EXECUTIVE SUMMARY – MARKET SNAPSHOT
During the last 18-24 months, the main domestic retail markets kept on being influenced by the weak economic recovery and the lack of consumer’s liquidity. This was more evident in secondary markets and locations. The inadequate economic growth was combined with the additional income tax obligations, pension cuts and insurance contributions, which continued to hamper households purchasing power and thus consumer spending. In 2017, however, with the first solid signs of economic recovery, the retail letting and related property investment market, in which predominant demand was for prime retail space, witnessed some encouraging increasing activity, which has remained in the first quarter of 2018.
At the same time, the growth in commercial transactions via internet (e-commerce), continued to bring about alterations in consuming behavior and it is gradually leading to a transformation in the supply chain. This has intensified the reduced demand for large-scale retail spaces and augment the need of retail businesses operating only in physical stores to invest in e-commerce (bricks vs clicks) and therefore occupy space in smaller and more flexible inner-city logistic hubs.
Rapidly changing shopping habits have also led to changes in the strategy of national and international well-known brands mainly operating large out-of-town outlets. They have now been targeting smaller inner-city stores, not only in Athens but also in other core and peripheral cities. A typical example is Leroy Merlin, which recently launched its new 6,000m2 store in the center of Athens. The Swedish Company IKEA has also announced that it is changing its strategic development plans in out-of-town big box retail units, as their online store purchases are growing.
On the other hand, the growing associated revenues from tourism, as recorded in the past years, are helping the retail market, in particular the turnover of shops located at the historic center of Athens. This has led to renewed and increased demand from existing and new retail brands and domestic F&B operators for spaces in these areas, especially around Acropolis and in Plaka, close to major central hotels or Monastiraki Square.
Finally, the general need for improved operating efficiencies has started to drive demand for commercial premises of contemporary specifications and better standards. This space demand has come mainly by international retail chains adopting more environmentally friendly specifications. This shift, combined with the offer of additional promotional services via the embracing of new technologies, is creating also a demand for retail spaces into more organized, higher standards properties.
In summary, we believe that in the foreseeable future the steady and solid economic recovery will remain the key determinant of strengthening consumer spending and it will continue in conjunction with other key market determinants to drive the development of the domestic retail property and shopping centers market. Other determinants are notably:
- The active management and disposal of nonperforming loans (NPLs) will lead to the disposal of collateralized commercial property portfolios, including retail stores and shopping centers.
- The growth in commercial transactions via internet (e-commerce) will continue to bring about alterations in the local consumers behavior and it is gradually leading to the transformation of the supply chain
- The growing trend, throughout Europe and worldwide, for improved operating costs and increase in productivity and resource efficiency expected to lead to further demand for commercial premises of contemporary specifications and standards