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Retail market overview | 2020

Like other real estate sectors in Tbilisi, modern shopping centres also struggled with the outcomes caused by the pandemic. In total, approximately 5 months the shopping centres were shut down. Generally, during strict lockdown majority of landlords proposed rental holiday.

According to our estimations and consulting with the stakeholders the retail turnover diminished by a third for the entire year.

Around 9K sq m was released in H2 2020. Thus, according to the preliminary data net take-up remains positive with c.6K sqm.

As of 2020, some performance indicators remained stable, some reduced slightly. It is expected that significant changes in modern shopping centres will occur in 2021, in terms of relocation, rent reduction or other agreement conditions.

1.

Updated: Apr 27, 2021

In 2020, the weighted average (WA) rental rate insignificantly reduced in modern shopping centres. The rate decreased by 3%, equalling to USD 18.3 per sqm (excl. VAT).

Weighted Average Rent in Modern Shopping Centres (USD, sq m, net of VAT), 2019-2020

2.

Updated: Apr 27, 2021

Despite WA rent, the vacancy rate saw an insignificant, however positive change. Since 2019, the figure improved by 1 percentage point and stands at 9%.

The decreased vacancy rate can be attributed to positive area absorption in City Mall Saburtalo, Gldani Mall and City Mall Gldani. The vacant areas increased in Tbilisi Mall, Merani Shopping Gallery and HomeMart.

Vacancy Rate in Modern Shopping Centres (%), 2019-2020

3.

Updated: Apr 27, 2021

The insignificant changes occurred in tenant category mix of modern shopping centres. The share of fashion and electronics saw a 1 percentage point growth each since 2019. In total area additionally absorbed by these categories amounts to 4K sq m.

Tenant Mix in Modern Shopping Centres (Area share, %) 2019-2020
Fashion
Hypermarket
Household
Entertainment
Electronics
Footwear
Food & Beverage
General
Accessories
Other

4.

Updated: February 14, 2021

In 2020, the weighted average (WA) rental rates reduced on main high streets. The WA rent on Pekini Street decreased by 9% and stands at USD 32.6 per sq m, while on Aghmashenebeli and Chavchavadze avenues declined by 5% and 3%, amounting to USD 24.4 and USD 29 per sq m, respectively.

The weighted average rent on Rustaveli Avenue increased by 6%.

Weighted Average Rent on High Streets (USD, sq m, net of VAT), 2019-2020
2019
2020

5.

Updated: February 14, 2021

The vacancy rate significantly increased on high streets.

The vacancy rate on Aghmashenebeli Avenue increased from 10% to 16%. At the end of 2019, the figure stood at 5% on Rustaveli avenue, increasing up to 13% as of 2020. Pekini street also saw a growth, from 7% to 9%.

Insignificant change has been recorded on Chavchavadze Avenue.

Vacancy Rate on High Streets (%), 2019-2020
2019
2020

6.

Updated: February 14, 2021

The weighted average rent of new contracts signed during the pandemic is 36% lower than the weighted average rent in 2019. The figure experienced a dramatic 50% fall on Aghmashenebeli avenue, from USD 25.8 per sq m to USD 12.8 per sq m. A prominent 40% decline was observed on Rustaveli Avenue, standing at USD 19.6 per sq m. Pekini street saw a massive 38% decline, while the WAR has decreased only by 3% on Chavchavadze Avenue.

The weighted average rent of new/renewal contracts in 2020 (Apr-Dec) vs. the weighted average rent in 2019
2019
2020

7.

Updated: February 14, 2021

In 2020, 169 tenants exited from Tbilisi high streets, with the total area of 11,385 sq m. 57% of this space (6,532 sq m) was located on Chavchavadze and Aghmashenebeli avenues. Dunkin’ Donuts, Finca Bank, Ovs Kids, Parfois, Flo are among tenants who closed a branch on high streets in Tbilisi. It is noteworthy, that not all of them were closed due to the pandemic.

The number of units and the total area of tenants exiting Tbilisi high streets in 2020 (unit, sqm)
Area
Units

Expectations and opportunities

Development of online shopping in the short and mid-term will help retailers to reduce losses, and investing in this direction may be justified. However, the development of e-commerce services in Georgia remains a challenge.
It is likely that the current business model will change, and the concept of fixed payment will partially and temporarily disappear. In order to keep tenants, landlords should work towards establishing more flexible lease terms and fixing rental rates to turnover.