argued that ever since
the development of the frst mall in the
1950s, entertainment has always been a
consistent part of it and today all
shopping centres strive to include
leisure and/or food amenities in their
mix. This is mostly due to the evolving
social function of the shopping mall,
from a functional destination to a
lifestyle centre, a space of
socialisation and entertainment.
Empirical studies have shown that the
presence of entertainment is closely
linked to the proftability of a shopping
centre and can improve other tenants
activities as well.
Such infuences can be proven; the
absence or existence of a cinema causes
a turnover variation in the food court,
of up to 20%, particularly in the
evening. Regardless of the motivation,
entertainment brings people to the mall
and thus increases proftability. Even
more, some people regard shopping
centres as a diversion from normal
day-to-day activities and are likely to
be attracted not only by entertainment
facilities, such as cinemas, bowling,
restaurants, ftness and spa centres,
event and show areas etc. but also by
the architecture, the interior design,
events, exhibitions and the atmosphere
in general.
Given the fact that entertainment
opportunities are currently quite limited
in most cities in Romania and are usually
represented by cinemas, the positioning
of the shopping centre as the local
entertainment hub is increasing in
importance and can represent a very
effcient strategy to attract customers.
Some of the most successful Romanian
shopping centres seek to provide
additional leisure opportunities
besides the traditional cinema, such
as ice-skating, gaming or bowling areas,
children playgrounds, etc. Having a
well-developed food court adds to the
overall shopping experience and
increases the time spent by customers
in the mall, the amount they spend
and their willingness to return.
The relevance of entertainment and
catering amenities will grow in the
future. The Romanian shopping centre
market is still in an early stage, and the
development of complex value creating
catering and leisure components has
been hindered so far by low income and
relatively less sophisticated customer
expectations. However, in the light of
future economic growth, customers
will begin to seek in a shopping centre
some value beyond the availability of
products and goods and will choose
shopping centres in relation to such
aspects. Therefore, one of the main
areas of relevance for shopping centre
managers is to shift their focus from
providing retail space to offering a
complete experience targeting all areas
of the customers lifestyle, including
cinemas, restaurants, cafes, children
playgrounds or exhibition and themed
areas. In terms of offer, the distinction
from competition is that unique factor
that will shape the customers choice.
This singularity among shopping
centres is particularly important in
Bucharest, where most customers tend
to perceive some locations more prone
to entertainment, meaning that
shopping centres in such areas are
expected to focus more on leisure
activities than others.
Catering and Leisure
One of the main areas of relevance for shopping centre
managers is to shift their focus from providing retail
space to offering a complete experience targeted at
the customer, including cinemas, restaurants, cafes,
childrens playgrounds or exhibition and themed areas.
Although still a moderate infuence factor, the presence of entertainment in shopping centres is bound to gain
more importance in the future, due to the expected increase in customer purchase power and a shift in the social
value of the mall. Furthermore, lack of extra activities and leisure within the cities, allows Shopping Centres to
perform a social function, to be at the same time a meeting point, cultural destination, entertainment area,
unique food concepts location; all within a set offer that grouped in this way, cannot be found anywhere else.
Conclusions regarding
key success factors for
shopping centres
With increased competition,
character and identity will become
a central consideration in retail
developments, encouraging a
move away from homogenized
environments and clone towns.
Shopping centres features will evolve to
become increasingly complex, focusing on
specialization and customized services,
with the shopping centres management
having to drive this change.
Furthermore, the experience of more
developed markets shows that after a
time, shopping centres should focus on
revitalisation in order to ensure their
continued success and to adapt to
customer behaviour. Such a trend will
become relevant for Romania over the
next decade. In fact, the frst capital
revamp of a Romanian shopping centre
is expected to start in the near future,
with plans for a complete redesign of
the centres architecture, layout,
atmosphere and functional aspects.
Evolving customer demands and the
tendency towards convenience and
shopping experience will bring to light
previously neglected key features, such
as extensive and user friendly parking
space, quality of public spaces, shopping
centre layout and ease of in-centre
navigation. This is particularly important
in Bucharest and in the largest cities
where competitiveness is expected to
increase with the number of shopping
centres while the customer basis is not
expected to change. This is expected to
infuence both the future development
of shopping centres and the pending
renovation of existing ones.
Moreover, key success factors such as
location, access and leisure will continue
to represent important growth drivers for
shopping centres, but tight competition
and changes in customers demand are
expected to increase in the importance
of professional management, tenant mix
and marketing activities, which are
crucial to attract customers and
differentiate among shopping centres.
The Romanian shopping centre market
dynamics has accelerated over the past
few years, a trend that will continue in
the next years. In a world where the
shopping centre represents no longer a
means to satisfy functional necessities
but constitutes a social environment of
its own, shopping centre owners and
managers must ask themselves whether
they are well positioned for success and
capturing future growth.
This study provides them with the means
to identify the main factors that exert an
infuence on shopping centre performance
and to assess the gaps between their
current and desired positions.
A diverse assortment
of tenants provides an
optimum mix for the
targeted demographics
and it is crucial to create
the centres brand and
to differentiate from its
competition in the area.
An effcient focus on
accessibility can
lead to steady visitor
fows, creating higher
revenues. This could
is a key advantage in the
competitive landscape of
large cities, particularly
in Bucharest.
The location of a
shopping centre
creates advantages
in an increasingly
competitive area by
leveraging details such
as position in the city
or by leveraging cultural
or historical aspects of
the centres surroundings.
Entertainment, catering
and leisure options
in Romania are relatively
limited and are expected
to represent important
growth drivers, as
shopping centres will
evolve from functional
areas to lifestyle centres.
With the increase
of competition, a
shopping centres
marketing activities,
including its online
presence can be effective
differentiation tools,
particularly in developed
cities such as Bucharest.
Professionalism
of management
underlines all other
factors and is expected
to represent a critical
success factor in coming
years as competition
increases and customers
become more demanding.
Source: PwC analysis and estimates
Contacts
Ingo Nissen
Managing Director
Sonae Sierra Romania
i.nissen@sonaesierra.com
Bogdan Belciu
Partner, Consulting Services
PwC Romania
bogdan.belciu@ro.pwc.com
2012 PwC. All rights reserved. Not for further distribution without the permission of PwC. PwC refers to the network of member rms of PricewaterhouseCoopers
International Limited (PwCIL), or, as the context requires, individual member rms of the PwC network. Each member rm is a separate legal entity and does not act as
agent of PwCIL or any other member rm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its
member rms nor can it control the exercise of their professional judgment or bind them in any way. No member rm is responsible or liable for the acts or omissions of
any other member rm nor can it control the exercise of another member rms professional judgment or bind another member rm or PwCIL in any way.
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