Outlet shopping on the way to the seaside?

Market report by Ionut OPREA

The Romanian retail market will soon reach 4 million sq m of GLA in shopping centers, retail parks, and outlet centers. Starting this May, Romania will have a second outlet developed by Liebrecht & Wood at the Eastern exit of Bucharest, which is connected to the highway towards the seaside resorts. 

The first one was opened in the western area of the capital in 2008. It is integrated into a retail park, connected to the most important logistics parks, the highway to Pitesti, and one of the main mountain crossing routes towards Transylvania, to Sibiu. 

“Romania is the second largest country in CEE, with a population of approx. 19 million and growing spending power, as well as great business premises beside the capital city of Bucharest. There are strong cities like Cluj-Napoca, Timisoara, Iasi, Constanta, Craiova, each with over 300,000 inhabitants and proven performances in terms of retail sales. Therefore, it is important for retailers’ business strategies to open more stores, and for new brands to enter the Romanian market. 

“The consequence of more stores opening here is that more stock becomes available, which is great for outlet development,” states Carmen Ravon, Head of Advisory & Transaction, Retail, CBRE Romania.

The latest addition to the FASHION HOUSE Group portfolio is the FASHION HOUSE Outlet Centre Pallady in Bucharest, which will open on May 27, 2021. Situated near the A2 highway, the second outlet center in the Romanian capital has direct access to the highway in a key location with a catchment area of over three million people. FASHION HOUSE Outlet Centre Pallady is being developed in two phases. Phase one will open with 8,700 sq m this summer and the remaining 4,000 sq m will follow at a later date. With a budget of 25 million euros, it will accommodate over 60 stores, and have restaurants and a children’s play area. The Centre is already over 70 per cent let and will offer customers top-quality international brands with discounts up to 70 percent, every day, all year round. 

Brendon O’Reilly, Managing Director of the FASHION HOUSE Group, said, “For the last 12 years, the FASHION HOUSE Outlet Centre Militari has been strengthening the outlet business model by offering massive discounts to its customers every day, and FASHION HOUSE Pallady will support the growing demand for this kind of shopping experience. The combination of the top-quality tenant mix, high service standard, and its great location will attract both Bucharest’s residents and visitors.”

The new outlet center will include open-air gallerias–a unique feature–while the shopping alleys are inspired by the Belle Epoque style of Bucharest’s old city. 

Bucharest is covered very well with the two outlets.

“A brand’s decision to open an outlet is very much linked to the number of stores that a brand has in the country but also of the remaining stocks strategy, as some brands are returning them to the centralized storage. I would say that for the time being Bucharest is covered very well with the two outlets. Given the size of the country, at least two more outlets in regions such as Transylvania and Moldova would be a target that professional outlet developer should consider,” underlines Carmen Ravon. 

Cornelia Nicolae, Retail Operations Director at FASHION HOUSE in Romania added, “Our new development clearly demonstrates the growth potential of the fashion retail market. Especially now, when Romanians have become more sensitive to the quality/price ratio, a context that offers great opportunities for both our outlets.”

How can brands optimize their collections, stocks, and strategies in the current market context? “During the pandemic, we all had to adapt to new ways of shopping, with peaks of demand like we saw during the back-to-school period last year, or as we expect in the upcoming period when people return to their offices and are allowed to mingle again. Take for example the period between October and December, which usually generates over 35% of the total online retail sales, due to Black Friday and Christmas campaigns. In order to maximize sales, brands became very agile in terms of predicting the stocks they need. This had an impact on supply chain strategies where omnichannel services are vital, as well as on the reviews of the respective store networks. 

Bucharest with solid macroeconomic foundation

“The outlet option is also important”, concludes Carmen Ravon. Bucharest has a population of 2.15 million people, reaching 2.60 million people including the metropolitan area, with 1.19 million employees and 175,231 students. However, unofficial figures suggest that more than 3 million people are living in the capital. Despite the Covid-19 turmoil, the city’s macroeconomic foundation is solid. The unemployment rate remained low during 2020, while the average net salary increased by 7.6% reaching 4,716 leu (968 euros) in December 2020. The capital’s residents have many other options beside the outlets so far–15 shopping centers with a total GLA of 709,000 sq m (57% of the stock) within reach, 11 retail parks with 438,000 sq m GLA (35%), and 6 commercial galleries (105,000 sq m GLA) covering the remaining 8% near the city. However, the expansion in logistics and residential areas in the Western part as well as the renewal and significant developments in residential and retail sectors in the Eastern part, have the potential to enhance footfall and sales at the two outlets that will be operational starting this summer, as the total amount of space reaches 28,000 sq m in this segment in Romania.