ECONOMY

Goodwill is particularly expensive in Athens

Rental rates for business properties have been kept at high levels, owing to the minimal number of available premises for rent and the limited supply of new stores in commercial centers. As a knock-on effect, the goodwill required for stores is also maintained in high levels. The operation of the first large commercial centers in Athens (The Mall, in Maroussi, and Attica Stores, downtown Athens) has created certain concerns on the market, as it was widely believed that this could force commercial streets into a frozen state as a result of consumers turning to the new opportunities launched by those shopping centers. However, even though such malls have so far done well in terms of business, demand has not been reduced on commercial streets. And, in turn, this has led to both rental and goodwill levels remaining relatively high. Some commercial streets nearby The Mall in Maroussi, were affected indeed. But others, such as in Halandri, downtown Athens, Kifissia and Glyfada are showing good signs of strength. The amount of goodwill (a term used to reflect the portion of the market value of a business not directly attributable to its assets and liabilities) depends on the premises location and a businessman’s readiness to lease a store that is already being used by some other business. Goodwill levels vary from area to area, and even from store to store, and are thus hard to estimate. Indicatively, goodwill required for a store on Ermou Street ranges from between -7,000 and -14,000 per square meter. Prices in Kifissia, Kolonaki and Glyfada start at -5,000 per sq.m. and may reach up to -10,000 per sq.m. Such amounts are regarded as especially high and can often act as a deterrent to the decision by a commercial chain or business to rent a space, as this can greatly extend the required amortization time. Large sums paid for goodwill are driven by the absence of available stores for rent in commercial streets that can safeguard good business. Large shopping centers, which promised businessmen good visibility (and have actually delivered it to a large extent) did not have to wait long before they saw their stores leased. This has been helped by intense competition among commercial chains, given that in addition to local signs, the Greek market is flooded by international groups which are following aggressive policies in the domestic market, either to make their entry or expand operations in new locations. Experts do not expect any great changes to occur in the business property market in the next few years, in terms of the existing balance between traditional stores and commercial centers. This would be possible only should there be an oversupply of business premises for rent, which in the current circumstances can be achieved only though the development of commercial centers. But again, such development is gradually picking up, with 630,000 sq.m. of new store space planned to be made available in commercial centers by 2010. Commercial streets, at least for the time being, are set to retain their level of business. This is strengthened also by the fact that busy Ermou Street has managed not only to retain its standing in the global listing, but improved from tenth position to ninth position, as shown in this year’s annual report by global real estate advisor Cushman & Wakefield. On an annual basis, rental rates for a store on Ermou Street may be up to -3,600 per sq.m., which is attributable to increased demand. Many foreign retail chains are entering the domestic market by renting a store at a commercial center, perhaps owing to the fact that this is the easiest way. However, their expansion does not take long to come about, as indicated by a number of cases, including Media Markt, Fnac, Spain’s Inditex (Zara, Bershka, etc), H&M, Prince Oliver, Sprider Stores, Elmaec, IKEA, Leroy, Merlin and Jumbo. In addition, Turkey’s Ipekyol clothing and footwear group, which has also entered the Greek market through the shopping and entertainment center The Mall, is aspiring to operate as many as 25 new locations.