Major Drivers of Baltic Shopping Centres’ Market

Abstract

The paper takes into consideration the complexity of shopping centres’ segment in the context of changing economy as well as in comparison with other real estate segments. It has often been said that the dynamics of retail real estate are three-dimensional (Shopping centre management, ICSC, 1999) while those of most other real estate formats are two-dimensional. The reasoning behind the comparison is that most nonretail real estate – office, apartment and warehouse formats, for example – are based upon a simple landlord-tenant relationship. Shopping centres and other retail real estate formats are based upon a more complex dynamic which includes the same two parties plus customers, who must patronize tenants’ stores in order to the process to work – thus creating a three-party process. The complexity results from the additional challenges related to finding the appropriate assortment of tenants who can effectively attract enough consumers to support the business plan, including paying the landlord’s rents. Moreover, in most cases, the fourth party – lender – plays important role when providing capital needed by shopping centre owners to build, purchase of finance a centre.The aim of the paper is to analyze the major Baltic shopping centre market drivers in the context of three dimensional dynamics as well as changing economy and discuss the key drivers’ impact for the segment development and change, as retail segment adapts to various challenges and opportunities more rapidly than the most of other real estate formats