Guy Norton in Zagreb -

The dog Latin phrase, "Res emptito, ergo sum" (I shop, therefore I am), could easily have been coined with your average Croatian in mind. No surprise then that Croatia's shopaholic tendencies are behind a planned wave of new malls in the country.

Fervent Roman Catholics they may be, but Croatians also show an almost equally religious zeal for shopping until they drop - Sundays included. At €930 per year, for example, research by retail consultancy RegioPlan demonstrates that the average free-spending Croatian spends far more on clothes than their more thrifty counterparts in Slovakia (€750), the Czech Republic (€580) and Poland (€520).

The recent recession in Croatia may have dampened the pace of new retail developments, but with the Croatian economy posting positive GDP growth of 0.8% in the first half of year, there's a growing belief - among developers and retailers at least - that there is more than enough consumer demand to support the dozen or so new shopping centres that are due to be built in the country over the next few years.

At 450 square metres per 1,000 inhabitants (sqm/'000), the Croatian capital Zagreb already boasts more shopping centre space than the likes of Vienna. And although at 225 sqm/'000 inhabitants the average for the country as a whole is much lower, it is nevertheless still a chart-topping figure for Central and Eastern Europe.

Alongside three major new malls in the capital Zagreb, there are also plans for fresh developments in important regional centres such as Pula, Rijeka, Rovinj, Sibenik, Slavonski Brod and Split. But with new centres set to sprout like mushrooms after the rain in the next few years, is Croatia really such a retail mecca?

New malls

Certainly, Austrian developer Braunsbeger Holding, thinks so. It has just started work on City Point, the first shopping centre in the northern Croatian town of Varazdin, a €50m development whose director Harald Peham claims is already 70% pre-let before construction has scarcely begun. When complete in March 2013, City Point will provide employment for over 600 people, a very welcome figure in a country that has shed 150,000 jobs in that last couple of years.

New foreign retailers in the Croatia market are reporting good business conditions. Swedish fashion retailer Hennes & Mauritz (H&M), which only set up shop in Croatia in March with the opening of a flagship store in the Svjetni Trg development in downtown Zagreb, reported €13.5m worth of sales in its first six months of operation. According to Emmanual Bakic, head of retail at global real estate consultancy CBRE in Zagreb, that is at least 30-40% ahead of what were already highly optimistic projections. Small wonder then that H&M is gunning for a dozen stores in Croatia by the end of 2012.

While there's undoubtedly grounds for optimism, it's equally fair to say that there's more than enough scope for pessimism as well. In mid-October Illuminato, the developers of the downtown Zagreb mall Cascade, told tenants that the centre, which only opened in 2009, would close for an undisclosed period because it couldn't afford to pay Energon, which oversees the technical maintenance, cleaning and security services at the mall.

Meanwhile, Blanka Braccia, head or retail at Croatian real estate consultancy Spiller Farmer, says that the recession of the last two years has severely curtailed the ability of Croatian retailers, which were often key anchor tenants in shopping centres, to take up space in new malls. "Retail sales have fallen 20% in the downturn, reducing local firms' ability to invest in new outlets."

She adds that while developers previously held out for premium retailers as tenants, discount chains are now increasingly welcome. Braccia believes that in the absence of a major influx of foreign retailers, rental levels could fall by 20-30% in the coming years.

Bakic at CBRE reckons that vacancy levels at the existing malls are likely to rise in the next couple of years when many existing leases expire. He says that at present vacancy levels are relatively low at 5-10%, but they could grow sharply if shopping centre owners are unwilling slash rents from those levels agreed in the economic boom period of 2003-2008 in Croatia.