Retail Market | Georgia | 2019

PREPARED FOR:

Photo: City Mall Saburtalo

Retail Market |

Georgia | 2019

2

Executive Summary 3

Country Profile 4

International Rankings 6

Economic Overview 7

Tourism Overview 14

Retail Market Fundamentals 25

Tbilisi Shopping Centres 27

Tbilisi High Streets 34

Batumi Shopping Centres 40

Batumi High Streets 47

Kutaisi Shopping Centres 52

Kutaisi High Streets 59

Outlet Industry 64

CONTENTS

Photo: The Biltmore Hotel Tisi

Colliers International Georgia

Conclusions & Outlook 67

Appendix 1 - Real Estate Registration 68

& Construction Permits

Appendix 2 - Primary Information Sources, 72

Data Used for the Study & Definitions

Disclaimer 74

Project Team 75

Colliers Global at a Glance 76

3Colliers International Georgia

EXECUTIVE SUMMARY

Photo: Galleria Tbilisi

The supply of modern shopping centres in Tbilisi has been growing over the years, and the city still has potential in this regard

The stock of modern shopping centres per 1,000

inhabitants in Tbilisi stands at a lower level than

that of the benchmark cities. The figure stood at

251 sq m in 2019, and is expected to grow up to

271 sq m by the end of 2022, while the benchmark

cities feature values from 330-900 sq m per 1,000

inhabitants. Therefore, Tbilisi has the potential to

expand the market of modern shopping centres.

High demand for retail spaces in modern shopping centres in response to the growing supply

Tbilisi saw a massive absorption of retail spaces in

2019, along with an increased supply. Leased space

increased by 34,807 sq m and can be attributed to

the expansion of City Mall Saburtalo. At the end of

2019, 78% of its leasable area was occupied by

various tenants.

In 2019, the net take-up in the shopping centres of Batumi and Kutaisi saw a positive trend, amounting to c.2,000 sq m and c.1,600 sq m, respectively.

A declining trend in the weighted average rent has been observed

As of 2019, the weighted average rent had modestly decreased by 1.5% in Tbilisi shopping centres, amounting to USD 19.0 per sq m. As in most benchmark cities, prime rents in Tbilisi shopping malls have had a declining trend, meaning that the market is moving towards stabilization. Rents on Chavchavadze, Pekini,

Rustaveli and Aghmashenebeli avenues have also decreased, reducing the overall high street weighted average rent from USD 34.3 in 2018 to USD 31.4 in 2019.

Shopping centres in Batumi experienced a 10% decline in the weighted average rent. Compared to 2018, the weighted average retail rent on Batumi high streets decreased by 4.8% and amounted to USD 13.8 per sq m.

In 2019, the weighted average rent in Kutaisi shopping centres amounted to USD 11.9 per sq m, reflecting a 15.4% decrease when compared to 2018. Street retail rents in Kutaisi decreased slightly, by 2.9%.

Kutaisi and Batumi shopping centres experienced reduced vacancy rates, while Tbilisi saw a modest increase

In 2019, the vacancy rate stood at 10%. Despite the expansion of City Mall Saburtalo, and as a result of the overall supply being expanded by 39.5K sq m, the vacancy rate did not increase significantly (2 percentage points). The absorption of vacant spaces in Batumi shopping centres caused the rate to drop from 12% in 2018 to 6% in 2019. The vacancy rate on street retail slightly decreased by 1 percentage point, from 11% in 2018 to 10% in 2019.

Due to the strong performance of Novita shopping centre, the vacancy rate in Kutaisi shopping centres dropped significantly after 2017 and stands at 5%. The vacancy rate on street retail grew by 3 percentage points YoY and amounted to 12%.

Photo: Galleria Tbilisi


At the crossroads of Europe and Asia, Georgia

borders Turkey, Armenia, Azerbaijan, and Russia. The

country occupies an area of 69,700 square kilometers

(sq km) and is home to a population of 3.7 million

people. The country’s land borders run a length of

1,839 kilometers (km), while the Black sea coastline is

315 km.

During last two decades, Georgia has implemented

large-scale reforms that have led to political and

economic transformation. It has strengthened its

democracy and furthered its relationship with the

European Union (EU). The Association Agreement

with EU was signed and ratified in 2014. Georgia has

also made business development within the country a

top priority through encouraging entrepreneurship,

attracting private investments, and shifting tax

incentives, thereby positioning itself as an attractive

option to the international business world.

With its unique cultural heritage and exuberant

hospitality, Georgia’s tourism industry continues to

grow and thrive, further bolstering economic growth.

Government

Georgia is a parliamentary republic. Parliamentary

elections are held every four years. In 2018, Georgia’s

parliament relocated to Tbilisi from Kutaisi. It acts as

the representative body for the country, exercising

legislative power and developing domestic and

foreign policy. As an executive council of government

ministers, Georgia’s cabinet is headed by Giorgi

Gakharia, a member of the majority ‘Georgian Dream

Party.’ Based on accountability, citizen participation,

technology, and innovation as its guiding values,

today’s government continues to make European and

Euro-Atlantic integration a primary strategic

objective.

Background

CAPITAL CITY OF GEORGIA TBILISI

OFFICIAL LANGUAGE GEORGIAN

CURRENCY GEORGIAN LARI (GEL)

GDP PER CAPITA, 2019* USD 4,763

REAL GDP GROWTH RATE, 2019 5.1%

UNEMPLOYMENT RATE, 2019 11.6%

AVERAGE MONTHLY SALARY, 2019* USD 567.9

LIFE EXPECTANCY, 2018 74 years

3.7mln 69.7K km2

POPULATION AREA

Source: Geostat (preliminary data)

COUNTRY PROFILE


Legal Framework

The Georgian Constitution, adopted in 1995, lays out

the structure of the national government and defines

its authority and function. Georgia’s court system has

three branches: the Courts of First Instance (District or

City Courts), the Appellate Courts, and the Supreme

Court. The Courts of First Instance have jurisdiction

over all civil, criminal, and administrative cases.

Decisions from the Courts of First Instance may be

appealed at the Appellate Courts and further

appealed at the Supreme Court.

As an alternative to litigation, Georgian laws allow

arbitration both in local as well as international

arbitration institutions. Georgia is a member of the

International Centre for Settlement of Investment

Disputes (ICSID). The Public Service Hall in Georgia

provides customers with state services, including

business registration and property registration

through the ‘one-stop-shop’ principle that ensures

efficient service delivery.

Tax Climate

To stimulate investments and boost economic

growth, developing an attractive tax system is one of

the main goals of the Georgian government. With

only six flat-rate taxes (Personal Income Tax – 20%,

VAT – 18%, Profit Tax – 15%, Import Tax – 0%, 5%, or

12%, Excise Tax – on a few selected goods, and

Property Tax – up to 1%) and the Estonian tax model

implemented in 2017 that exempts undistributed

earnings from profit tax, has made Georgia one of

the most competitive places to invest in. Georgia’s

liberal trade regimes include: “Double Taxation

Avoidance” 56 countries and the DCFTA with the EU

(since 2014).

In January 2019, a new pension fund system was

launched in Georgia that is compulsory for every

hired person under the age of 40. For self-employed

people and those above the age of 40, engagement

in the system is optional. The methodology of the

reform is a 2+2+2 scheme, meaning that employer,

employee, and government transfer 2% of the gross

volume of the employee’s income on a personal

account.


EASE OF DOING BUSINESS

GLOBAL COMPETITIVENESS INDEX

Source: World Bank, Colliers International

Georgia has improved its status as a free economy

thanks to its fiscal policy, regulatory efficiency, and

open market policies. According to the World Bank’s

Doing Business report 2020, Georgia ranks 7th for

“ease of doing business” among 190 economies, 2nd

for “ease of starting a business”, and 5th for “ease of

registering property”.

In 2019, Fitch Ratings upgraded Georgia's Long-Term

Foreign-Currency Issuer Default Rating from 'BB-' to

'BB' with a stable outlook. As Fitch explains, it was

due to the country maintaining a resilient economy

during the regional shocks in 2018 and adds that

Georgia ranks above the current medians of 'BB'

category peers. Standard & Poor’s also raised

Georgia’s ranking from ‘BB-’ to ‘BB’, while Moody’s

credit rating for Georgia remains at ‘Ba2’.

Registering a new business takes a maximum of two

days and requires no minimum capital requirements.

According to the ‘Heritage Foundation Index of

Economic Freedom 2020,’ Georgia’s economy is

categorized as Mostly Free, ranking 12th across 180

countries.

Georgia remains the least corrupt country in

the region. According to Transparency

International, Georgia is the top performer

among the Eastern European and Central

Asian countries.

Foreign investors in Georgia are guaranteed equal

rights to those of Georgian citizens. After payment of

taxes, foreign investors are entitled to repatriate the

earnings (income) gained from investments and other

funds abroad.

THE WORLD CORRUPTION RANKING


Georgia44

Belarus66

Romania70

Bulgaria74

Armenia77 Turkey

91

Moldova120

Ukraine126

Azerbaijan126


International Rankings

Property Ownership & Non-agricultural Lands

In Georgia, property rights are recognized and protected by the Law. An owner has the right to possess, use

and dispose of his or her property. The rights of individual owners to possess, use and dispose of land are

regulated by the land legislation. There is no restriction on non-agricultural land ownership in Georgia.

According to the Heritage Foundation Index, Georgia has substantial improvement in property rights in 2020

and is 21% above the world average.


Gross Domestic Product

In 2019, according to the preliminary data of Geostat,

the gross domestic product of Georgia reached an

all-time high of GEL 40.4 billion. Despite the political

and economic difficulties at the edge of the 2nd and

3rd quarters of 2019, the real GDP growth reached its

maximum after 2015 at 5.1%, well above the

Caucasus (Russia, Azerbaijan, Armenia, Georgia)

region average of 3.7%.

As of 2019, according to the Ministry of Finance of

Georgia, the ratio of total government debt to

nominal GDP is 40.6%, well below the euro area

average (86.4% - 2019 Q2). During the last eight years

(up to and including 2018), the budget deficit has

remained under 4%. As of 2018, the budget deficit

constitutes only 2.9% of the nominal GDP.

GDP STRUCTURE

13%

Trade

Real Estate

Industry

Transport & Communication

Construction

Agriculture

Public Administration

Financial Activities

Accommodation

Education

Health & Social Work

Other

Source: Geostat, Colliers International


GDP AT CONSTANT PRICES BY YEARS (GEL, BLN)

Georgia has recorded the highest

real GDP growth of 5.1% since 2012.

Fast-growing Sectors

Despite the political and economic difficulties at the

edge of the 2nd and 3rd quarters, strong growth in

the professional, scientific and technical activities

(26% YoY), administrative and support activities (20%

YoY) and information and communication (19% YoY),

as well as art and entertainment (19% YoY) sectors

contributed positively to the real GDP growth.

REAL GDP GROWTH (%)


Georgia Caucasus

ECONOMIC OVERVIEW

33.9 34.936.6

38.440.4

2015 2016 2017 2018 2019

3.0 2.9

4.8 4.85.1

1.3

0.1

3.53.3

3.7

2015 2016 2017 2018 2019



Exports

The main exporting partners for the country in 2019

were Russia, Azerbaijan, Armenia, Bulgaria, and

Ukraine. In 2019, based on the preliminary data, total

exports grew by 12% YoY. This figure is significantly

lower compared to the previous years, when the

growth rate was above 20%. The increase in exports

to EU countries was also 12% YoY and represented

22% of the total exports. For CIS countries, it grew by

20% YoY, making up 53% of total exports.

498 497

412

284245

228202

178

132

MAIN EXPORT COUNTRIES, 2019 (MLN,USD)

Azerbaijan

Russia

Armenia

Bulgaria

Ukraine

China

Turkey

Romania

USA

CURRENCY FLUCTUATIONS (LCU vs. USD)


Currency Fluctuations

Depreciation and high volatility of the Georgian national currency was one of the main issues of the first half

of 2019, seeing it reach a peak in August when, after the effects of flight ban from Russia were fully realized, 1

USD was exchanged for 2.97 GEL. However, as the negative expectations eventually dissipated following

intervention by the National Bank of Georgia in the FX market, and the fundamental macroeconomic

indicators showed a positive trend, the GEL quickly strengthened and at the end of 2019, 1 USD was traded

for 2.82 GEL.

-20%

0%

20%

40%

60%

80%

100%

2015 2016 2017 2018 2019

The high volatility and depreciation

of the Georgian national currency is

one of the main challenges in recent years.

Azerbaijan Armenia

Georgia TurkeyRussia

Ukraine


Unemployment Rate

Georgia’s labor force comprises approximately

1,911,200 people. The unemployment rate is 11.6%,

which is the lowest it has been for more than a

decade. Since 2013, the unemployment rate in urban

areas has declined by approximately 10%; however,

the flat trend in rural areas indicates the fact that the

main cities of Georgia remain the gravitational centre

for businesses and are more attractive places to

invest in. The distribution of hired people in the labor

force for Tbilisi and rest of the country is significantly

different.

Remittances

In 2019, the total number of

remittances amounted to USD 1.73

billion, reflecting a 10% growth

compared to 2018.

The main source markets are Russia (25%), Italy

(14%), Greece (11%), USA (10%), Israel (9%), and

Turkey (6%).

REMITTANCES (USD), 2015-2019

1.08 1.15 1.39 1.58 1.73

7%

20%

14%

10%

0%

5%

10%

15%

20%

25%

0.0

0.5

1.0

1.5

2.0

2015 2016 2017 2018 2019

Billio

n (

USD

)

Remittances Growth y-o-y

Source: National Bank of Georgia, Colliers

International

CONSUMER PRICE INDEX (INFLATION, %)


Headline Inflation Core Inflation

Inflation

The annual inflation rate in 2019 was 4.2% (IMF

estimate). The main source of inflationary pressure on

prices was the depreciation of the nominal currency.

As a result, the monetary committee of the central

bank raised the monetary policy rate from 6.5%

(September) to 9.0% (December). It is expected that

during the year, the refinancing rate will decrease as

mid-term inflation expectations become positive.

14.1% 14.0% 13.9%12.7%

11.6%

2015 2016 2017 2018 2019

UNEMPLOYMENT RATE IN GEORGIA (%)


3.9

6.1 6.06.4

4.3

2.52.8

2.3 2.2

4.14.6

6.96.4

2.83.3

4.3 4.4

3.0

1.81.4

1.7 1.7

3.6 3.4

4.74.4

Jan 2017 Apr 2017 Jul 2017 Oct 2017 Jan 2018 Apr 2018 Jul 2018 Oct 2018 Jan 2019 Apr 2019 Jul 2019 Oct 2019 Jan 2020


According to the preliminary estimates of Geostat, in

2019, the volume of FDI increased by a modest 0.2%

(amounting to USD 1,268 million) compared to the

previous year, while dramatically decreased

compared to 2017. Among the reasons for the

decline may be the completion of magistral gas

pipeline project, the transfer of several enterprises to

the ownership of Georgian residents, as well as the

reduction of non-resident direct investors liabilities.

The United Kingdom, Turkey, and Ireland were the

main investors, with shares of 19.5%, 18.7%, and

10.5%, respectively. As for the sectoral distribution,

20.6% of total FDI was invested in the financial sector,

while the second and the third were the energy and

manufacturing sectors with 15.4% and 13.4%,

respectively.

In 2019, unlike other sectors, FDI in real estate

experienced a significant decrease and recorded a

negative figure. The first quarter of 2019 was

particularly remarkable in terms of decline as the

number stood at USD -125 million. The most likely

reason for such a sharp decline in 2019 was the fact

that companies moved to ownership by residents,

from non-residents.

FDI BY SECTORS (MLN, USD)

FOREIGN DIRECT INVESTMENT (FDI)

262

194

171158

118 117

14 14 -32

253

Financial

Energy

Mining & Manufacturing

Hotels & Restaurants

Construction

Transport & Communication


Agriculture

Real Estate

Other

1,7291,650

1,963

1,265 1,268

2015 2016 2017 2018 2019

FDI INFLOWS BY YEARS (MLN, USD)



In 2019, Financial, Energy &

Manufacturing were the key sectors

that attracted around 50% of total

FDI. In 2020-23, around USD 1 billion

is expected to be invested in the

construction of hydroelectric power

stations.


While already contributing roughly 9% to the country’s Gross Domestic Product (GDP), Georgia’s manufacturing sector is poised to provide further significant investment opportunities. Greenfield investments are expected to rise in the export-oriented manufacturing sectors, for which access to the European market would be attractive. Together with international and local experts, Georgia’s government is performing a deep analysis of the competitive sectors, and seeking new ways to stimulate foreign investment, attract new technology and know-how, and create high value-add production in the country.

From the transport and logistics perspective, Georgia can serve as a gateway for foreign companies interested in the Caucasus/CIS region due to its geographic location and open business environment. Georgia is uniquely positioned to capitalize on the increasing trade flows between Europe, the Caspian Region, Central Asia, and China. With a transport system that functions as a key link in the historic “Silk Road,” it offers the shortest route between the Black and Caspian seas.

In October 2017, leaders of Georgia, Azerbaijan, and Turkey officially opened the Baku-Tbilisi-Kars (BTK) railway as a part of Iron Silk Road project. The 826-kilometer (km) / 513-mile line has the capacity to transport one million passengers and 6.5 million tons of freight per year. The project will deepen trade relations between Georgia and China, making the country a primary link between Europe and Asia. Additionally, the government is investing heavily in road infrastructure, including highways and local roads. It is believed that long-term growth will stem from Georgia’s role as a transit state for pipelines. Three pipelines currently exist:

• The Baku-Supsa pipeline;

• The Baku-Tbilisi-Ceyhan oil pipeline;

• The South Caucasus pipeline (operated by BP).

Georgia has 1,603 km of international roads, 5,298 km of internal state roads, and 2,084 km of railway lines. Construction of Georgia’s central highway is one of the top priorities in the government’s infrastructure rehabilitation program. Since 2005, most of the country’s significant roads for international trade have been upgraded or are now under reconstruction.

Poti Sea Port is the largest port in Georgia. Currently serving as the European gateway for international trade in Georgia, Armenia, and Azerbaijan, it is ideally located to become a future hub for trade with central Asia. Together with the Georgian government, the Chinese conglomerate CEFC China Energy group recently signed a cooperative agreement regarding the construction of a Common Market Zone in Poti that will actively promote the export of advanced technologies, production capacity, and products from China to countries in the Eurasian region, and build a new Eurasian land bridge that will function as an economic corridor between China, Central Asia, and Western Asia.

Georgia’s five airports are located in various regions, with the largest - operated by TAV Airports - in Tbilisi. The Ambrolauri airport opened in December 2016; it serves smaller aircraft with a 30-50 passenger capacity. Georgia’s additional airports are in Batumi, Mestia, and Kutaisi.

A recent governmental initiative regarding the establishment of logistic centres in Tbilisi and Kutaisi created substantial interest from investors. Along with several Georgian companies, applications from companies registered in China, Switzerland, Turkey, and others were received. The anticipated development of infrastructure and manufacturing in Georgia, combined with its increasingly recognized strategic location at the crossroads of Europe and Asia, will open up opportunities for modern industrial and logistics real estate investments.

TRANSPORT & LOGISTICS INFRASTRUCTURE

AMBROLAURI

5AIRPORTS RAILWAY

2,084km

1,603km

INTERNATIONAL

ROADS

5,298km

INTERNAL

STATE ROADS


Georgia’s economic sectors are exposed to the crisis on different scales.

The Hotels, Food & Beverage and Entertainment sectors are highly

exposed; however, in total, their share in the GDP amounts to 10%. Trade

(14%) and Construction & Development (8.6%) have a relatively larger

share in the GDP, yet both fall into the category of highly exposed sectors.

Covid-19 Effects & Economic Outlook


Wholesale & Retail Trade

14.4%

Real Estate

Activities

11.5%

Manufacturing

10.1%

Construction

8.6%

Agricalture, Forestry

& Fishery

7.2%

Public Administration &

Defence

6.8%

Transportation &

Storage

6.5%

Financial & Insurance Activities

5.4%

Accommodation &

Food Service Activities

4.8%

Education

4.5%


Activities

4.3%

Arts, Entertainment &

Recreation

3.2%

Information &

Communication

3.0%

Professional, Scientific &

Technical Services

2.9%

Other Sectors

6.7%

GROSS DOMESTIC PRODUCT, COVID-19 IMPACT ON SECTORS (2019)

Very Exposed Exposed Partially Exposed

Neutral/Limited Impact More positive, than negative

Exposure Of Economic Sectors Towards Covid-19


The Influence of Covid-19 on Foreign Direct Investments

LARGEST DIRECT INVESTOR COUNTRIES

(USD,MILLIONS), 2019*

UNITED KINGDOM 247.8

TURKEY236.5

132.7IRELAND

USA 99.0

PANAMA 78.1 NETHERLANDS 52.9

CHINA 50.5RUSSIA 40.4

39.2JAPAN


According to the national statistics

office, in 2019 the foreign direct

investments (FDI) slightly increased by

0.2% and amounted to USD 1,267.7

million. Around 50% of the

investments are coming in from the

UK, Turkey and Ireland (preliminary

data, Geostat). The way these

countries tackle the spread of Novel

Coronavirus, and their investing

strategy, will be critical for the inflow

of future investment in Georgia.

The crisis of 2008-2009 had a

negative impact on direct foreign

investment inflows in Georgia,

recording a 60% decrease compared

to the previous year.

Agriculture,

Forestry and

Fishing

1.1%

Mining &

Quarrying

5.4%

Manufacturing

8.1%

Electricity, Gas,

Steam and Air

Conditioning

Supply

15.3%

Construction

9.3%

Hotels and

Restaurants

12.4%

Transport and

Communications

9.2%

Financial

Sector

20.6%

Other Sectors

18.5%

FOREIGN DIRECT INVESTMENT BY LARGEST

SECTORS IN THE ECONOMY, 2019*

Very Exposed Exposed Partially Exposed Neutral Other

Note: *Preliminary data


In 2019, (preliminary data)

investments were made in the

given sectors: Finance (20.6%),

Electricity, Gas, Steam and Air

Conditioning supply (15.3%),

and Hotels & Restaurants

(12.4%). Hotels & Restaurants

and Construction sectors fall

into the very exposed and

exposed category, respectively.

In the period of isolation, it is

expected that investments in

Hotels & Restaurants and

Construction sectors will

dramatically decrease.


Tourism in Georgia

In 2019, the number of international traveller trips

grew by 7.8% YoY from 8.7 mln to 9.4 mln, of which

83% were international visitor trips (7.7 mln.).

The number of tourist arrivals increased by 8.3%,

constituting 65.7% (5.1 mln) of the total number of

international visits, while same-day trips stood at

about 34.2%.

Citizens of 98 countries can travel to Georgia without

a visa and stay up to one full year. In addition, foreigners who hold a visa/residence permit of 50

countries can enjoy visa-free travel to Georgia.

Visitors who need to obtain a visa can take advantage

of the e-visa portal to get a short-term visa.

Simplified travel and visa-free regimes build on the

strong growth of inbound tourism.

Road travel remains the main means of transport for international arrivals due to the large share of travellers from neighbouring countries in the total number of visitors. In 2019, this increased by 8.7%, representing 74.8% of the total. Air travel, the second most popular choice among travellers, increased modestly by 2.3%, and constituted 23.7% of the total.

INTERNATIONAL ARRIVALS BY YEARS (MLN)

5.2 5.3 6.4 7.2 7.7

3.03.3

4.14.8

5.1

2015 2016 2017 2018 2019

International arrivals Tourist arrivals


TOURISM OVERVIEW

In 2019, the number of international

arrivals as well as the number of

tourists increased by modest 7%.


INTERNATIONAL ARRIVALS BY TYPES OF VISIT (MLN)

3.0 3.34.1 4.8 5.1

2.2 2.0

2.42.4

2.6

2015 2016 2017 2018 2019

Tourist arrivals Same-day visit



Source Markets

In 2019, the number of tourist arrivals amounted to

5.1 million. Most tourist visits originated from Russia

(23%), Azerbaijan (19%), Turkey (13%), EU countries

(12%), and Armenia (11%). Despite difficulties related

to US sanctions on Iran, the country remained in the

list of top 15 countries of international visitors.

Remarkably, in recent years, Georgia has become

more attractive to the western Europeans, as the

number of visits from EU countries increased by

21.9%. July and August remained the most popular

months for visiting Georgia.

From July 8, 2019 Russia has banned direct flights to

Georgia due to extended street protests. After the

flight bans the number of international visits by

Russian citizens decreased by 20.6% in Q3 2019,

when compared to Q3 2018. The annual figure

marked an insignificant 0.6% decline. However, the

strong growth of the number of tourists visits from

Israel (31%), Ukraine (20%), Armenia (12%) mitigated

the shock and the total annual number of tourist

visits increased by 6.8%.

Q3 2019Q3 2018

NUMBER OF TOURIST VISITS FROM RUSSIA IN Q3

2019 vs. Q3 2018 (THOUSAND)

Even though the number of tourist

visits dropped by 20.6% in Q3 2019

due to flight bans from Russia, the

annual figure marked an

insignificant decline.

SHARE OF MAIN SOURCE MARKETS


23%

19%

13%

11%

4%

4%

1%

12%

13%

5.1MLN

Azerbaijan

Turkey

Armenia

Israel

Iran

Ukraine EU

Other

Russia

36245620.6%


Source: GNTA, Colliers International

COUNTRY 2015 2016 2017 2018 2019

Azerbaijan 1,156 1,076 1,302 1,425 1,527

Russia 763 849 1,135 1,405 1,472

Armenia 1,192 1,152 1,287 1,269 1,365

Turkey 1,074 988 1,007 1,099 1,157

Ukraine 127 152 170 177 208

Israel 55 85 115 157 205

Iran 22 130 283 291 142

Kazakhstan 31 41 47 59 104

Germany 30 33 43 64 89

Poland 39 42 49 67 88

Saudi Arabia 8 18 46 52 75

Belarus 26 33 42 60 66

India 8 26 43 51 55

China 7 11 18 32 48

USA 25 27 34 42 47

DYNAMICS OF INTERNATIONAL TRIPS FROM TOP 15

SOURCE MARKETS (THOUSAND) Georgia’s tourism market is sourced

dominantly by neighbouring countries

(71% of tourist trips in 2019). However,

there’s significant increases shown from

other non-neighbouring countries.

79.6% 75.4% 73.0% 72.1% 71.4%

20.4% 24.6% 27.0% 27.9% 28.6%

2015 2016 2017 2018 2019

Neighbouring countries Non-neighbouring countries

DISTRIBUTION OF INTERNATIONAL TRIPS FROM

NEIGHBOURING AND NON-NEIGHBOURING

COUNTRIES


Map Of Top 15 Source Markets



The tourism industry accounted for 8.1% of Georgia’s

economy in 2019. The same year, tourism value added

grew by 16.9% YoY and amounted to USD 1.3 billion

(GEL 3.53 billion). Tourism value added reflects the

economic activity generated by industries such as

hotels, food and beverage (F&B), travel agencies,

airlines and other transportation services. The transport

category, which represents 38% of the total value

added, grew by 20% YoY. The F&B industry grew by

23%, while the travel agencies and the accommodation

categories increased by 17% and 11%, respectively.

Travel industry supported 123 million jobs in 2018.

Revenues from inbound tourism have been growing

rapidly over the past five years. In 2018, revenues rose

by 17% YoY and amounted to USD 3.22 billion. The

volume of foreign card operations by international

travellers has also grown - by 3.7%, hitting 2.14 billion

GEL in 2018. Spending volume is expected to increase

as Georgia continues to attract travellers with higher

holiday budgets.

Economic Impact of Tourism

STRUCTURE OF TOURISM VALUE ADDED, 2019

(USD)

TOURISM VALUE ADDED AND SHARE IN GDP BY YEARS (USD, BLN)

Travel Agencies

Transport Food & Beverage

Accommodation



38%

37%

22%

3%

1.3BLN

0.86 0.83 1.03 1.19 1.27

6.7%7.1% 6.9%

7.6%8.1%

2015 2016 2017 2018 2019

Tourism value added Share in GDP

TOURISM REVENUE BY YEARS (USD, BLN)

1.94

2.17

2.70

3.22

3.27

2015

2016

2017

2018

2019

645 658 665 677 644

2015 2016 2017 2018 2019

EXPENDITURES PER TOURIST VISITS BY YEAR (USD)



Types of Tourism

Winter tourism is becoming ever more popular. The Mestia-Hatsvali cableway construction was completed in 2017. Goderdzi ski resort in Adjara and Tetnuldi ski resort in Mestia both opened in recent years. Two cableways were added to Goderdzi resort and in 2023, the world championship in freestyle ski and snowboarding is set to be held in Bakuriani. Three new ski lifts are to be built for the event.

Wine tourism, adventure tourism and spa and wellness tourism are under development. In 2019, wine tourism grew further with 46 newly built cellars and small enterprises. In Kakheti, near the village of Kisiskhevi, a wine village was built by Schuchmann Wines Georgia, consisting of 10 cottages with 15 more to be built in 2020.

Georgia hosted the 18th World Federation of Tourist Guide Associations (WFTGA) international convention in Tbilisi from January 17 to January 25, 2019. The convention brought together 300 tourist guides and representatives from around 70 countries and contributed to raising awareness about tourism in Georgia and will further contribute to the development of the tourism industry in the future.

458 570 724 919

1.85 1.88

2.5

2.8

2015 2016 2017 2018

Hotel industry Revenues, mln

Number of Guests in Hotels, mln

HOTEL INDUSTRY REVENUES (USD, MLN)


Hotel industry revenues are growing

in line with the tourism trend in

Georgia.


Source: Worldbank, GNTA, Colliers International

Source: Worldbank, Geostat, Colliers International

INTERNATIONAL TOURIST ARRIVALS (24+ HOURS)

Y-O-Y GROWTH RATE (%) BY BENCHMARK

COUNTRIES, 2019/2018

Benchmarking

In 2019, tourist arrivals in Georgia has increased by

6.3%. Among benchmark countries Bulgaria and

Estonia experienced the highest annual growth rate

in 2019 amounted to 4.5% and 3.2%, respectively.

Israel and Turkey had the negative growth rate in

2019 amounted to 1.2% and 2.4%, respectively.

Among benchmark destinations, international

tourist receipts were the highest in Turkey (USD

36.5 billion), followed by Israel and Bulgaria with

USD 8.16 billion and 5.07 billion, respectively.

Georgia has the fastest growth in

arrivals, and the revenue per tourist

visit is on par with the benchmark

countries, except for Israel.

6.3%

4.5%

3.2%

1.4%

-1.2%

-2.4%

Georgia Bulgaria Estonia Romania Israel Turkey

INTERNATIONAL TOURISM RECEIPTS (BLN) AND EXPENDITURE PER TOURIST TRIPS (USD)

BY BENCHAMRK COUNTRIES, 2019

36.5 8.16 5.07 3.27 3.262.33

818

2,005

545641

274

698

Turkey Israel Bulgaria Georgia Romania Estonia

International tourism reciepts(USD/billion) 2018 Expenditure per tourist


Travel Purposes

The number of guests in hotels has had a positive trend over the past four years. Out of 2.8 mln hotel guests in 2018, 1.9 mln were international travellers. 74% of these were leisure travellers, 13% visited Georgia for business purposes and only 1% for health tourism.

Out of 5.1 million tourist trips, 56% were made for leisure-recreation and shopping purposes, 25% for visiting families and relatives, and about 12% for business purposes. Its notable that business visits have increasing trend, the figure grows with an average of 9% annually. On average, the typical tourist spent 6.2 nights in Georgia.

6.3

6.6

6.36.2

2016 2017 2018 2019

56%

25%

12%

4%

1% 2%

5.1MLN

AVERAGE LENGTH OF STAY IN GEORGIA (NIGHTS)

Leisure & Shopping

Visiting Friends/family

Transit

Health & Medical Care

Business Other


PURPOSE OF TOURIST VISITS IN GEORGIA,

2019


During last five years, the number of

business trips is growing on average

by 9% annually.


In 2019, Georgian residents took a total of 14.3 mln domestic trips. 44.7% of those visits included at least one overnight stay, with an average trip length of 1.97 nights.

The majority of domestic trips made by Georgian residents were made with the intention of visiting friends and relatives (51%). The second and third most frequent purposes were leisure & shopping and visiting a second home, respectively. Adjara was the third most visited region in 2019: since it is located next to the Black Sea, it was the most popular holiday, leisure, and recreation destination.

Domestic tourism is a significant part of Georgia’s economic activity. In 2018, domestic travel spending accounted for 71.2% of direct Travel & Tourism GDP. Total expenditure by domestic visitors amounted to c. USD 792 million (over 2 bln GEL). The majority, more than 852 mln GEL, was spent on shopping, followed by food and drinks (400 million GEL) and transportation (305 mln GEL). Since 87.1% of domestic visitors preferred to stay at a friend’s, relative’s, or their own homes, spending on accommodation accounted for only 5% of the total expenditure (over 86 mln GEL).

775,838 local travellers stayed in hotels in 2018, 58% of them for leisure and 28% for business purposes. Hotels in Tbilisi received 255,354 local guests, while hotels in Batumi and Kutaisi hosted 222,556 and 53,935 Georgian guests, respectively.

Domestic Tourism

33.5%

23%

17.6%

19.4%

5%

1.5%

SHARE OF TOTAL EXPENDITURE (USD), 2018

Shopping

Food & Beverage

Transportation

Other

Accommodation

Cultural & Entertainment

service


792MLN

Visiting Friends

& Family

Leisure & Shopping

Visiting second

home

Health & Medical

Care

Business

Other


51%

22%

9%

9%

5%4%

14.3MLN

PURPOSE OF VISITS IN GEORGIA 2019


Airlines carried 1.97 million international travellers

in 2019, up by 1.3% from 2018. Tbilisi International

Airport once again received the largest number of

travellers – 1.5 mln depicting a 3% decrease YoY.

Decline of travellers in Tbilisi airport was caused

by flight bans from Russia as the number of

international travelers received in airports from

this country decreased by 24% YoY. The number

of travellers in Kutaisi Airport increased

significantly by 43%. The main contributors were

Ukraine and Poland. 55% of the travellers were

received from these countries. Batumi Airport was

also up from 262 K to 279 K international

travellers, which represents a 7 % increase.

In 2019, there were 50 international and two

domestic airlines operating on the Georgian

market. Wizz Air Hungary is the largest company

operating on the Georgian market. It offers flights

to up to 39 destinations. In 2019, it provided

service for 825,290 passengers (16% of the total

trips). The second largest company is Turkish

Airlines, with 572,181 passengers and 11.1% of the

market share. This is followed by Georgian

Airways, Ural Airlines, Fly Dubai, and Ukraine

International Airlines. In 2018, one Georgian, My

Way Airlines, and nine international companies

appeared on the market. Additionally, in 2019,

Ryanair, one of the Europe’s low-cost and most

popular airlines, also entered Georgia, offering

two routes from Tbilisi and two from Kutaisi.

Air Travel

1,551

138261

1,498

197

279

Tbilisi Kutaisi Batumi

2018 2019

7%

3%


NUMBER OF INTERNATIONAL TRAVELLERS

RECEIVED IN AIRPORTS, 2018-2019 (THOUSAND)

43%


NUMBER OF INTERNATIONAL TRAVELLERS

RECEIVED IN AIRPORTS FROM RUSSIA , 2018-2019

(THOUSAND)

530 404

24%

20192018


Origin DestinationDuration

(hours)

Tbilisi Baku 1.0

Tbilisi Tehran 1.7

Tbilisi Istanbul 2.0

Tbilisi Tel Aviv 2.1

Tbilisi Kiev 2.2

Tbilisi Moscow 2.4

Tbilisi Athens 2.6

Tbilisi Minsk 2.6

Kutaisi Vilnius 2.8

Kutaisi Budapest 2.9

Tbilisi Dubai 2.9

Tbilisi Warsaw 3.0

Tbilisi Yerevan 0.39

Tbilisi Brussels 4.2

Tbilisi Beijing 7.4

Tbilisi Sharm el sheikh 2.5

Map Of Direct Flights From Georgia


(hours)

Tbilisi Riga 3.1

Tbilisi St. Petersburg 3.1

Tbilisi Vienna 3.2

Kutaisi Berlin 3.3

Tbilisi Prague 3.4

Tbilisi Almaty 3.5

Tbilisi Munich 3.6

Kutaisi Milan 3.8

Tbilisi Amsterdam 4.2

Tbilisi Urumqi 4.5

Tbilisi London 4.6

Batumi Istanbul 1.7

Batumi Kiev 2.0

Tbilisi Paris 4.4

Tbilisi Bologna 3.6

Tbilisi Milan 3.8


(hours)

Tbilisi Kuwait 2.1

Tbilisi Bahrain 2.5

Tbilisi Astana 3.1

Tbilisi Aktau 1.2

Tbilisi Doha 2.7

Tbilisi Bucharest 2.2

Tbilisi Barcelona 4.6

Tbilisi Tashkent 2.8

Tbilisi Ankara 1.6

Kutaisi Paris 4.2

Kutaisi Prague 3.2

Kutaisi Rome 3.3

Kutaisi Riga 3.0

Kutaisi Thessaloniki 2.4

Batumi Minsk 2.5

Batumi Moscow 2.3

MAIN FLIGHT ROUTES

Source: www.flighttime-calculator.com


The Reliance of The Georgian Economy on Tourism

The reliance of the Georgian economy on tourism

has increased significantly in the last couple of

years. In 2019, tourism made up 8.1% of the Gross

Domestic Product of Georgia.

Domestic tourism has a small role in the sector

overall and takes up a mere 27% (percent of local

tourists in the total number of tourists staying at

hotel-type accommodations). With these numbers,

Georgia appears in the lower right corner of the

graph (close to Greece). It is expected that the crisis

will have a significant effect on the hotel industry

and the economy in general for countries in the

same category, and the recovery period will be

extensive.

Georgia mainly receives tourists from its

neighboring countries. Leading countries by the

number of tourists in Georgia are Russia, Turkey,

Armenia, Azerbaijan, Ukraine, and the EU countries

collectively. In order to make an accurate estimate

of future visitors to Georgia, the spread of the virus

in said countries must be taken into consideration,

as when these countries will be able to stop the

spread of the virus.

Significant impact on the hotel industry

and economy, prolonged recovery


but less on the economy, slow recovery


and economy, gradual recovery

Significant impact on the hotel industry but

less on the economy, faster recovery

Source: Colliers International

DOMESTIC TOURISM RELATIVE TO TOURISM AS A PERCENTAGE OF THE ECONOMY, 2019


Retail Market Fundamentals

Retail Trade

The retail trade (excluding motor vehicles and

motorcycles) is one of the largest and fastest

growing sectors in Georgia. In 2019, retail trade

turnover amounted to GEL 15.3 billion (at

current prices). When compared to the same

timeframe in 2018, this reflects an 8.5% increase.

A massive growth was recorded in 2018, when

the figure increased by 18.3%. The number of

employed persons is also growing steadily in the

sector, with the exception in 2019, when the

figure declined by 5%.

With a 77% share, Tbilisi dominates Georgia’s

trade economy. The average annual growth rate

of the trade sector in Tbilisi was 12% over the

last three years. Adjara and Imereti are other

significant trade regions, with 6% and 5% shares,

respectively. In Adjara and Imereti regions, the

average annual growth during the last three

years amounted to 12% and 16%, respectively.

Along with the development of the retail trade

sector, annual per capita retail expenditure has

grown in Gel over the last decade, while due to

currency depreciation has decreased in USD. The

share of spending on food is 35% in 2019. retail

spending on foot, clothes and other

consumption expenditures is just 10% of the

total spending and amounts to USD 75,

reflecting a 10.7% decrease YoY.

78% 76% 77% 77%

6% 7% 6% 6%4% 4% 4% 5%4% 4% 4% 4%8% 8% 8% 8%

2015 2016 2017 2018

Tbilisi Adjara Imereti Kvemo Kartli Other

ANNUAL RETAIL SPENDING PER CAPITA BY YEARS

RETAIL TRADE DISTRIBUTION BY REGIONS, 2015-

2018

RETAIL TRADE TURNOVER AND NUMBER OF

EMPLOYED PERSONS (MLN)




87,983 95,376 101,727 108,763 103,342

9,86210,622

11,950

14,14115,357

4,346 4,488 4,7615,581 5,544

2015 2016 2017 2018 2019

Number of employed persons

Retail trade turnover (GEL)

Retail trade turnover (USD)

2,491 2,586

2,769 2,749 2,922

1,098 1,092 1,103 1,085 1,055

358 348 360

370 366

91 82 89 84 75

156 152 146 143 145

2015 2016 2017 2018 2019

Total consumption expenditure (GEL) Total consumption expenditure (USD)

On food, beverages, tobacco (USD) On clothes, footwear and household goods (USD)

Other consumption expenditurre (USD)

756 520 758 548 200 306 252 887 801 758 631 623 331 271

9.1

2.5

9.9

11.5

3.1

5.6

3.1

Zagreb Kiev Riga Vilnius Batumi Sofia Tbilisi

Existing modern SC (sq m per 1,000 inhabitants)

Upcoming modern SC (sq m per 1,000 inhabitants)

Household final consumption expenditure per

capita (constant 2010 USD)


Among the benchmark cities, the highest growth in

modern shopping centre stock per 1,000 inhabitants

is expected in Kiev, amounting to 54%, from 520 in

2019, up to 801 by 2022.

Riga is close to Tbilisi in its prime rental rates.

However, the difference in modern shopping centre

stock per 1,000 inhabitants is apparent: 758 sq m in

Riga and 274 sq m in Tbilisi.

Completion of upcoming shopping centres in

Batumi (Orbi mall, Grand mall, Mardi mall and

Batumi trade centre) will triple the stock per 1,000

inhabitants from 200 sq m to 623 sq m by 2022.

By the end of 2022, Tbilisi’s modern shopping

centre stock per 1,000 inhabitants is expected to

grow by 8%, from 252 sq m to 271 sq m.

EXISTING AND PROPOSED MODERN SC SUPPLY (sq m per 1,000 inhabitants) AND HOUSEHOLD FINAL

CONSUMPTION EXPENDITURE per capita (USD/CONSTANT 2010), THOUSAND, 2018

Source: WorldBank, Colliers International

BENCHMARKING

Photo: City Mall Saburtalo

Modern Shopping

Centres | Tbilisi


Supply

The total volume of retail floorspace in Tbilisi shopping centres, street retail and Bazaars amounts to 783 K sq m. Among them, Bazaars hold the largest share with 49% of the total stock, yet Bazaar floorspace is not increasing in contrast with modern shopping centres (MSC). Since 2015, the floorspace of MSC’s increased by 28% to 296 K sq m. In 2016, a third shopping centre was opened in Gldani, holding a total gross leasable area (GLA) of 22 K sq m, doubling the district’s floorspace and increasing its competitiveness.

Over the next two years, 29,500 sq m of leasable floorspace is expected to be added to the city’s supply. New shopping centre is planned to open on the territory of the former Children’s World. The size of the project has not been specified yet. The GLA of the mall is likely be about 25 K sq m.

230,933253,384

276,485256,923

296,437 296,437

29,500

2015 2016 2017 2018 2019 2020-21 F

RETAIL SPACE SUPPLY 2019


SHOPPING CENTRE SUPPLY BY YEARS (sq m)Source: Colliers International

Existing Supply Future Supply

HIGH STREETS

110 Ksq m

MODERN SC’S

296 Ksq m

BAZAARS

384 Ksq m


# Shopping Centre LocationGLA

(sq m)

Parking

Lots

Construction

Type

Developer/

Operator

Investment

Volume

1 East Point 2 Tvalchrelidze Street 71,780 1,900 Greenfield CBD Development

USD 540 mln

(incl.VAT)

2 Tbilisi Mall 213 Aghmashenebeli Alley 66,660 2,700 Greenfield Rakeen Development

3 Galleria Tbilisi 2/4 Rustaveli Avenue 24,500 300 Greenfield Georgian Co-Investment Fund

4 City Mall Gldani 1 Khizabavri Street 21,510 850 Greenfield IG Development

5 Tbilisi Central 2 Station Square 18,000 120 Brownfield Riverside Plaza

6 Gldani Mall Near Akhmeteli M/S 11,700 - Greenfield Salkhino-93

7 City Mall Saburtalo 1 Kavtaradze Street 50,698 1,500 Greenfield IG Development

8 Karvasla 7 Tsotne Dadiani Street 9,209 60 Greenfield Karvasla

9 Gldani Plaza 14 I.Vekua Street 7,870 80 Greenfield Plaza+

10 Merani Shopping Gallery 42 Rustaveli Avenue 7,544 60 Greenfield Warwickshire Estates Limited

11 HomeMart 37L Chavchavadze Avenue 6,966 50 Greenfield Ibercompany Irao

EXISTING MODERN SHOPPING CENTRES

UPCOMING MODERN SHOPPING CENTRES


(sq m)

Parking

Lots

Construction

TypeDeveloper/Operator

1 Axis Towers 37 Chavchavadze Ave 12,000 1,900 Greenfield Axis/GCF

2 GTC Vekua Street 7,000 2,700 Greenfield Georgian Trade Center

3 Didube Mega Trade 2 Eristavi Street 10,000 300 Greenfield Didube Mega Trade

Map Of Existing & Upcoming Modern Shopping Centres in Tbilisi


The leased area of Tbilisi shopping malls

amounted to 257,788 sq m. Fashion category

continues to hold the largest share (32%) with

the area 83,584 sq m. It is followed by

Supermarkets with the share (16%) and leased

area of 40,570 sq m.

Even though there are only 27 entertainment

units in Tbilisi’s shopping centres, they occupy

the fourth largest share (10%) of the leasable

floorspace and the ocuppy 26,985 sq m. Cavea,

Adjarabet, Maxxi Land, Playland and Lebowsky

are major tenants in this category.

Kidswear, Health & Beauty and Service

categories that are represented by financial

institutions, banks, pharmacies, cosmetic stores

and other chained shops, hold the lowest share

in the leased area of Tbilisi Shopping mall

(each 2%).

Demand

Supermarket

Household

Entertainment

Footwear

Food & Beverage

General

Electronics

Accessories

Kidswear

Fashion

Other

TENANT CATEGORY MIX 2018-2019 (AREA

SHARE)

Source: NAPR, Colliers International

30% 32%

18% 16%

11% 12%

10% 10%

9% 7%

5% 5%

5% 4%3% 4%3% 3%7% 6%

2018 2019

224,511 257,788

The share of Fashion category grew

by a modest 2 percentage points,

resulting a decrease of Supermarket

category portion.


Demand

237

74

74 56

52

45

45

35

31

30 27

11

Fashion

ServiceFootwear

Accessories

Health & Beauty

Household

ElectronicsFood & Beverage

General

Kidswear

Entertainment

Other

717UNITS

TENANT STRUCTURE BY CATEGORY (UNITS)


AVERAGE LEASED AREA BY TENANT CATEGORY,

2019 (sq m)

Tbilisi Shopping malls market is represented by 717

tenants, among them the largest number hold by

those from fashion category (237 units). The

average leased area in this category amounts to

353 sq m.

Despite the fact that only 27 entertainment tenants

operate on the market, the average leased area in

this category is the highest and amounts to 999 sq

m.


999

710

613

353

201 174 159 153 123 113 90


The demand for Tbilisi shopping centres has

significantly increased. In 2019, the net take-up

in Tbilisi shopping centres was positive. The

leased space increased by 34,807 sq m. This can

be attributed to the expansion of City Mall

Saburtalo. At the end of 2019, 78% of its

leasable area was occupied by various tenants.

The largest contributors in the net take-up were

Fashion and Household categories, with a 42%

and 21% share, respectively. Footwear and

Electronics were categories where the net take-

up was negative, amounting to 253 and 1,616

sq m, respectively.

15,563

7,648

4,690

3,292

1,769 1,182

615 48

(253) (1,616)

Service

Electronics

Food & Beverage

General

Accessories

Footwear

Fashion

Household

Entertainment

Health & Beauty

NET TAKE-UP BY TENANT CATEGORY, 2019 (sq m)

NET TAKE-UP BY YEARS (sq m)



1,720

32,937

20192018

32,937


18.4 19.3 19.0

2017 2018 2019

Performance Indicators

As of 2019, the weighted average rent in shopping

centres had modestly decreased by 1.5% compared

to the previous year, amounting to USD 19.0 per sq

m. Increased competition represented by the

expansion of City Mall Saburtalo was the main

reason for the decline.

In 2019, the vacancy rate stood at 10%. Despite the

expansion of City Mall Saburtalo, and as a result of

the overall supply being expanded by 39.5K sq m,

the vacancy rate did not increase significantly. The

reason was strong performance from City Mall

Saburtalo, seeing the signing of pre-let agreements

with main retailers. By the end of 2019, around 80%

of the leasable area in City Mall Saburtalo was

occupied.

Tenants from the Health & Beauty category pay the

highest rent, USD 43.9 per sq m, followed by

Accessories with a rental rate of USD 35.5 per sq m.

Tbilisi’s shopping malls are scattered throughout

the city, and local customers value the malls as

destinations and convenient facilities offering

shopping, dining, and family gathering areas.

Like Galleria Tbilisi, City Mall Saburtalo will be

positioned as a destination mall. With anchor

tenants such as H&M, Zara, and Cavea Cinema

attracting a large number of customers, the

shopping centre is expected to have a strong and

stable performance.

43.9

35.5

27.1 25.6 24.9

Health &

Beauty

Accessories Service Food &

Beverage

Footwear

TOP 5 HIGH PAYER CATEGORIES

(USD, sq m, net of VAT )

WEIGHTED AVERAGE RENT (USD, sq m, net of VAT)



VACANCY RATE (%)

13%

8%

10%

2017 2018 2019


75.0

57.363.0

48.144.7

25.3

80.0

56.250.6

47.243.8

26.5

Kiev Zagreb Riga Vilnius Sofia Tbilisi

2018 2019

PRIME RENTS IN MODERN SHOPPING CENTRES,

2018-2019 (USD/sq m, net of VAT)

Among benchmark cities, Prime rent in Tbilisi stands at a lower level, equaling

to USD 26.5 per sq m.

Source: NAPR, Integis, Colliers International

Photo: Aghmashenebeli Avenue

High Streets |

Tbilisi


Supply

In 2019, the supply of leasable floorspace on Tbilisi high streets amounted to 103 K sq m. Aghmashenebeli Avenue holds the largest share with 28% (c.28K sq m), followed by Pekini with 25%, after which are Chavchavadze and Rustaveli Avenues with 24% and 23%, respectively.

The leasable area on Chavchavadze Avenue increased by additional c.3,000 sq m in 2019. As a result of Hausart Plaza completion the floorspace grew by 12%. The retail space in mentioned project is already absorbed.

It is expected the growth of retail area on Pekini Street, while Pekini Plaza is finishing construction works. The figure might increase by c.2,000 sq m.


RETAIL SPACE SUPPLY BY HIGH STREETS, 2019

Aghmashenebeli

Pekini

Chavchavadze

Rustaveli

28%

25%

24%

23%

103’KSQ M

The completion of Hausart Plaza

increased retail supply on

Chavchavadze Avenue by 12%.

Map of Tbilisi High

Streets



SHARE)


Service

Food & Beverage

Fashion

Supermarket

Health & Beauty

General

Accessories

Footwear

Other

In 2019, the Service and Fashion categories held

the largest share of the total leased floorspace

(23% each), mostly represented by financial

institutions, mobile operators, and other service

providers, as well as fast food chains, restaurants,

and cafes.

18% of leased space was held by Fashion,

represented by local and international brand

stores. Health & Beauty held 8% of leased space

on the Tbilisi high street market. The category is

represented by beauty salons, pharmacy chains,

and cosmetic stores such as Yves Rocher, Lutecia,

and Ici Paris.

Supermarkets, with a 7% share, were comprised of

local and international grocery stores such as Spar,

Nikora, and Ori Nabiji.

The Footwear category held the smallest share of

the leased floorspace (4%) and was mainly

represented by local brands. International brands

in this category are Bata, Schon and Timberland.

Demand

22% 23%

18%23%

22%18%

10% 8%

8% 7%

5% 6%

4% 5%2% 4%9% 7%

2018 2019

81,905 94,217

The opening of large-sized F&B venue on

1st Republic Square, increased this

category share by 5 percentage points.


263

170

155

95

78

72

40

23 22

49

Service

Supermarket

Food & Beverage

General

Footwear

Accessories

Household

Fashion

Health & Beauty Other

967units

TENANT STRUCTURE BY TENANT CATEGORY

(UNITS)


Tbilisi high street retail market is represented by 967

tenants, among them the largest number hold by those

from service category (263 units). The average leased

area in this category amounts to 83 sq m.

Even though, only 23 tenants operate in the

supermarket category, the average leased area in this

category is the highest and amounts to 298 sq m.


2019 (sq m)


298

125 109

98 87 83 83

60 56


28.7 34.3 31.4

2017 2018 2019


33.9 34.4

29.1

24.9

36.8

33.5 33.8

31.5

35.5

32.5

29.9

25.8

Pekini Rustaveli Chavchavadze Aghmashenebeli

2017 2018 2019

WEIGHTED AVERAGE RENT ON HIGH STREETS (USD/sq m/net of VAT)


Rents have decreased on Chavchavadze, Pekini,

Rustaveli and Aghmashenebeli avenues, driving

the overall high street weighted average rent from

34.3 in 2018 to 31.4 in 2019. A significant decrease

was observed on Chavchavadze and

Aghmashenebeli avenues.

The reason for the decline on Chavchavadze

avenue is rehabilitation works that were extended

by more than a year.

Rents on Aghmashenebeli Avenue were

overpriced in 2018, then the market has been

stabilized, rents have been reduced that led the

vacancy rate to slightly decrease.

Prime rent on Tbilisi’s high streets stands at low in

contrast with the benchmark cities. In 2019, the

figure amounted to USD 38.3 per sq m, reflecting

a 7% decrease, when compared to 2018.

Rental Rates

WEIGHTED AVERAGE RENT (USD, sq m/net of VAT)

83.080.2

68.7

45.0 45.841.2

83.078.6

67.4

50.0

39.3 38.3

Kiev Sofia Vilnius Zagreb Riga Tbilisi

2018 2019

HIGH STREET PRIME RENTS IN BENCHMARK CITIES

(USD, SQ M)

Source: NAPR, Colliers Integis, Colliers International

Overpriced rents on Aghmashenebeli

Avenue have stabilized, returning to

the historic market position.


VACANCY RATES ON HIGH STREETS BY YEARS


The overall vacancy rate on Tbilisi’s high streets

increased from 6% in 2018 to 8% in 2019. The main

cause for this increase was road construction works

on Chavchavadze Avenue. A slight increase was

seen in vacancy rates on Pekini and Rustaveli

avenues, yet Aghmashenebeli saw a two-

percentage point decrease.

Vacancy Rate

4%

1%3%

4%

3%4%

8%

12%

10%

11%

4%

15%

2017 2018 2019

Pekini Rustaveli Aghmashenebeli Chavchavadze


VACANCY RATE (%)

7%

6%

8%

2017 2018 2019

Prolonged rehabilitation works on

Chavchavadze Avenue have led to a

significant increase in the vacancy

rate.

Photo: Metro City Batumi

Modern Shopping

Centres | Batumi





There are now three shopping centres in Batumi:

Batumi Mall, Metro City Forum, and Black Sea Mall,

which supply the city with a total of 33,285 sq m gross

leasable retail space.

The market size of modern shopping centres will

expand, by an additional c.50 K sq m in 2024, with the

completion of Orbi City Shopping Centre and World

Trade Centre by Alliance Group.

Grand Mall shopping centre will be located on the

corner of Khimshiashvili Street. The total GLA will

amount to 12,061 sq m and will be distributed on two

floors. The project is to be completed in 2022.

The shopping mall in Orbi City on Khimshiashvili

Street will comprise retail spaces distributed on the

ground, 1st and 2nd floors, with a total GLA of c.25,000

sq m. The project is set for completion in 2024.

Supply

SHOPPING CENTRE SUPPLY BY YEARS (sq m)


27,991 30,954 33,285 33,285 33,285

59,173

25,888

50,000

2017 2018 2019 2020 2021 2022

59,173

109,173

HIGH STREETS

109 Ksq m

MODERN SC’S

33 Ksq m

BAZAARS

410 Ksq m

20242022




(sq m)

Construction

TypeDeveloper/Operator Completion Date

1 Orbi Khimshiashvili Street 25,000 Greenfield Orbi Group 2024

2 Grand Mall Khimshiashvili Street 12,061 Greenfield Grand Mall 2022

3 Mardi Mall Pushkini Street 13,827 Greenfield Mardi Group 2022

4Batumi World

Trade CentreKhimshiashvili Street 25,000 Greenfield Alliance Group 2024



(sq m)

Construction


Parking

Lots

Investment

Volume

1 Metro City Forum1 Lech & Maria Kachinski

Street15,867 Greenfield Metro Atlas Georgia 220

USD 35 mln

(incl.VAT)2 Batumi Mall 88a Gorgiladze Street 11,664 Greenfield House in Boulevard 124

3 Black Sea Mall 14 Shartava Avenue 5,754 Greenfield MP Development 120

Map Of Existing & Upcoming Modern Shopping Centres in Batumi


In Batumi, most of the leased area is occupied

by fashion retailers, which hold around 32% of

the area. All major operators are presented in

this category, except for Inditex brands, such as

Zara, Bershka, and Mango.

The second largest occupier, with a 29% share,

is the Supermarket category, with the main

market players being Carrefour and Goodwill.

Food & Beverage, Entertainment and Health &

Beauty categories hold the lowest share of

leased area in Batumi shopping malls. The

categories are represented by entertainment

centres, pharmacies, local and international

cosmetic stores.

Demand

There is a growing trend in

the fashion category, while

the share of supermarkets in

MSCs is slightly diminishing.



SHARE)

Fashion

Supermarket

Household

Food & Beverage

Footwear

Entertainment

Health & Beauty

Other

23%

32%

31%

29%

15%

13%

6%

5%6%4%4%4%4%3%

4% 2%

8% 8%

2018 2019

28,37226,483



32

13

109

7

7

6

5

3

11

103units



Batumi Shopping malls market is represented by 103

tenants, among them the largest number hold by

those from fashion category (32 units). The average

leased area in this category amounts to 282 sq m.

The following is Household category with 13 tenants

and their average area is 283 sq m. There are only 5

tenants from entertainment category and their

average area amounts to 226 sq m.

283 282

226

174

153

116 104

75 64

Fashion

Household

Footwear

Food & Beverage

Health & Beauty

Electronics

Accessories

Other

General

Entertainment


2019 (sq m)


In 2019, the net take-up in Batumi’s shopping

centres saw a positive trend and amounted to

c.2,000 sq m. The largest contributors were

Fashion retailers. Eurobrand, Atelier Outlet and

New Yorker were new entrants on the market.

The Fashion category is followed by Kidswear.

The main contributors in this category were

Minimen, OVS kids and Bebe.

The vast majority of categories in Batumi

shopping centres experienced a negative net

take-up. Among them, the largest outflow was in

the electronics category since Aray Tomorrow

left Black Sea Mall.

NET TAKE-UP BY YEARS (sq m)


Health & Beauty

Footwear

Accessories

Household

General

Fashion

Electronics

Kidswear

Catering

NET TAKE-UP BY CATEGORY, 2019 (sq m)

2,941

403

47

-97 -147 -239 -265 -269-483


1,88912,346

20192018

1,889



As of 2019, the weighted average rent on

Batumi’s shopping centres amounted to USD

14.4 per sq m. When compared to 2018, the

figure dropped by 10%. It should be noted that

rents of Hyper/Supermarket category tenants

are not included in the weighted average rent

analysis as they are turnover-based.

The Service category pays the highest weighted

average rent on Batumi’s shopping centre

market. At USD 45.8 per sq m, the category is

represented by financial institutions and beauty

salons. Health & Beauty and Accessories tenants

are also among the high payers, with USD 26.2

per sq m and USD 24.4 per sq m, respectively. In

contrast with Tbilisi, the Electronics category has

higher rental rates, mostly due to small units

under lease. TOP 5 HIGH PAYER CATEGORIES

(USD/sq m/net of VAT)



45.8

26.2 24.4 24.2 22.7

Service Health & Beauty Accessories Electronics Footwear

11.2 16.0 14.4

2017 2018 2019


Some of the high-payer

categories leaving MSCs has

resulted in the reduction of the

weighted average rent.

29%

12%

6%

2017 2018 2019

VACANCY RATE (%)


The absorption of vacant spaces caused the rate

to drop from 12% in 2018 to 6% in 2019. In

terms of shopping centres, the largest amount of

vacant area is recorded in Metro City Forum.

However, they have negotiations underway with

several potential tenants.

75.0

57.363.0

48.144.7

21.7

80.0

56.250.6

47.243.8

24.3

Kiev Zagreb Riga Vilnius Sofia Batumi

2018


PRIME RENTS IN MODERN SHOPPING CENTRES,

2018-2019 (USD, sq m, net of VAT)

Photo: Old Batumi

High Streets |

Batumi


The supply of street retail floorspace

is increasing year over year as the

city is under active development.

Supply

As of 2019, the supply of leasable floorspace on Batumi high streets amounted to 98 K sq m. Due to active developments the supply of retail spaces increases year over year. In 2019, the amount of total leasable floorspace has increased by 6%, when compared to the previous year.

Around 20 streets were researched. Among them Z.Gamsakhurdia, Khimshiashvili, Rustaveli, Gorgiladze Streets, Chavchavadze Avenue, the part of old Batumi are the city’s high streets, offering visitors various attractions, cafes, restaurants, and fashion stores.

Map of Batumi High Streets


Service providers are the largest occupiers on Batumi

high streets, occupying 25% of the gross leasable area

(GLA). Major tenants from the Service category

include Bank of Georgia and TBC Bank, followed by

Catering and Fashion, with 17% and 13%, respectively.

The Fashion category is represented by both local and

international brands, among them Defacto, Waikiki,

and Koton. Tenants from the Catering category

include McDonalds and Chachatime.

With 13% of the stock, the Electronics category is

represented by local chain stores such as Zoommer,

Elit Electronics, and Alta.

The Household and General categories each hold 6%

of the stock. The Household category is represented

by local stores such as Supta Sakhli and Akhali

Nateba.

The Hyper/Supermarket category holds the smallest

share of the Batumi high street retail market. With 3%

of the leased space, it is represented by international

brand Spar and local brands such as Nikora, and

Goodwill.

Demand


Service

Food & Beverage

Fashion

Household

Electronics

General

Health & Beauty

Entertainment

Supermarket

Other

TENANT CATEGORY MIX 2018-2019

(AREA SHARE)

25% 25%

18% 17%

13% 13%

13% 13%

6%6%5%6%5%5%5%4%3%3%7%8%

2018 2019

92,41298,096

Despite the increase in supply, tenant

category mix has not changed

significantly.




Service

ElectronicsFashion

General

Household

Health & Beauty

AccessoriesFood & Beverage

Grocery

Supermarket

Other

419

235

225

142

124

103

66

57 33

24 70

1,498units

Batumi high street retail market is represented by

1,498 tenants, among them the largest number is

hold by those from service category (419 units). The

average leased area in this category amounts to 59

sq m.

The lowest number of tenants are from footwear,

kidswear, entertainment and fitness/lifestyle

categories with the total of 70 units.

Tenants from general and grocery categories hold

the lowest average area amounted to 39 sq m and

27 sq m, respectively.


2019 (sq m)


217

143

8573

59 54 5241 39 27





13.7 14.5 13.8

2017 2018 2019

20.2 18.7

16.1

14.5 13.5

Health &

Beauty

Supermarket Service Fashion Entertainment


(USD, sq m, net of VAT)

The highest paying category on Batumi high streets is

Health & Beauty. In 2019, the weighted average rent

for tenants from this category amounted to USD 20.2

per sq m. In contrast with Health & Beauty, the

weighted average rent rate of Entertainment stands at

USD 13.5 per sq m, as it tends to occupy larger

spaces.

Compared to 2018, the weighted average retail rent

on Batumi high streets decreased by 4.8% and

amounted to USD 13.8 per sq m. K. Gamsakhurdia

and Chavchavadze remain the most prestigious

streets, where average retail rental rates vary from

USD 10 to USD 30 per sq m. Chavchavadze Street is

primarily occupied by electronics and service tenants,

while K. Gamsakhurdia tends to attract more fashion,

footwear, and catering stores.

Since Batumi is very active in terms of new

developments, new retail spaces are being added to

the city supply. However, the vacancy rate slightly

decreased by 1 percentage point, from 11% in 2018

to 10% in 2019.


7%

11%10%

2017 2018 2019

Vacancy Rate (%)


Among comparable cities, prime

rent on high streets stands modest

at USD 15.6 per sq m.

HIGH STREET PRIME RENTS IN BENCHMARK

CITIES, 2018-2019 (USD/sq m, net of VAT)


83.080.2

68.7

45.0 45.8

16.6

83.078.6

67.4

50.0

39.3

15.6

Kiev Sofia Vilnius Zagreb Riga Batumi

2018 2019

Photo: Cinema Sakartvelo – Novita SC

Modern Shopping

Centres | Kutaisi





Compared to Batumi and Tbilisi, Kutaisi’s retail market is

the least developed. Existing modern shopping centres

provide better facilities in comparison with Bazaars.

Additionally, the common practice of selling individual

retail units makes city’s investment opportunities more

challenging.

Currently, there are three modern shopping centres in

Kutaisi: Grand Mall, Karvasla, and Novita (also known as

Kino Sakartvelo). The total supply of the city amounts to

23,455 sq m leasable area.

High streets accumulate around 47% of the total supply.

Kutaisi’s high streets include Chavchavadze Avenue,

Gamsakhurdia, Rustaveli, and Old Kutaisi streets. High

streets are primarily leased by service, fashion, health &

beauty, catering and hyper/supermarket tenants.

Supply

SHOPPING CENTRE SUPPLY BY YEARS (sq m)

13,966 13,966

23,455 23,455 23,455 23,455

8,200

2015 2016 2017 2018 2019 2020

HIGH STREETS

57 Ksq m

MODERN SC’S

23 Ksq m

BAZAARS

35 Ksq m


Carrefour shopping centre is announced to open in Kutaisi by the end of 2020,

this will enlarge the supply with 8,200 sq m.



(sq m)

Parking

Lots

Construction


Investment

Volume

1 Grand Mall 67 Chavchavadze Street 7,500 50 Greenfield Bajiti LLC

USD 15 mln

(incl.VAT)2 Karvasla 4-4a Tsereteli Street 6,466 60 Greenfield Karvasla Management

3 Novita 14 Tamar Mephe Street 9,489 80 Greenfield Novita Capital Partners



(sq m)

Parking

Lots

Construction


1 Carrefour 2 Shartava Street 8,230 50 Greenfield West Point


Map Of Existing & Upcoming Modern Shopping Centres in Kutaisi


The highest share of leased retail space is held by

Fashion and Entertainment, occupying 33% and

28%, followed by General and Service tenants with

9% each, respectively. The anchor tenant in

Entertainment category is Cavea cinemas in Novita.

It should be noted that the recently opened Novita

shopping centre (former Kino Sakartvelo) is growing

in popularity among locals.

The lowest share of leased area is hold by Food &

Beverage, Health & Beauty and household

categories.

Demand

Fashion

Entertainment

General

Accessories

Service

Electronics

Footwear

Other


(AREA SHARE)


ANCHOR TENANTS IN KUTAISI SHOPPING MALLS

34% 33%

29% 28%

6% 9%

5%9%4%

6%4%

1%4%5%6%5%

9% 5%

2018 2019

13,62910,694



39

14

13

11

10

9

5

14

116units

Fashion

Other

Service

Electronics

Health & Beauty

Accessories

General

Footwear

TENANT STRUCTURE BY CATEGORY (UNITS)Kutaisi Shopping mall market is represented by

116 tenants, among them the largest number is

hold by those from fashion category (39 units). The


sq m.

The following is service category with 14 tenants

and their average area is 86 sq m. There are only 5

tenants from health & beauty category and their

average area amounts to 39 sq m.


99

8682

68

5652

39


2019 (sq m)

740

455 432

355

236

128

-30-68 -90 -92

-184

-249

1,634


In 2019, the net take-up in Kutaisi’s shopping

centres was positive and equalled 1,634 sq m. The

largest contributors were Entertainment, General,

Service, Accessories, Fashion and Electronics

retailers. Among new market entrants are Basti

Bubu, Euro brand, Wishlist.ge, Crystal bet and

Miniso.

Household category experienced the significant

outflow of tenants from Kutaisi shopping malls.

The largest tenant who left the market was Super.

NET TAKE-UP BY CATEGORY, 2019 (sq m)

Service

Electronics

General

Accessories

Fashion

Entertainment Food & Beverage

Footwear

Household

Health & Beauty

Kidswear

Supermarket


Despite the outflow of several

tenants, the net take-up

recorded a positive number.



In 2019, the weighted average rent in Kutaisi

amounted to USD 11.9 per sq m, reflecting a 15.4%

decrease when compared to 2018. The figure

significantly declined, by 34.6%, when compared to

2017.

Due to the strong performance of the Novita

shopping centre, the vacancy rate dropped and

stands at 5%.

Among the high payer categories are Electronics

with USD 25 per sq m, Accessories with USD 17.5 per

sq m, Footwear and Fashion retailers with USD 15

and USD 14.2 per sq m and the Service category

with USD 12.7 per sq m.


18.2 14.1 11.9

2017 2018 2019




25.0

17.5

15.0 14.2

12.7

Electronics Accessories Footwear Fashion Service


Due to the strong performance of

Novita shopping center, the

vacancy rate significantly dropped

following 2017.

39%

7%5%

2017 2018 2019

Vacancy Rate (%)


Photo: Café Paolo, Kutaisi

High Streets |

Kutaisi


Supply

Compared to Tbilisi and Batumi, Kutaisi’s street retail

market is less developed. High streets in Kutaisi are

Chavchavadze Avenue, Aghmashenebeli,

Gamsakhurdia, Rustaveli and Old Kutaisi (Queen

Tamar, St. Nino, Tsereteli, Pushkini and the territory

around Aghmashenebeli Square).

High streets are mostly rented by the Service,

Electronics, Catering, Health & Beauty,

Hyper/Supermarket, and Household categories.

High streets are accumulating around 50% of the

total supply. In 2019 the total leased space

amounted to 57 K, depicting about 12% increase,

when compared to the previous year.

In 2019, the supply of street retail

spaces recorded a 12% annual

growth rate.

Map of Kutaisi High Streets


The Service category holds 29% of the gross leasable

area. The figure has increased by 3 percentage

points in 2019, when compared to the previous year.

A considerable amount of lease space has been

occupied by microfinance organizations and banks.

Unlike Tbilisi, Electronics is the second largest

occupier by leasable floorspace on Kutaisi’s high

streets, holding 14% of the tenant mix. Comparing to

2018, the portion of Electronics category has

decreased by 2 percentage points. Noticeable

representatives are Megatechnica, Vestel, Elit

Electronics and Metromart.

The Fashion category does not hold such a

significant portion on high street market in Kutaisi, as

in Tbilisi and Batumi. As of 2019, The share of

Fashiom account for 7% and has not changed

compared to the previous year.

Demand



(AREA SHARE)

26%29%

16%14%

10%11%10%

9%8%

7%7%

7%7%

7%4%

5%5%

4%6%

6%

2018 2019

45,680

50,912

Service

Electronics

Food & Beverage

Household

Supermarket

Fashion

Health & Beauty

General

Grocery

Other

The portion of Service category in

tenant mix is significantly growing

year over year.




Service

ElectronicsFood & Beverage

Household

Fashion

Health & Beauty

SupermarketGeneral

Grocery

Entertainment

Other

302

8383

62

58

55

49

2713

1022

764units


357

267

200

75 69 60 62 48 39 29

AVERAGE LEASED AREA BY TENANT CATEGORY, 2019

(sq m)

Kutaisi high street retail market is represented by

764 tenants, among them the largest number is hold

by those from service category (302 units). The


sq m and is mainly represented by banks, financial

organisations etc.

The lowest number of tenants are from footwear,

kidswear, accessories and entertainment categories

with the total of 32 units.

Tenants from grocery and general categories hold

the lowest average area amounted to 39 sq m and 29

sq m, respectively.





21.5

16.1 14.8 14.6

11.0

Health &

Beauty

Service Catering General Supermarket

12.7 13.5 13.1

2017 2018 2019

WEIGHTED AVERAGE RENT

(USD, sq m, net of VAT)Street retail rents in Kutaisi range from USD 5 up to

50 per sq m. Since 2017, the weighted average rent

of the city’s high streets has grown by 6.3%, except

for 2019, when the figure decreased slightly by

2.9%.

Currently, rents on Chavchavadze Avenue are

relatively high and, along with Old Kutaisi, it is the

city’s most prestigious area.

In 2019, the vacancy rate grew by 3 percentage

points YoY and amounted to 12%. Compared with

2017, the figure increased significantly, by 8

percentage points.

Tenants from Health & Beauty category pay the

highest rate in Kutaisi (USD 21.5 per sq m),

followed by service (USD 16.1 per sq m).



4%

9%

12%

2017 2018 2019

Vacancy Rate (%)


Photo: Factory Poznan

Outlet Market

Potential

Outlet malls as a business segment have experienced

rapid growth over the last decades. Understanding

the evolution of the outlet mall industry is important.

The main drive for entering outlet malls on the retail

market was to sell surplus or irregular stock to

consumers at discounts. Outlet malls came about in

the 1980s and were often located in the suburban

areas of cities, targeting tourists as the largest

consumer base, and represented by tenants that were

not found in traditional malls. They offered a

significantly different atmosphere from the traditional

regional shopping centres.

The sector is prosperous due to low operating costs,

low rents, low construction costs, and the fact they

require less staff to run.

As of 2018, 213 outlet centres were operating in

Europe (excluding Turkey), with a total stock of 3.7

million sq m. The market continues to produce strong

sales growth. Estimated European outlet industry

sales increased by 51%, from €11.5 bn in 2013 to

€17.3 bn in 2017. The United Kingdom, Italy,

Germany, France, and Spain are the most developed

markets and have the highest stock of outlet malls.

VIA Outlets is one of the leading outlet operators, a

company that originated in 2014. The rapid growth

allows it to have 11 premium complexes in nine

European destinations, where it is represented with

more than 1,100 stores with a total area 260,000 m².


29,200

62,730 62,000

28,520

63,000

23,500

Vilnius Kiev Zagreb Sofia Riga

Operating Upcoming

OUTLET CENTRES SUPPLY BY BENCHMARK CITIES, 2019 (sq m)

Source: www.ecostra.com

Global Trends

Photo: Arena Centar Zagreb


Outlet Retail Market In Georgia

In contrast to the recent trends in the world, this

industry is yet to develop in Georgia. Currently, there are

no large outlet destinations, the market is limited to

several outlet stores located in existing shopping malls

and high streets in the central and suburban areas of

Tbilisi. The main market players in this sector are LC

WAIKIKI, ATELIER OUTLET, ICR, Navne, and EuroBrand.

The weighted average rent of outlet stores in Tbilisi

shopping centres varies between USD 5 per sq m and

USD 11 per sq m, approximately 2.5 times lower than

those of non-outlet retailers from a similar category. The

figure stands between USD 20-25 per sq m on high

streets, that is 1.5 times lower compared to the rents of

non-outlet tenants.

Pros

• Georgia is clearly a tourism hub in the Caucasus,

which means that a modern outlet shopping centre

will be a regional, rather than local, destination

• According to Colliers, existing retail operators have a

very positive sentiment towards entering the outlet

market.

• The Mtskheta-Tbilisi-Rustavi-Gardabani urban

agglomeration seems to be a prospective location for

new outlet destinations. Tbilisi is the main contributor

in GDP (52%) and tourism (with 57% of the total

tourist visits). Mtskheta is a standalone tourism

destination with a large number of international

tourists, and Rustavi is another close city that could

enhance the catchment area of the potential outlet

property.

Cons

• In Georgia, there is a lack of upscale brands that are a

popular part of the outlet centres throughout in CIS

region.

• The existing brand mix in the city is not satisfactory

to anchor a new outlet destination of regional

standards. Therefore, new market entrants would be

recommended in this regard.

• Existing local retailers prefer to enter outlet

destinations as multibrands, rather than monobrands,

to avoid high fit-out costs. Yet outlet centres that

feature numerous multibrand stores are not

considered a modern trend in outlet shopping in

terms of customer experience.

• Due to low operational costs and convenience

regarding delivery of goods, online shopping will be

an important competitor for the outlet industry.

• Another challenge is to bring into the country an

international outlet mall operator. This would be vital

for the Georgian market, as the current brand mix is

not fully appropriate for this purpose. A lot of effort

will be needed to form an international standard

tenant and brand mix for a regional outlet

destination.

The first steps have been taken, and the very first outlet

centre is set to open in Tbilisi in 2021. Gino Freeport

Fashion Outlet will be located on the territory of Tbilisi

Sea with an area of 8 K sq m. The centre is expected to

consist of 76 stores, restaurants and cafes. The project is

being implemented by Gino Holding, in partnership with

British Freeport. The company operates 16 outlet malls

worldwide, including in France, Germany, Switzerland,

and the UK.


CONCLUSIONS & OUTLOOK

Consumption spending per capita in GEL has been

growing over the years; however, as the currency

depreciates, the opposite picture is observable in

terms of US dollar. There is a similar pattern between

the weighted average rents and consumer spending

in USD, as it is the main currency in the real estate

market. A downward trend is expected to prolong in

2020, as spending is not forecasted to increase in

USD. As a result, turnover is not expected to increase,

and tenants might find it difficult to pay rent.

In 2020, Covid-19 has already affected the retail

market. It will trigger the further decline in rental

rates. Due to a decreasing trend in spending and

number of tourists, shopping centers, as well as

street retailers are expected to suffer from a

significant fall in revenues.

Tbilisi

The newly opened City Mall Saburtalo increased

retail supply within large modern shopping centres;

however, there is no increase in consumer spending

(USD) in the country. Therefore, we expect a declined

average turnover per sq m, which will potentially

result in reduced rental rates.

Even though the supply of MSCs has increased by

15%, the vacancy rate did not significantly increase in

2019, the reason being the strong performance of

City Mall Saburtalo. Due to its optimal size, location,

configuration and marketing efforts, around 80% of

the centre was leased before opening with the

signing of pre-let agreements with the main retailers.

Due to increased competition, as well as challenges

caused by Covid-19, landlords/leasers should

efficiently work to maintain occupancy. To prevent a

growth in vacant spaces, they might adjust the rental

rates and apply flexible payment conditions.

Currently, Fashion holds the largest portion in the

tenant category mix, while the supply of F&B and

Entertainment is very low compared to CEE countries.

Despite the entrance of City Mall Saburtalo on the

market, and increased supply, the distribution of

tenant categories has not significantly changed,

especially regarding F&B and Entertainment.

It is expected that due to Covid-19, the

abovementioned categories, holding 46% of the total

leased space, will most likely experience a significant

negative impact.

In street retail, our research covers four high streets

in Tbilisi. A dramatic increase in vacancy rate (11

percentage points) on Chavchavadze Avenue has

resulted in a modest (2%) increase in the total figure.

Potentially, Chavchavadze Avenue may regain

operational performance with a modified tenant

category mix. Due to the wide pavements, the street

might become focused on pedestrians and leisure

activities, resulting in increased interest from F&B

tenants.

It is expected that Covid-19 will further affect the

declining trend in rental and occupancy rates on high

streets. The leading categories in the Tbilisi high

street tenant mix are Service, F&B, Fashion, and

Health & Beauty. Most likely, decreased spending

and the declined number of tourists will negatively

affect these categories.

Batumi

Upcoming shopping centres in Batumi will triple the

stock per 1,000 inhabitants. Two major players (Orbi

and Alliance Group) are planning to enter the market

in the next 2 to 4 years, so we expect that the

competition will flourish between them. Therefore,

existing shopping malls might need to change their

concept and become more specialized.

The tourist market in Batumi has been adversely

affected by Covid-19. The F&B and Household

categories, holding 45% of the leased space, could

be particularly exposed to risks posed by the

pandemic. Unlike Tbilisi, the Entertainment category

holds a mere 3% of the total leased area, so this

category is less exposed in this regard.

On the high street market, Service, Electronics, F&B

and fashion categories, holding 67% of the leased

area, are likely to experience a significant negative

effect.

Kutaisi

Kutaisi’s retail market remains less developed. The

city’s existing shopping centres are not comparable

to those in Tbilisi and Batumi; however, they offer a

variety of better facilities in comparison to traditional

bazaars.

The adverse effect of Covid-19 on the tourist market

is also observable in the Kutaisi shopping centre

market. Like in Tbilisi, the Fashion and Entertainment

categories, holding 61% of the leased area, are most

exposed to risk.

As in Batumi, the high street market in Kutaisi has the

Service, Electronics, F&B and fashion categories

holding 63% of the leased area, which are likely to be

affected by the pandemic.

APPENDIX

Real Estate Registration

& Construction Permits

1


Real Estate Registration

In Georgia, the National Agency of Public Registry is the state institution responsible for the registration of property,

registering both transfers between private entities and state-owned properties.

In case of private transfer, the purchaser has two options:

• Via a notary - contract drafting and legalization by the notary and subsequent registration. The notary assumes

responsibility for the content of the draft and its legalization. The presence of a translator and his signature on the

bilingual purchase document is required and the translator assumes responsibility for the authenticity of texts. Time

for preparation of the bilingual document and its legalization varies depending on the notary

• Via the National Agency of Public Registry - direct submission of the purchase contract for legalization and

registration. In this case, the bilingual purchase document is to be drafted directly by both parties or by their

authorized representatives. The Agency’s representative certifies the signatures and may provide recommendations if the document is not accurately drafted but does not carry any responsibility for the validity or its content.

• The National Agency of Public Registry is represented in: a) Public Services Halls (Tbilisi, Gori, Kutaisi, Batumi,

Ozurgeti, Mestia, Zugdidi, Rustavi, Marneuli, Gurjaani, Telavi, Kvareli and Akhaltsikhe) and b) regional departments of

the National Agency of Public Registry (located in cities throughout the country).

In the case the property being purchased from the state/municipality (privatization, auction or other form of purchase)

the documents should be submitted directly to the Agency.

Times and fees for registration

• 4 working days upon the submitting of documents (ordinary time) - the day of submission of documents is not

counted - GEL 50 (registration fee per one property) + GEL 5 for certifying the document (GEL 5 per each document

subject to submission)

• 1 working day - GEL 150 + GEL 5 for certifying the document

• On the day of submitting the agreement in the Agency - GEL 200 + GEL 5

Times and fees for renewal of public registry information

Online

• 1 working day - GEL 10 (USD 4.4)

• Same working day - GEL 40 (USD 17.6)

Justice House

• 1 working day - GEL 15 (USD 6.6)

• Same working day - GEL 50 (USD 22)

Service Fee Payment

Application

Submission

Property

AcquisitionPurchase / Gift

Document

Preparation

Documents needed:

- Proof of identity document

- Duly attested Purchase

Contract / deed of gift on

immovable item

Public Service Hall or

territorial office of

National Agency of

Public registry

Within 4 business days - 50 GEL

Within 1 business day - 150GEL

On the day of application - 200 GEL


Construction Permits

For the purposes of construction, buildings are divided into five types:

1st class buildings - no construction permit is required;

2nd class buildings - buildings with low risk factors;

3rd class buildings - buildings with medium risk factors;

4th class buildings - buildings with high risk factors;

5th class buildings - buildings with very high-risk factors.

The permit issuance process is divided into three stages:

Stage I - Statement of urban construction terms;

Stage II - Approval of architectural-construction project;

Stage III - Issuance of Construction Permit;

State organs responsible for the issuance of permits:

Local self-governmental (municipal) organs - for II, III class buildings within the municipal territory (at stages I and II)

except from Gudauri, Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the

territory of Borjomi.

Local self-governmental (municipal) organs - for IV class buildings (at stages I and II) with the participation of

corresponding state organs

Local self-governmental (municipal) organs - for II, III and IV class buildings (at III stage) independently (including Gudauri,

Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi)

Tbilisi City Hall - for II, III and IV class buildings in Tbilisi Municipality (at all stages) independently

Corresponding local organs of Adjara Autonomous Republic and Abkhazia Autonomous Republic - for II, III and IV class (at

all stages) on the territory of the Autonomous Republics

Local self-governmental (municipal) organs - II, III and IV class buildings (at stages I and II) for Gudauri, Bakuriani,

Bakhmaro, Ureki-Shekvetili recreation territories and for special regulatory zones on the territory of Borjomi - with the

participation of the Ministry of Economy and Sustainable Development.

Ministry of Economy and Sustainable Development - for V class buildings

Ordinary terms per each stage (working days):

Stage I

10 days for II, III and IV class buildings

15 days for Bakhmaro, Bakuriani and Ureki-Shekvetili recreation territories (excluding V class buildings), also for all

buildings that require ecological expertise.

30 days for V class buildings

Stage II

18 days for II and III class buildings

20 days for all IV class buildings, for Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories , for all buildings that

require ecological expertise and for V class buildings.

Stage III

5 days for II, III and IV class buildings

10 days for V class buildings


Exceptions:

The special terms for permission process:

Construction permits concerning:

III class buildings with an intensity coefficient up to 1,500 p/m2 and for buildings with a height of up to the 14

meters that will be located on the territories where urbanization regulatory plans do not exist and are

organized according to land use or which are organized according to the perspective development regulatory

plans on the territory of Tbilisi - the permission process may involve II and III stages only

The simplified permit procedure may involve just two stages and the permit is issued in the second stage.

The terms for the simplified procedure are as follows:

Stage I - 12 days for II and III class buildings

15 days for all IV and V class buildings, for Bakuriani, Bakhmaro, Ureki-Shekvetili recreation territories and for

all buildings that require ecological expertise.

Stage II (issue of permit) - 20 days for all classes

Permission fees

The municipal organs determine the permission fees though the maximum limits are envisaged by the Law:

For all territory of Georgia - 1 (one) GEL (USD 0.4) p/m 2 of construction territory

For construction of industrial buildings at resort areas- 5 (five) GEL (USD 2.2) p/m2 of construction territory

Exceptions:

Investors seeking the construction of hotels in free tourism zones and investing not less than 1,000,000 (one

million) GEL (USD 440,494) per each hotel are exempted from paying the permission fee.

Construction Permits

APPENDIX

2Primary Information Sources,

Data Used for the Study,

Definitions & Assumptions


In the process of preparing the research, we were guided by the information provided by property managers, owners,

developers, governmental institutions (The National Agency of Public Registry, the National Statistics Office of Georgia, the

National Bank of Georgia, the Ministry of Economy and Sustainable Development of Georgia, Georgian Civil Aviation

Agency, City Halls, World Economic Forum). The following web-portals is also used:

www.geostat.ge; www.nbg.ge; www.gnta.ge; www.tas.ge; www.worldbank.com; www.imf.org; www.cia.gov

Definitions & Assumptions

EMEA: Europe, Middle East and Africa

FDI: Foreign Direct Investment

IMF: International Monetary Fund

GDP: Gross Domestic Product

GEL: Georgian Lari

GLA: Gross Leasable Area

NLA: Net Leasable Area

sq m: Square metre

USD: The United States Dollar

HVAC: Heating, ventilation, and air conditioning

VAT: Value added tax

EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization

IRR: Internal Rate of Return

Primary Information Sources, Data Used for the Study, Definitions &

Assumptions

Rent Prices: Are calculated based on registered lease

transactions in the National Agency of Public Registry. all

rents are calculated in USD /sq m per month net of VAT

and service charges.

Vacancy rate: Vacancy rate is calculated as ratio of total

vacant stock to total stock within the specified area.

Vacant Stock is calculated as total currently vacant within

the specified area.

Prime Yield: When considering the yield to be quoted,

the Prime Central Business District (CBD) yield should

reflect what an investor would be prepared to pay for a

fully-let, prime rented asset within the CBD area of the city

at the time of reporting. It should be quoted in relation to

recent comparable transactions, where possible/available,

but should not be skewed by one-off transactions. Nor

should it simply be an average of recent prime CBD

transactions. Gross Yield is considered in calculations.

Gross Yield = First years' passing rent (i.e. net effective

rent) / Property Price (irrespective of transaction costs).

Prime Rent: The Prime Headline CBD Rent represents the

rent that could be expected for a unit of standard size

commensurate with demand (typically 500-1,000 sq m for

offices), for space of the highest quality and specification

(Grade A) in the CBD area at the survey date. This rent

should reflect the level at which relevant transactions are

being completed at the time but need not be identical to

any of them, particularly if deal flow is very limited or

made up of unusual one-off deals. If there are no relevant

transactions during the survey period, the quoted figure

will be more hypothetical, based on expert opinion of

market conditions, but the same criteria on building size

and specification will still apply.

Net Take Up: is a difference between leased areas by the

end of current and previous periods.

Gross Building Area: is total construction area of the

building including common and technical spaces.

Net Leasable Area: is calculated by deducting common

and technical area from the gross building area. It is

considered that net leasable area amounts 80% of gross

building area for business centres.

Occupancy rate: is calculated by deducting percentage

amount of vacancy rate from 100%. It is considered that

occupancy rate in Tbilisi will be the following: in the first

operational year – 50%, in the second operational year -

70% and in stabilized year - 85%. Batumi and Kutaisi will

have the following occupancy rates: in the first operational

year – 50%, in the second operational year - 80% and in

stabilized year - 90%.

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