Slovenia

Slovenia Slovenia is a very small market in Central Europe, with borders to Italy, Austria, Croatia and Hungary.  Its population of just over two million is smaller than some of the larger European cities. However it has enjoyed strong economic growth since gaining independence in 1991, which led to it becoming the first former Yugoslavian nation to join the EU in 2004, after which it saw an influx of foreign retailers, particularly from Austria. It then went on to forge further links with other European nations by joining the Eurozone in January 2007.  

Slovenia’s GDP per capita rates stand well above most other Central and Eastern European markets, bringing it more in line with some of the markets in Southern Europe.  GDP per capital is converging with the OECD average, and Slovenia is the wealthiest of the accession countries.

Tourism has been progressively developing in Slovenia, and tourist activities are developing faster than other economic activities.

The regional outlook in Croatia, Bosnia and Serbia is improving which will provide a boost to Slovenia’s exporters. Serbs can now travel to Slovenia without visas and this is expected to help increase tourism, and retail spending.

The Slovene retail market is illiquid and it has historically been difficult to acquire quality retail space, but this is now easing due to the global financial crisis, and some weaker retailers going out of business. The Ljubljana retail market will be improved with a pipeline of new schemes.

ECONOMIC SUMMARY
ECONOMIC INDICATORS*200920102011F20122013F
GDP growth -8.01.40.5-2.0-1.4
Consumer spending -0.1-0.60.201.0
Manufacturing production -18.76.62.0N/AN/A
Investment -23.3-8.3-10.40.63.0
Unemployment rate (%)5.97.38.27.87.4
Inflation0.91.82.02.42.6
US$/€ (average)1.391.331.391.271.24
US$/€ (end-period)1.441.341.291.201.21
Interest rates 3-month (%) 2.970.711.0131.39N/A
Interest rates 10-year (%) N/AN/AN/AN/AN/A

Note: *annual % growth rate unless otherwise indicated. E estimate F forecast

Source: Unicredit reports, Slovenian Statistical office, National Institute of macroeconomic analysis and development, www.xe.com 

ECONOMIC BREAKDOWN
Population 2.1 million (2011)
GDP36.3 (EUR bn)
Public sector balance 24.7% of GDP
Parliament Social Democrats coalition
Prime minister Janez Janša
President Danilo Turk
Election date Autumn 2015 (Government)
RETAIL SALES GROWTH:
% CHANGE ON PREVIOUS YEAR
20092010201120122013F
Retail Volume-10.45-0.361.78-0.81N/A
Retail Value-13.453.655.933.21N/A

Source: Slovenian Statistical office

LARGEST CITIES (2010)
SLOVENIAPOPULATION
Ljubljana272,220
Maribor95,171
Celje36,874
Kranj36,874
Velenje25,456
Koper24,996
Novo mesto23,341
Novo mesto18,164

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Slovenia : 46.151241, 14.995463

MAJOR DOMESTIC FOOD RETAILERS

Mercator, Tuš

MAJOR INTERNATIONAL FOOD RETAILERS

Spar, Lidl, Hofer

MAJOR DOMESTIC non-FOOD RETAILERS

Big Bang (electronics), Merkur (DIY)

INTERNATIONAL RETAILERS in SLOVENIA

Inditex Group, DM, Muller, H&M, Swarovski, Marks & Spencer

Food & Beverage Operators

McDonald’s, Burger King, Coffee Shop Company

TYPICAL HOURS
MONDAY-FRIDAYSATURDAYSUNDAY
09.00-20.0009.00-21.0009.00-15.00 (only the largest shopping centres)

Slovenia is the wealthiest of the EU accession countries with €18,558 average income per capita, forecast for 2013 by Unicredit Bank. Home ownership is high at over 80% and because many homeowners acquired their properties during the transition to a free market economy at low prices, mortgage debt is low, at 13.7% of Slovenia’s GDP, compared to 54% in the EU. Consequently there is a high level of disposable income and many luxury and mid brands have good market penetration.

Mercator is comfortably the largest retailer in Slovenia with operations in a number of food and non-food sectors. It has also expanded into a number of neighbouring markets, with expansion a major driver of its decision to sell a stake in the company in 2011. The strength of the market leader and the small market size has limited investment from foreign retailers, although a number of non-food sectors have received investment particularly from the nearby German and Austrian markets. Retailers include the Austrian Spar organisation, Baumax, Stiefelkönig, Leder & Schuh and Kastler & Öhler. Other leading names such as Charles Vögele, New Yorker and Sports Direct also operate in the market.

Typical shopping centres in Slovenia comprise malls of 20,000 to 55,000sq.m, anchored by a food retailer. The capital city Ljubljana is unique in that approximately 50% of the available retail space comprises converted industrial space, and is compromised in terms of parking, depth and frontage. In the past 12 months new schemes have come to market in Maribor, Krško, Kamnik and Nova Gorica. The regional retail market is now saturated, although there is space for new schemes in Ljubljana with generally poor quality retail space and 1.6 sq.m per inhabitant.

Slovenia is well served with retail warehouses in larger cities, but with a limited offer elsewhere. The market is active and has seen retailers entering from other countries such as Austria and Denmark with homeware and DIY stores. It is not anticipated that the sector will grow in the near future due to difficulties in finding suitable land and poor availability of debt.

There are no factory outlets in Slovenia. Two projects are planned but are currently on hold due to insufficient pre-leases and difficulties in obtaining debt. Slovenes travel to Zagreb in Croatia and Palmanova in Italy for factory outlet shopping.

E-commerce is developing slowly in Slovenia, although there is no publicly available information on consumer volume. Anecdotal evidence suggests that websites such as Next and Gap are popular with mothers who like the better choice and prices. Slovenes are tech savvy and 73% of homes have internet access, with 20% accessing the internet via mobile devices.

It is possible to enter the Slovene retail market direct, though many also franchise and enter via concessions/shop-in-shops.

Foreign companies can buy real estate in Slovenia, providing they are from the EU, or have reciprocity. There are no restrictions on foreign companies renting property, but they are sometimes penalized with higher rents as landlords cannot charge them VAT, which can cause a clawback from the tax office in some cases.  Current legislation protects both landlord and tenant. There is no security of tenure, and leases are renewed only by agreement. Most, but not all, leases are indexed to the Slovene or Austrian consumer price index.

It is difficult to obtain good quality retail space in Slovenia as the market is illiquid. There is a waiting list for all good malls. All malls are owner operated and most would benefit from professional asset management and marketing. It will become easier over time in Ljubljana as the pipeline schemes come to market.

Although it is possible to occupy new retail space within a few weeks, it is more realistic to expect that on average it will take 12 – 18 months from initializing the property search to taking occupation of an existing property.  This includes time for considering location options, the identification of buildings or sites, negotiating leasehold or freehold terms and drafting of the appropriate legal documentation.

New Entrants to the Market

Silvian Heach Bennetton Yves RocherJones

KEY FEATURES OF LEASE
ITEMCOMMENT
Lease TermsRetail leases in Slovenia are typically for 5 to 10 years. Break options are not common. In the absence of a clear agreement in the lease, the tenant has no legal right to break so long as the landlord fulfils his obligations. Rent reviews are not customary, but leases are often indexed to the Slovene or Austrian CPI. The authorised use will depend on the terms of the lease, which will also state the degree to which this may be varied by the tenant.
Rental PaymentRents are typically payable monthly in advance. Turnover/percentage rents are charged in most shopping centres. A security deposit is generally required of around three months rent. Premium payments were previously common place in the retail market at times of rising rents and limited supply, but less so now that the market has softened.
Rent ReviewRent reviews are not customary. The rent can be increased or decreased by agreement between Landlord and Tenant when renewing leases.
Service Charges, Repairs and Insurance A service charge is usually payable in multi-tenanted buildings and covers management fees, security, cleaning, landscaping, internal maintenance of common parts, external maintenance and insurance, servicing of elevators, water, heating, air conditioning, management fees and property taxes. It excludes internal maintenance and insurance of rented accommodation, utility charges and VAT. The landlord is responsible for external/structural matters in shopping centres (charged back via service charge) or tenant (except in multi-let buildings). The tenant is responsible for internal matters. Insurance for common parts is also paid by the landlord. The tenant usually pays for internal insurance directly. Most shopping centres also charge a marketing contribution.
Property Taxes and other costs Local authorities charge so-called Indemnity for usage of land (property tax). This is payable on all properties. Each Municipality sets the value of Indemnity individually and it depends on the size of the premises, infrastructure on the site, location, and designated use of the land. In some cases Municipalities include parking areas and other outdoor areas. This property tax is sometimes paid by the Landlord and recovered through service charges, and sometimes directly by the Tenant. VAT at 20% is charged on rental payments but is usually recoverable by most tenants (tax advice should be sought).
Disposal of a LeaseSub-letting is only possible under the terms of the lease with the landlord’s approval. Assignment rights can be included in the lease with the landlord’s agreement. At lease end, the tenant is responsible for re-instating the premises to the same condition as at the start of the lease, subject to normal wear and tear. All tenant improvements must be approved by the landlord subject to the alteration covenant in the lease and the fact that approval should not be unreasonably withheld.
Valuation MethodsShops are valued by the sq.m using ISO 9836, but because rent reviews are not customary, and because there is little vacant retail space in Slovenia, valuations are not often required.
LegislationThe general provisions regarding leases are stated in the Obligation Code (OJ RS No. 83/2001); The Office Buildings and Business Premises Act (Zakon o poslovnih stavbah in poslovnih prostorih) also regulates leases of business premises; and Law on commercial buildings and business premises (ZPSPP) OG SAS no. 18/1974