Retail

1.

The supply of modern shopping centres in Tbilisi has been growing over the years. In 2019, Tbilisi saw a massive 32 K sq m absorption of retail spaces, along with an increased supply.

NET TAKE-UP BY YEARS (sq m)
2018
2019
Source: Colliers
SHOPPING CENTRE SUPPLY BY YEARS (sq m)
Existing Supply
Future Supply
Source: Colliers
2.

As of 2019, the weighted average rent in shopping centres had modestly decreased by 1.5% compared to the previous year, amounting to USD 19.0 per sq m. Increased competition by the expansion of City Mall Saburtalo was the main reason for the decline.

WEIGHTED AVERAGE RENT (USD, sq m, net of VAT) & VACANCY RATE (%)
3.

Prolonged rehabilitation works on Chavchavadze Avenue have led to a significant increase in the vacancy rate. The overall vacancy rate on Tbilisi’s high streets increased from 6% in 2018 to 8% in 2019.

VACANCY RATES ON HIGH STREETS BY YEARS
Pekini
Rustaveli
Aghmashenebeli
Chavchavadze
Source: Colliers
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Consumption spending per capita in GEL has been growing over the years; however, as the currency depreciates, the opposite picture is observable in terms of US dollar. There is a similar pattern between the weighted average rents and consumer spending in USD, as it is the main currency in the real estate market. A downward trend is expected to prolong in 2020, as spending is not forecasted to increase in USD. As a result, turnover is not expected to increase, and tenants might find it difficult to pay rent.
Currently, Fashion holds the largest portion in the tenant category mix, while the supply of F&B and Entertainment is very low compared to CEE countries. Despite the entrance of City Mall Saburtalo on the market, and increased supply, the distribution of tenant categories has not significantly changed, especially regarding F&B and Entertainment.
Upcoming shopping centres in Batumi will triple the stock per 1,000 inhabitants. Two major players (Orbi and Alliance Group) are planning to enter the market in the next 2 to 4 years, so we expect that the competition will flourish between them. Therefore, existing shopping malls might need to change their concept and become more specialized.
The adverse effect of Covid-19 on the tourist market is also observable in the Kutaisi shopping centre market. Like in Tbilisi, the Fashion and Entertainment categories, holding 61% of the leased area, are most exposed to risk.