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Invasion Of The Trade Snatchers

After an avalanche of investment in shopping centres in Sofia, Varna and Plovdiv, another trend has emerged. Entrepreneurs targeted smaller regional urban centres where markets have not yet reached the maturity of the "big three".

Realtors have one simple rule for malls: one large shopping centre is viable for every 100 000 residents in an urban area, including cities, nearby towns and villages. Subsequently, "Location, location, location", real estate's all-important maxim, becomes paramount.

Most experts agree that projects in the three big cities have reached saturation point. If all planned shopping centres in Varna materialise, then the market will be unable to absorb all the retail space, according to Foros' real estate agency analysis.  Foros' managing director, Dobromir Ganev, believes that many projects will be forced to alter their original concept over the next couple of years before construction starts.

Pavlina Nikova, commercial property manager at consulting company Forton International, says it is "utterly impractical" to continue investing in retail space in Sofia, Varna and Plovdiv. She believes that it is inevitable that capital shifts elsewhere. "However, the centre of gravity hasn't shifted to smaller towns yet and Stara Zagora and Ruse are the current hot spots," she says.

Strong demand for retail space is still concentrated in bigger cities and that trend will continue, Nikova explains. She says that it is perfectly viable to invest in urban areas, even those with a population of 80 000, as long as the malls are smaller than Sofia's. The size of the malls should correspond to the local population.

Several companies have already announced plans for cities such as Ruse, Pleven, Shumen, Gabrovo, etc. According to consulting company Colliers International, in the next four to five years new shopping centre projects will add more than 700 000 sq m of retail space to the market throughout Bulgaria. Currently, there is 105 000 sq m alone in just two malls - City Center Sofia and Mall of Sofia.
"A cherished goal for every retail area investor is to be the first in a location," says Victoria Encheva, PR officer for Aladin Ltd., justifying her company's decision to build an 80 million euro mall in Pleven. Aladin Ltd. also bought land for another retail project in Kardzhali. The company, owned by Syrian entrepreneur Aladin Harfan, who has worked in Bulgaria since 1991, has a range of varied business interests.

Every city has enough potential clients for a shopping centre, Regent's Property Advisors' CEO Vili Belyov, said recently. What's important, however, is the type of product offered to potential clients.

Ensuring project viability

When investors choose a location, they usually order a market study. Consulting companies then analyse the location in detail. NAI Pro Con, the company that consults plastic (PET) packaging manufacturer Terrachim-97 for Mall Gabrovo, explained that studies cover general conditions such as political and economic climate, local market practices and, finally, site examination.

A market analysis evaluates many factors:

- population
- labour availability and wage levels
- competition
- supply and demand of retail space
- rent levels
- local leasing practices
- growth trends
- - saturation level
- - costs
- access to site.

Colliers International and Forton International prepared a market study for Aladin's Mall Pleven. The company had bought a little more than 9000 sq m of land near the central railway and bus stations in a city of about 150 000 residents, including the population of nearby villages. Consultants recommended that 10 per cent of the space be assigned to cinemas, 11 per cent to supermarkets, 16 per cent to large chain stores, 26 per cent to clothing brands and 14 per cent to small stores. Fast food establishments should receive 0.5 per cent of the space and other restaurants less than one per cent. A separate five per cent of the space was allocated to recreation and up to three per cent will be a children's area.

Profit trends

Depending on various factors such as location, lease terms and  tenants' mix, yields of seven to 8.5 per cent are expected from shopping centres, according to Nikova. Selling the first projects in Sofia, Plovdiv and Varna produced increasing returns for initial investors (see table). The profitability of such ventures further afield, however, is uncertain because they're breaking new ground. Evaluating possible yields and comparing rents to those of street outlets is therefore difficult. Yet the market senses a deficit in quality retail space, so Nikova believes that a city's first project will usually be successful.

Price levels in malls are usually lower than in a city's most attractive shopping streets. In Sofia, for example, monthly prices a sq m for a shop in Vitosha Boulevard vary from 80 to 120 euro, while in malls you can rent for 30 to 60 euro a sq m. Well located shops in Varna generally fetch 150 euro a month a sq m, while prices in retail centres reach an average of 30 to 50 euro.

Encheva said that Colliers International, the exclusive agent for Mall Pleven, let out space in the centre for an average 18 euro a sq m. Current offers for street shops in the city show that rents are normally cheaper than that, but conditions in available retail space do not match those of newly built shopping centres.

Nikova says she expects many famous brands to be included in retail projects of most of the larger regional cities. Realtors have noted that quality brands are very important to a mall's success because they attract smaller retailers.


In the past two years or so, several projects have been announced in different towns and cities. These include:

Stara Zagora
The Alexandra Group is planning to invest more than 20 million euro in Mall Stara Zagora. The building consists of more than 30 000 sq m, of which 19 500 sq m will be let out. It includes six cinema halls, run by Arena Cinema, with a total of 900 seats. Construction started last March and the building will be inaugurated in September.

Rousse was infected by Varna's mall investment fever. By the end of summer 2007 three projects had been announced. The first will be built by Densi-M, an importer of home appliances. Together with the owners of motor and industrial oil manufacturer, Prista Oil, the brothers Plamen and Atanas Bobokovi, and Rousse Municipality, Densi-M is a partner in the second retail project - Mall Rousse. The third project was unveiled by the same Israeli entrepreneurs who started Mall of Sofia and are now working on Mall of Plovdiv - Ocif Investment and Development and Cinema City International.

Retail projects entered centre-stage in Pleven even before last year. Mania Tower invested in a centre that combines three levels of retail area and 12 floors with 115 offices. Retail outlets occupy about 10 000 sq m of a total 17 000 sq m area.
Mall Pleven is Aladin's project of almost 47 000 sq m, the city's biggest. Construction should start in the spring. The project will include 97 stores, and more than 10 restaurants and other retail outlets, embracing a total 17 800 sq m area. A supermarket and cinemas will also be on the site. The investment will exceed 40 million euro and the planned completion date is the spring of 2010.
Aladin has already signed leases for some of the area, including the cinemas and the supermarket, but the company refused to disclose its clients. According to Encheva, it will do so at the end of January.
A third project, Central Mall Pleven, which uses the former building of a bank, Niya Ltd, will see an investment of more than 4.5 million euro in a 11 000 sq m project.

Two months ago, Israeli company Plaza Centers, which works on malls in Central and Eastern Europe, announced plans to invest 38 million euro in Shumen. The project will include 18 000 sq m of retail space for rent and 20 000 sq m of parking lot with 600  spaces. The project should be completed by the end of 2009.

FairPlay International has launched a 20 000 sq m project in the northwestern city of Vidin. In the beginning of 2007 Bulgarian Property Developments acquired a 50 per cent stake in the project. The mall should be launched by the beginning of 2009.
A smaller project, Mall Vidin, covers 9000 sq m, two-thirds of which is retail space. It will accommodate about 60 stores and some offices. Both projects involve renovating old buildings.

The former Struma factory of machinery construction in Pernik will be transformed into a shopping, recreation and administrative centre covering almost 26 300 sq m - Pernik Plan Ltd. The factory consisted of an office building, needing renovation, and another for manufacturing, which will accommodate retail space.

Lovech Properties Management will invest in the reconstruction and expansion of the town's former central store. Most of the 7000 sq m area consisted of retail space, but it also had a cinema hall, library and offices.

Preforms and plastic (PET) packaging manufacturer Terrachim-97 will invest about 7.5 million euro in Gabrovo. Named Terra Centre, the planned completion date is April 2009. The mall will comprise a 19 000 sq m area, of which about 10 000 sq m will be let out. Prices are 15 to 25 euro a sq m a month. A supermarket, more than 45 stores, some restaurants and cafes will be on the site.

Mall Bansko will be completed this year. The shopping centre consists of 5576 sq m in about 30 stores. Rentals are between 17 and 35 euro a sq m. A casino will also be on the site. The investor, Bansko Privilege Resort, had to delay the project because it had some problems optimising the space because of the small triangular plot.

About a year ago Sandanski Property announced a retail space project where it will invest about seven million euro. The centre will accommodate about 50 stores, a casino, restaurants, a nightclub, cinemas, a spa centre and hotel area.

For another retail space project Aladin Ltd.  bought a 7350 sq m plot in the centre of Kurdzhali. Colliers International's study, however, showed that the Syrian investor needed more land to develop a project sufficient to justify the investment. The company's PR officer explained that the company is trying to buy a neighbouring plot before ordering a design.

Many other plans and projects are afoot. Aladin Harfan is also looking at Blagoevgrad, which has seen a number of big-box retailers recently. The city is also attractive for Israeli company Melina. It works on Central Mall Markovo Tepe in Plovdiv and has plans for 12 similar centres in cities including Vratsa, Dobrich, Ruse, Plovdiv, Vidin, Yambol, Haskovo, Burgas, Sliven and Blagoevgrad.

Real estate agents are positive that this year will see a burgeoning number of malls throughout Bulgaria.


Malls sold  Price
(million euro) 
Initial investment
(million euro)
Mall of Sofia 90 55 Electric Real Estate and Quinlan Private
City Center Sofia  94 40 Equest Balkan Properties
Mall of Plovdiv 145* 40 General Electric Real Estate and Quinlan Private
Mall Varna 120 30 Miller Group

* An estimate of the total price. GE and Quinlan Private bought 40 percent of Mall of Plovdiv for 58 million euro and will acquire the rest when construction is finished.