Vasar: Tallinn quickly becoming a battleground for shopping centres

06.11.2012, 15:08

Ants Vasar, CEO of Viru Keskus which operates one of Tallinn’s largest shopping centres, writes in Äripäev that there is an armament race going on among retailers in Tallinn.

Vasar writes that Ülemiste shopping centre has already announced expansion plans while in a few years’ time there will be doors opening in Europa (Moekombinaat) and Panorama City shopping centres, both located in Lasnamäe. In addition, the old Postimaja building in central Tallinn is being renovated into a mall.

Those who think that the Tallinn retail market is getting saturated and there is no room for newcomers are obviously wrong. On the other hand, the proliferation of retail developments in a short period of time and in limited areas such as Lasnamäe could trigger a war between competitors who fight for customers for any means, but also without much profit.
If this happens, there will be no winners because the race will affect customers, retailers, the city and the economic sector as a whole.

One should not assess the would-be market volume only based on current economic results of retailers, because retail space is being constantly developed and future needs may be very different from the present ones.

In the first half of 2012, the Estonian retail volume expanded by 250 million euros year on year. Half of the growth came from Tallinn and the surrounding Harju county.

Since the annual volume of one large shopping centre is about 100 million euros, it shows that in one year Tallinn retail market will grow by more than one mall worth of volume. At least for the next few years, there should be plenty of customers and tenants for one to two new shopping centres.

As shopping centres increasingly compete with special ambience, one must also consider their location. In the last few years, most retail space expansion has been concentrated in Kristiine and Haabersti, but also in Lasnamäe with Tähesaju City.

At present there is 1.2 sqm of retail space in Tallinn per person. By 2016 it will be 1.65 sqm, with almost all large expansions taking place in Lasnamäe where the retail space will double to 2.6 sqm per inhabitant.

From one side it is logical for retail developers to focus on Lasnamäe because its current ratio of retail space to population is still very low.

On the other hand, there will be a major supply in one specific area and there will not be so many customers adding.

So Lasnamäe may soon become the first area in Tallinn where supply notably exceeds demand. At the same time there are areas in Tallinn which have very few shopping centres per residents such as in North Tallinn which has only 0.2 sqm of retail space per resident at present.