The total amount of retail space in the three main Georgian cities amounts to around 1.1 million sqm, out of which 80% is concentrated in Tbilisi.
During the last two years the total volume of shopping centre supply in Georgia grew by 28% approximately and currently amounts to 292,000 sqm. Growth has mainly been driven by developments in the capital, Tbilisi. After the opening of the country’s first large modern mall in 2012 (Tbilisi Mall), the next major scheme (East Point) will start operations at the beginning of next year.
The prime high street rent in Tbilisi is around USD 60 per sqm, which exceeds several Eastern European cities (Tallinn, Riga, Sofia, Tirana, Vilnius, Bratislava), but is 27% less than the average CEE figure.
The estimated prime retail yield in Tbilisi is 13% for shopping centres and 12% for street retail, which exceeds average CEE figures (8.6%-9.1%) significantly.
The total amount of office space in five Georgian cities amounts to around 1.05 million sqm, out of which 85% is concentrated in Tbilisi, and the rest in regional business cities. During the last few years the total volume of business centre supply in Tbilisi has grown by 15% and currently amounts to 183,312 sqm.
The prime rent in Tbilisi is around USD 21 per sqm, which is the least of Eastern European cities and equals the average CEE figure.
By 2014 the average modern business centre vacancy rate in Tbilisi stands at around 7%, which has been declining gradually after the highest rate in 2010 (25%).
Total modern stock in Tbilisi accounts for 334,800 sqm of which 151,486 sqm (45%) is owner-occupied. Big companies in Tbilisi prefer to build office buildings for themselves, which are fitted to their needs, rather than rent one in a business centre.
During the last three years the number of non-resident visitors in Georgia increased annually by 40% on average. At the same time, the number of international tourists1 experienced an average annual growth of 25%. These figures peaked in 2013 reaching 5.4 million of total international visitors and 2.1 million of international tourists2. Fast growth in demand, coupled with slower hotel room growth (12% annually), resulted in increased occupancy rates, especially in Tbilisi, where brand hotels are now achieving an average occupancy of 75%.
In June of 2014, the Association Agreement between Georgia and the European Union was signed. This agreement aims to expand political and economic relations between Georgia and the European Union, and to gradually integrate Georgia into the European Union’s Internal Market. The Association Agreement includes the set up of a Deep and Comprehensive Free Trade Area (DCFTA), which is a core part of the accord. During the next few years we expect significant growth in the MICE segment, while numerous workshops and conferences will be organized in the framework to implement the Association Agreement.
As of the first half of 2014, seven international hotel brands (Sheraton, Radisson, Marriott, Courtyard by Marriott, Holliday Inn, Citadines apart hotel and Best Western) are represented in the Tbilisi hotel market. The share of international upscale brand hotel rooms in Tbilisi is only 11% and international midscale brands occupy 17% of total supply.
2011 and 2012 years showed a dramatic y-o-y increase in international visitors who stayed in Georgia 24 hours and more – 24% and 36% respectively. In 2013, the growth rate declined to 15% and the total number of travelers amounted to just over two million. During the first eight months of 2014, 1,56 million non-resident travelers arrived in Georgia (12% more than same figure in 2013).
As ADR is not expected to change significantly, we see an opportunity to develop middle class brand hotels in Tbilisi, which will compete with local non-brand hotels and also make competition among existing international brand hotels tougher.
According to UNWTO, Georgia has one of the highest growth rates of international tourist arrivals during last three years among European countries. Georgia was the fourth country in Europe by the growth rate of international tourist arrivals in 2013 after Iceland, Bosnia & Herzegovina and Greece. In 2012 Georgia occupied the first position in the region, amounting 35.7% annual growth.
Although Georgia has one of the lowest figures for international tourism receipts per capita among selected countries, it has the highest growth rate during recent years. The average y-o-y growth rate in Georgia amounted 28% during 2010-2013. Middle class hotels3 in Tbilisi have better performance indicators than several eastern European cities like Riga, Bucharest, Vilnius and Zagreb, where average daily rate and average occupancy rates for selected cities are respectively 10% and 8% less than the same figures for Tbilisi.
During 2010 – 2011, the growth rate of mortgage lending amounted 39% and the volume of issued loans reached USD 314 million. In 2012 a 34% decrease was observed in comparison with the previous year. In 2013, due to the marketing campaigns of commercial banks and reduced interest rates the volume amounted USD 416 million. Comparing the first nine months of 2014 to the same period in 2013, the growth rate stands at 68%.
Ongoing and pipeline residential project in Tbilisi amounts almost 2.9 million sq. m. under construction. During next two years supply will rise by 16,000 dwelling units and amount 360,000 sqm. In the last two years, strong demand has resulted in stalled projects being resumed.
Registered purchase transactions are following a positive trend in Tbilisi. The average growth rate of selling transactions during last two years was 9% in Tbilisi. The volume of registered transactions amounted USD 829 million. The average growth rate was 10%. 2014 is expected to see an increase in transaction volume of 4% in Tbilisi (USD 860 million). The average residential real estate selling price in Tbilisi grew from USD 826 per sqm in Q1 2012 to USD 835 per sqm in Q3 2014. Compared to the same figure in Q3 2013, the average selling price in Tbilisi remained unchanged.
The total volume of warehouse space in Georgia amounts to around 1.8 million square metres, of which around 1.2 million square metres is owner-occupied and the remainder is leasable. The largest share of total leasable space is located in Tbilisi – 61%.
From the 627,000 square metres of leasable warehouse supply, 89% is dry storage and 11% cold storage. The total capacity of cold storage amounts to 243,700 tons.
The broad categories with the highest occupied space are food and beverage, representing 42% of occupied space in listed warehouses and building materials – occupying 14% of stock. Transport companies take up to 13% of space.
The warehouse market in Tbilisi is more developed than in other Georgian cities. The only A class warehouse storage in Georgia with a leasable area of 10,000 square metres is the recently developed facility by Gebrüder Weiss near Tbilisi Airport, which was fully occupied at the date of this research. The company plans to develop an additional 37,000 square metres as a second phase of development.
The government is actively supporting the development of the gambling industry, which gives Tbilisi a competitive advantage in the region. The gambling industry accounts for about 70% of the entertainment industry’s total turnover, which equalled 1.2 billion GEL in 2013.
During the next two years several new projects will be completed around the country, Tbilisi Fine Art Museum and the refurbishment of the Tbilisi Opera house are the major planned projects.
The Government of Georgia is actively seeking to hold international sports tournaments in the country and some of them are already planned, such as The Youth Olympic Games 2015 and the UEFA Super Cup 2015. The country’s main stadiums and sports complexes are concentrated in the capital Tbilisi (Boris Paichadze Tbilisi Dinamo Arena, Mikheil Meskhi Stadium and Tbilisi Sports Palace) which will see the development of new sport facilities, such as the new rugby stadium and a new tennis complex.
The water entertainment industry (Aqua Park and swimming pools) is actively developing in Georgia. The recently opened Gino Paradise and the Euro Park are main players in the country. Completion of a new swimming pool for the Youth Olympic Games 2015 is planned next year. Health and well-being becomes more popular in Georgia, especially in Tbilisi. Aspria Fitness is actively expanding its chain.
The major amusement parks of the city is Mtatsminda Park. Tbilisi also offers botanical garden, zoo and several recreation parks. The relocation/expansion of the Tbilisi Zoo and renovation of Park Mziuri are the major planned projects in the near future.
Tbilisi is one of the visited destination of the county. Red-tiled roofs, narrow streets and ancient buildings as well as modern architecture buildings impress visitors from around the world. Tbilisi offers visitors unique cuisine, gambling, sports and leisure opportunities.
The restaurant market is the most developed sector of the Gastronomic industry in Tbilisi. The Modern Café-Bars, night clubs and international cuisine market is growing fast.