City Mall cuts rents to keep occupancy rate at 90%

City Mall is falling in line with the market trend by cutting rents by as much as 15-20% to maintain the occupancy rate at 90%. Despite the opening of Vitantis, Liberty Center and Grand Arena projects, the head of City Mall says that the number of visitors remained at last year’s level during summer: 13,500 people.

Mihai Agaficioaia, who has been running City Mall shopping centre in southern Bucharest for a year, says the main target he set at the moment he took over this position, changing the tenant mix, has not been hit so far because of the crisis that has made retailers expand less.

A series of tenants, such as Timberland Nautica, Danik or Sony, have closed their shops in the mall lately, but the firm has signed new contracts with Grand Bistro, Pada Murre or Sprider Home, which will keep the project’s occupancy rate at 90%.

“We’ve had direct talks with certain retailers and starting March we’ve agreed on 15-20% smaller rents for a six-month period. The general target is to come out of this crisis period with an occupancy rate of at least 90%,” Agaficioaia also said.

City Mall has a lettable area of almost 19,000 square metres and is held by Australia’s APN/ULA European Retail Trust investment fund, which paid over 100m euros to include the mall in its portfolio.

According to the latest report by the fund, City Mall’s market value lost around 40%, to some 60m euros.

“We expect revenues to fall by 10-15% this year,” says Agaficioaia, a decline that could translate into a new drop in the value of the property that generated turnover worth 23.7m RON (6.4m euros) in 2008.

One of the steps that could revive the mall’s business and also improve the revenue balance is linked to the fact that on the top floors of City Mall office spaces with a 5,000-sqm area will be fitted out. “(…) Investments in the fitting out of these spaces are put at 4.5m euros and rental talks were held at the level of 12-14 euros per square metre,” specified Agaficioaia.

Office space construction and rental could generate additional revenues worth above 700,000 euros, with investments likely to be amortised in less than 7 years.

Bucharest’s southern area is one of the most crowded in terms of shopping centres, including, besides City Mall, Liberty Center and Grand arena, with Sun Plaza also to be opened this autumn.