How Shopping Centers Work in Paraguay

Jorge Mendelzon, Vice President of the Chamber of Shopping Centers of Paraguay, explains the specifics of the shopping center model in the country, from the contract structure and initial investment by tenants to management strategies that ensure traffic and competitiveness.

Shopping Mariscal

The shopping center model in Paraguay has established itself as one of the country's main consumer and retail platforms. Beyond being a place to shop, behind each shopping center lies a structure of contracts, investments, and management strategies that differentiate it from a brick-and-mortar store. Understanding how their basic rules work helps to understand why they have become a central player in the real estate and retail markets.

One of the unique features of this business is that contract terms are usually determined by the tenant's needs. The shopping center hands over the vacant space, and it's the retailer who must assume the investment in refurbishing their premises. These significant amounts include civil works, equipment, and interior design, making it unfeasible to consider short-term contracts.

In practice, agreements are typically set for three to five years, allowing for the amortization of the investment. In the case of large stores or anchors, which require larger spaces and more complex setups, contracts can extend up to ten years. This permanence provides predictability for both the operator and the shopping center, and contributes to the stability of the store mix that defines the identity of each shopping center.

Another characteristic of this sector is that rentals are not limited to a fixed monthly rent. Contracts often include a variable component linked to the tenant's sales. This makes the shopping center an indirect partner of the retailer, with a direct interest in the business's success. To achieve this, shopping centers allocate resources to marketing, promotions, and events, seeking to generate constant traffic. In this way, the percentage-rent scheme aligns incentives: the better the store sells, the higher the income for both parties.

A decade ago, entering a shopping center involved paying a "key" or entry fee that could range from $400 to $700 per square meter. Today, this practice has declined. The reason for this is the increasing supply of square meters in Asunción and surrounding areas, which has generated vacancies and increased competition. Currently, key values are rather symbolic and depend on supply and demand. In a market with abundant space, shopping centers prefer to prioritize occupancy and the incorporation of attractive brands that strengthen their commercial mix.

The entry process has become much more accessible. Shopping centers have active websites and social media platforms where interested parties can easily initiate contact. Furthermore, the Paraguay Chamber of Shopping Centers—which represents approximately 25 complexes—collects useful information and maintains a policy of openness toward potential tenants.

Once the contract is signed, the merchant is given between 60 and 90 days to complete the renovation of their premises, with the obligation to submit plans approved by the government. In more complex cases, such as large retail stores or special technical installations, the deadlines can be extended up to six months.

Managing a shopping mall isn't limited to renting space. Shopping centers constantly monitor their operational performance. To do this, they use electronic systems at entrances and parking lots that record the number of visitors and peak hours. This information is complemented by the sales reports that tenants regularly submit. This dual source of data allows for adjusting strategies, planning campaigns, and measuring the impact of events or promotions.

Generating traffic is one of the central tasks of shopping centers. To achieve this, they employ a schedule of activities that includes promotions, fairs, activations, and special events. At the trade level, the Chamber organizes two annual events: Shopping Day , in August, and Black Shopping Weekend , toward the end of the year. Both are held simultaneously in the associated shopping centers and have a significant impact on sales.

Added to this are times when the country receives extraordinary influxes of visitors, such as international sporting events or business conferences, which increase the flow of visitors. In a country with a low level of inbound tourism, these events represent significant opportunities for shopping malls and their tenants.

The difference between operating in a shopping center and an independent store is stark. A street vendor must generate customer flow themselves, which entails high advertising costs and scale limitations. In contrast, a shopping mall concentrates collective efforts: a person visiting a movie theater, a supermarket, or a fashion store inevitably passes by other stores.

This synergistic effect is the main advantage of being in a shopping center: traffic is shared, and the investment in attracting customers is assumed by the complex. The retailer's task becomes capturing that visitor and converting them into customers. New tenants often make a common mistake: replicating the same product mix in every shopping center. Each shopping center has a different customer profile and requires a tailored offering. Failure to do so reduces sales performance and wastes the location's potential.

In recent years, the number of commercial square meters in Asunción has grown significantly. This has increased competition and forced both shopping centers and retailers to differentiate themselves. For shopping centers, the challenge is to maintain high traffic levels and improve their value proposition; for tenants, it is to strategically choose which shopping centers to operate in, as it is unfeasible to cover all of them.

The arrival of foreign brands in the last five years reinforces this trend. Many of them were already familiar to Paraguayan consumers accustomed to traveling or following international trends on social media, which facilitates their acceptance. The globalization of consumption is reflected in the fact that the same brands can now be found in Paraguay, Brazil, or the United States, within the same commercial framework.

The expansion of the commercial sector raises questions about its long-term sustainability. The increased availability of space is forcing a natural market realignment, where demand will drive the pace of new developments. Meanwhile, shopping centers will continue to occupy a central place in Paraguayan urban life: as meeting points, as drivers of consumption, and as venues where real estate investment decisions and brand strategies intersect.