Displaying “This space for rent” signs in their windows, the stores offering tens or hundreds of square meters of floor space are waiting for giants like Zara, H&M and Mango to come, which have yet to muster the courage to try street front retail.
Each western capital has its main street. What is that not working in Bucharest?
Eugen Paturan, holder of the Bata footwear franchise in Romania, said the country will not have a strong main retail in the next decade, either, because shopping centers are extremely attractive and the number of customers of street front retailers is low.
“You’d need a high price per item to be able to cope or else you cannot stay in business if only four people walk into your store any given day and only two of them buy something,” Paturan said.
The boulevard between Piata Unirii and Piata Romana is bordered by tens of stores and connects three of the most important squares in the city (the third square is Piata Universitatii between the two) right in the center of Bucharest.
Although apparently it has everything it needs to compete with famous main streets in other European capitals, the empty stores waiting for tenants tell a different story.
“It’s a chicken or the egg-type situation. Retailers want to see high pedestrian traffic to pick this area for their flagship stores and consumers want a wide selection of stores to go to in their leisure time,” explains Luiza Moraru, head of retail department with real estate consultant CBRE Romania.
The boulevard between Piata Unirii and Piata Romana is populated by small clothing, footwear and accessory retailers, but most of the shops are not that attractive so as to become a regular shopping destination.
Kenvelo is one of the few large retailers that tried its luck in the area, but its store is located at the entrance to the Old Town, the destination of choice for most of those going out, with tens of thousands of people passing through every day.
Pedestrian traffic figures are not the same across the boulevard.
“The most important factor currently preventing the area from becoming a shopping destination is the lack of high pedestrian traffic, but this could be fixed by creating new parking lots in the respective areas,” Moraru says.
She added that the Magheru Boulevard (the part of the boulevard ending in Piata Romana) had seen significant interest from office and retail developers lately.
Though main street visibility is very good, most traffic stays around subway stations and public transportation stops, says Estera Enache, senior consultant with the retail department of DTZ Echinox. This shows in the occupancy rate of the space and influences rent per square meter.
“The closer a shop is to the intersection and the higher the traffic, the more attractive it is and the faster rented.”
She says an example is Piata Romana with its several fashion stores (Stefanel, BSB, Nissa, Calzedonia and Terranova). The area is also an important spot for fast food restaurants, with Pizza Hut, McDonald’s and KFC operating there.
At the other end of the boulevard from Piata Romana lies Unirea Shopping Center (Piata Unirii), built before 1989, which changed with the times. Major fashion retailers like Zara and H&M now have stores running on the ground floor of this center.
“Retail still concentrates in shopping centers. They have space that can accommodate any type of business,” says Cristina Burlacu, representative of the high street retail department of Cushman & Wakefield.
The tenant mix in shopping centers is stable, but in main street retail it is not, which means a lot of shops change tenants and business frequently, Burlacu says.
For the area to become a shopping attraction like the main streets in the West are, Cushman & Wakefield’s official believes the first step should be “for major fashion retailers to take up space in high [pedestrian] traffic street areas. Then a retail hub will emerge around them with various types of businesses.”
High pedestrian traffic street areas should ideally have the same type of businesses that operate in a shopping center such as apparel, footwear, cosmetics, accessories, coffee shops, restaurants and services.
There are several reasons for why the area between Piata Unirii and Piata Romana is the way it is, says Andrei Vacaru, head of retail consultancy with Jones Lang LaSalle Romania.
The first is the lack of uniform management of the area.
“Each space has a different owner, interested in maximizing their own profits and local authorities are not making any efforts to turn the area into a retail destination.”
Moreover, it does not meet the standards of major fashion retailers about traffic, parking spots, building quality, floor area and structure.
“Despite the significant drop in rent there, the fashion brands that require lots of space can get better terms in shopping centers, where owners want to have them to be able to improve the tenant mix.”
Latest Cushman Wakefield data show rent for prime space on Magheru Boulevard was EUR55 per square meter in the fall of 2012.
Large retailers taking up space in shopping centers negotiate the rent as a percentage of sales and anchors usually pay less than 10% or even less than 5%, those in the industry say.
“This is why there are no retailers who serve as anchors in the area (between Piata Romana and Piata Unirii i.e.), and small space retailers are not very interested,” Andrei Vacaru added.
Moreover, he believes there will not be any significant changes on the main street between Piata Unirii and Piata Romana (actually comprised of three boulevards Bratianu, Balcescu and Magheru Blvd).
“I believe the Old Town and Calea Victoriei [which runs parallel to the three i.e.] stand more chances of attracting new names in the fashion business soon.”
(English version by Loredana Fratila-Cristescu)