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OLYMPIAN HURDLES

Greece’s bureaucrats loosen grip on development — a bit

BY DAKOTA SMITH

With three large-scale shopping centers slated to open by the end of the year, and six more in the pipeline, Greece appears to be entering a new era in retailing with — finally — some support from the national government.

“The market really is maturing now,” said Thalia Drousiotou, head of retail at the Athens, Greece, office of Cushman & Wakefield Healey & Baker. “It’s not that there have been miracles, but the problems of the past, like the difficulties getting permits, are being addressed by the government.”

A small country of just 10 million, Greece posts the lowest shopping center space per capita in the European Union. Over the past decade several development firms have come to Greece, but difficulties getting permits and navigating local environmental and archaeological laws have discouraged them from building large shopping centers, or even from completing some they managed to start.

“Finding a plot of land and developing it is very hard,” said Lambros Anagnostopoulos, CEO of Athens-based Lamda Development, one of the most prolific retail development firms in the country. “You start digging, and then you find something, and you are delayed three years.”

But all of that is changing now. Lamda will be opening the 484,300-square-foot (45,000-square-meter) Mediterranean Cosmos shopping center this fall in the Pylea district of Thessaloníki, Greece’s second-largest city. Lamda developed the project in conjunction with Sonae-Charagionis, a joint venture of the Athens-based Charagionis Group and Sonae Imobiliária, a Portuguese developer of some 30 shopping centers in Europe and Brazil.

The largely open-air center’s anchors will be a Grand Masoutis supermarket, an 11-screen multiplex cinema, a bowling alley and a family leisure center. In addition to 226 stores, Mediterranean Cosmos will house a traditional “Greek neighborhood,” with a church, a museum, some artisan shops, an open civic space and a 500-seat outdoor amphitheater.

Given its location in the south part of the country and its proximity to Thessaloníki’s airport, Mediterranean Cosmos will appeal to both regional consumers and tourists from southeast Europe, Anagnostopoulos says.

Lamda is also behind the 645,700-square-foot Maroussi Commercial and Leisure Center, set to open in the fall in Maroussi, a suburb north of Athens. Unlike Mediterranean Cosmos, the Maroussi center will be largely enclosed. Anchored by a 15-screen multiplex cinema, the center will boast 240 shops, 2,500 underground parking spaces and a large, outdoor, landscaped square.

The 613,400-square foot City Link Centre is also scheduled for a fall opening in Athens. Developed by Athens-based Piraeus Real Estate, a branch of Piraeus Bank, the largely enclosed Link Centre will be anchored by a 269,000-square-foot Attica department store and a 15-screen multiplex center. (Cushman & Wakefield Healey & Baker is serving as the project’s preopening management consultant.)

There are six more shopping centers still in the planning stages, notably the 1.8 million-square-foot Yialou Retail Park, in the Spata district of Athens, and the 645,700-square-foot Paralimnio Center, in Ioanina, in the western part of the country.

The law’s delay
This new spate of development is occurring in spite of Greece’s Byzantine system of building codes, which has wreaked havoc on some projects. Take Sonae-Charagionis’ Aegean Park, a 645,700-square-foot center that was scheduled to open in the Athens port district of Piraeus in 2003. Touted as Greece’s first large-scale shopping center, the three-level project is still being delayed because of permit and land-use problems.

And Athens-based Helios Plaza, a subsidiary of the Israeli-owned, Netherlands-based Plaza Centers Europe, aims to sue local authorities over permit delays for a planned 322,900-square-foot center in downtown Athens, according to Ron Meshulam, vice president of Helios Plaza.

But following some recent changes in development law, companies are encountering a (slightly) more hospitable investor climate in Greece. Foreign developers still find it to their advantage to form partnerships with Greek development firms, which have leverage in dealing with local authorities and a better understanding of building and tax laws.

Further, these firms are learning from the failures of the country’s small-scale shopping centers. Greece has about 10 such centers, ranging from about 40,000 to 260,000 square feet. These have been unsuccessful largely because of a lack of planning and insufficient parking, observers say.

By contrast, the newest crop of shopping centers will include parking garages, as well as multiplex cinemas, which are seen as a way to combine entertainment and shopping.

According to Anagnostopoulos, the popularity of these cinemas among younger Greeks is driving construction of enclosed-area shopping centers. Previously, moviegoers attended closed cinemas in the winter and open-air cinemas in the summer, Anagnostopoulos says, but “now they are happy to sit in air-conditioned cinemas in the summer.”

Some like it open
Not everyone agrees that the trend is toward enclosed spaces, however. Among the dissenters is Kenneth J. Christian, a director in the London office of RTKL, an international architectural firm based in Baltimore. Christian led the design team on Veso Mare, a 161,400-square-foot leisure center that opened in 2001 in Patras, in the western part of the country. He says the movement favors open-air centers.

“We’re seeing more and more outside-focused spaces in Greece as well as throughout Southern Europe,” said Christian. “As we’re also seeing in America, the days of building a typical enclosed structure with a glass roof are pretty much over.”

The newest shopping centers will contain a number of international retail chains, many of which are already present in Greece. Mediterranean Cosmos will offer stores from the Spanish Inditex Group, including Massimo Dutti and Zara, while Link Centre’s stores will include such high-end European names as Hermès and Salvatore Ferragamo. International chains are entering the country at a steady clip, with Dixons, the U.K.-based consumer electronics company; Scandinavian furniture chain Ikea; and Starbucks all having arrived in the past year.

“There is a growing interest in Greece,” said George Cambanis, an Athens-based senior partner at Deloitte & Touche. “It is a tight, small market, and for companies looking to test out the European market, it can be easier to go through Greece rather than into the U.K., for instance.”

To date, one of the biggest of the internationals is French hypermarket chain Carrefour, which anchors many smaller shopping centers.

Other than Starbucks or fast-food companies such as McDonald’s or Pizza Hut, drawing major U.S. chains has proved to be more difficult. Many of these choose to partner with local entrepreneurs or third parties rather than establish their own stores.

“I don’t see many American chains wanting to come to Greece,” said Anagnostopoulos. “They do not want to address the various legal and fiscal hurdles encountered in the Southeastern European market.”

It is equally difficult to persuade local retailers, who have witnessed the failure of the small-scale shopping centers, to sign leases in these new, larger malls.

“It is just a learning curve,” said Felipe Fulcher, general manager at Sonae-Charagionis. “But we’ve had the same difficulties with retailers in Portugal. It is just a matter of explaining to them the process of managing a store in a large shopping center.”

Still, Fulcher remains optimistic about Greece, predicting that this newest crop of centers will probably lead to more development over the next 10 years.

“All this development is very positive,” Fulcher said. “Even the competition among developers helps. It facilitates growth and helps the [government] better understand the importance of shopping centers.”