For this year, we are expecting the completion of six retail parks with a total area of 18,000 sq m. This is one half less than the amount developed last year. The primary reasons include difficulties in obtaining the required permits and the diminishing supply of suitable locations. Last year, 14 new retail parks were completed with a total area of 40,000 sq m. The aggregate area of retail parks in the Czech Republic is set to be 775,000 sq m at the end of 2016. Out of that space, 8.3% is currently vacant.
“With almost 800,000 sq m of space in retail parks, the Czech Republic ranks second after Poland in the Central Europe. The ratio is 78 sq m per thousand Czech inhabitants, making it the second densest coverage in the Central Europe after Slovakia,” says Jiří Kristek, Head of the Retail Warehouse Team in the Czech Republic and Slovakia at Cushman & Wakefield.
“In the pan-European context, the most developed market is in Germany with 104 sq m per thousand inhabitants. The total space available is 8,500,000 sq m. The biggest retail park completed this year is in Havířov and will open by the beginning of November,” Mr Kristek adds.
RETAIL PARKS OPENING 2016
Source: Cushman & Wakefield, September 2016
Substantial amount of the Czech retail park market is in the hands of international investors. Almost a half of the local market is shared between four companies. Of these, the biggest portions are owned by Saller (15%) and Intercora (14%) from Germany, followed by the Czech developer and investor CPI (10%) and the Austrian-based Immofinanz (8%).
“The demand for retail park acquisitions in the Czech Republic is rising among both local and international investors. The current owners are not eager to sell, however, as retail parks represent an attractive part of property portfolios,” Jiri Kristek says. “Aside from funds, local firms also invest in retail parks. Investors such as these are often motivated for the purchase by a sense of responsibility towards the region and the detailed knowledge of the location. Retail parks fundamentally influence the character of their respective environment,” Mr Kristek adds.
The Severka Liberec and Campus Brno retail parks were sold this year. Other transactions are currently in the discussion phase. The popularity of retail parks among investors stems from several factors. Their prices start in the order of tens of millions of crowns, making them accessible to smaller investors. Retail parks generate stable income for their owners, and their layout is highly flexible so when an occupier leaves it is relatively simple to change the purpose. In addition, managing a retail park is less demanding for the owner than managing an office building or a business centre.
Retail parks retain their popularity despite an apparent decrease in the yield from their sales compared with the preceding years. Whereas the profit on parks outside Prague ranged round 8.5% last year, it is usually about 8% of the total price this year. For premium parks and parks in Prague, this can get as low as 7%. Even so, this is more than the usual yield from office properties.
A retail park is defined as a property involving three or more retail outlets in one building with direct accesses from a shared car park. The total area not including grocery stores and large format DIY and furniture stores is approximately 1,000 sq m or more n. It always includes a car park shared by all operators in the park. Retail parks are usually built by one developer in a targeted manner and with a unified look.
Furniture shops and DIY stores (carrying goods for do-it-yourself projects and house and garden equipment) represent specific categories. We examine this segment separately because their floor area is much greater in comparison with the other outlets included in retail parks.
DIY stores in the Czech Republic take approximately 850,000 sq m and furniture shops about 580,000 sq m. Mountfield owns almost one half of a total of 134 DIY stores in the Czech Republic.
“We are currently operating 57 shops on the Czech market and preparing a few more for opening in the years to come,” says Bc. Luděk Lhota, Sales Department Director at Mountfield; the company has been operating on the Czech market since 1991. “While expanding our network, we are also moving some of our stores to modern and larger units. We want to be close to our customers, so we opt for relatively dense coverage with smaller stores. The average size of our shop is about 1,200 sq m,” Mr Lhota adds.
By contrast, brands such as Bauhaus and Hornbach choose a strategy of having fewer stores with a greater sales area. The average area of such shops is around 17,000 sq m. OBI chooses the happy medium with 33 establishments in the Czech Republic. Their aggregate area is 300,000 sq m, which is the highest figure for all DIY brands in the country.
There are 158 furniture shops in the Czech Republic. IKEA is the biggest player with four stores taking up an aggregate of approximately 100,000 sq m. Among the Czech-based chains, Jamall is the leader with total area about 50,000 sq m (25 stores). Denmark-based Jysk has by far the highest number of establishments, operating 70 stores with a sales area of 1,000 sq m each.
“E-commerce is beginning to assert itself more strongly in the furniture and DIY sectors. Operators have been responding to this trend slowly yet steadily. Most of them have online sales channels or are at least considering launching them. In addition, we also see furniture retailers operating e-shops exclusively. Examples include MT nabytek and Bonami,” Mr Kristek concludes.