Shopping centers in the Czech Republic have been successful again, but e-commerce is gaining ground. The highest growth at shopping centers was in gastronomy, while electronics saw a drop, according to the CBRE Shopping Center Index study, compiled for the seventh year by the retail service firm CBRE.
The study looks at the Czech shopping centers outside of Prague, which represent over 560,000 sqm of retail areas and were visited by 95 million customers in the last year.
Another study by JP Morgan Chase and Co shows that e-commerce is on the rise, and the Czech Republic is expected to be a leader in growth. “E-commerce growth as a whole across the European region remains strong. It is slowing slightly in more mature markets. …However, a number of smaller markets present compelling opportunities,” JP Morgan’s 2019 Global Payments Trends Report – European Overview stated.
“Of the 18 European countries we examined, 10 are projected to enjoy double-digit e-commerce market expansion between now and 2021, with the Czech Republic (16 percent), Italy (14 percent) and Spain (13.5 percent) ranking highest for predicted growth,” JP Morgan Chase added.
But CBRE says that there is room for growth in both shopping platforms. Although the number of visitors to the centers grew minimally, 2.5 percent on average in 2018, the average basket has grown consistently every year for the entire existence of the index. “Over the past seven years, it grew by an incredible third and it is mainly due to strong turnover recorded over the past five years,” Tomáš Míček, head of retail property management at CBRE, said.
“This trend is significant in the context of the long-term growth of online shopping. It can be seen that despite strong online growth, the Czech Republic has the second-highest online share in Europe, Czechs still like to shop in shopping centers, and shopping centers are not weakened as a platform for selling goods and services. On the contrary, both platforms grow,” Míček said.
Turnover in Czech regional shopping centers grew for the fifth consecutive year, according to CBRE. Compared with the previous year, turnover grew 4.2 percent. Rents grew only minimally and the vacancy rate is stable. The “rent-to-sales ratio” reached a historical minimum and the average basket achieved its historical maximum. This once again proves that Czech retail is doing well, CBRE states.
The highest growth of turnover was in the area of gastronomy, up 9.5 percent, and services, up 7.9 percent and specialty retail, up 7.9 percent, while electronics dropped by 5.1 percent
Since 2014, there has been an upward trend in turnover, which achieved record values over the last five years and showed total revenue grew of 35 percent over this period. The growth slowed to 4.2 percent last year. This is still a very good result from the perspective of the Czech market, according to CBRE.
“The fashion segment also significantly participated in the overall growth, although it grew only by 3.8 percent. With its share of 38 percent to the overall gallery area, it is the largest sector and therefore the most affected,” Milan Mašša, head of CBRE’s retail advisory and transaction services, said, adding that the performance of anchor tenants in the fashion, sports and toy sectors is still growing .
Gastronomy is the most dynamic sector, which registered the biggest growth since 2015. “The average turnover in the gastronomy sector grew by 9.5 percent year-on-year in the year 2018 and in the last three years, it grew by more than 40 percent. The services sector registered exceptional results thanks to hairdresser’s and beauty salons and travel agencies, which reported the highest year-on-year growth within the individual services, i.e. 20.2 percent,” Klára Bejblová, associate director retail research and consulting at CBRE, said.
Rents have been stable. It could be expected that four years of strong turnover growth will show up in the growth of average rent, but this did not happen. In 2017, the average rent grew for the first time by almost 5 percent, but 2018 did not repeat this growth. The average rent grew by only 1 percent.
“However, when we look at the individual sectors, there is an interesting consistent trend of rent growth for the four sectors over the past three years. In 2018, the biggest growth was recorded in the household equipment and furniture sector, by almost 12 percent, also in the gastronomy segment (7.1 percent), and further across all partial sectors in the given segment, special food (3.6 percent) and services (2.3 percent). As far as the size of the store is concerned, rent grew in all sizes up to 1,000 sq.m. Despite the continuous turnover growth of anchor tenants, over 1,000 sqm., over the past three years, the rent in this size category dropped by 6.2 percent year-on-year,” CBRE’s Mašša said.