Another giant leap forward

Poland is second only to Russia as a construction site for shopping centres in CeE countries. Developers are turning their attention to medium-sizeD cities, where modern MALLS are still ABSENT

 

A record will be set this year on the Polish retail market, when 1.3 mln sqm of modern space will open up for customers. But before we put the champagne on ice, it is worth taking a look at the past 12 months, which was also regarded as one of the most successful periods so far. Developers held opening ceremonies for 45 new shopping centres, with a total space of app. 852,000 sqm, according to data supplied by DTZ – more than in 2006. The first customers were able to shop in the long awaited shopping centre in the very heart of Warsaw city – Złote Tarasy with 63,500 sqm of leasable space. It is the flagship investment in Poland of ING Real Estate Development, and its history goes back almost 10 years. Market experts are agreed that the event should be treated as the most significant of 2007. Apart from this, more than 20 shopping centres opened for business last year, including such major projects as Magnolia Park (previously Galeria Legnicka) in Wrocław (74,400 sqm of leasable space), which was built in intermittent stages, starting in 2003, Galeria Bałtycka in Gdańsk from ECE Projektmanagement (45,000 sqm retail space), Pasaż Grunwaldzki by Echo Investment (50,000 sqm leasable space) and Galeria Biała in Białystok (32,000 sqm retail space) – another TK Polska Operations’ development. In comparison, 2006 witnessed the opening of 26 shopping centres, including 13 malls with a combined space of 560,000 sqm. Building materials hypermarkets also hitched their wagons to the construction boom, adding 11 DIY new stores to their tally, including Castorama in Słupsk, Kalisz and Ostrowiec Świętokrzyski, as well as Praktikers in Grudziądz and Rybnik.

A Factory Outlet opened last year in Luboń near Poznań, developed by Neinver of Spain. The centre holds 80 retail outlets comprising 9,700 sqm of space. One retail park opened – Zielony Retail Park Targówek in Warsaw, the developer of which was TK Polska Operations.

To counter the competition, some existing shopping centres are to undergo an image-overhaul in 2007. Apart from the natural re-commercialization process, a number of shopping centres were enlarged, among them Stary Browar in Poznań, which was expanded by 27,000 sqm in March 2007, and now features 57,400 sqm of retail space. Fashion House Outlet Centres in Sosnowiec and Piaseczno were increased in size by 6,300 sqm and 6,500 sqm respectively. And the Warsaw based Reduta shopping centre decided to reach out to a new group of customers, i.e. singles, and to concentrate its efforts on the rebranding process.

Often bitter before becoming sweet

Events kept everyone on their toes, but there have also never been so many false starts in the industry. A number of developers experienced problems with opening new centres. Shopping was possible in Wrocław’s Pasaż Grunwaldzki only two weeks after its planned opening. The developer, Echo Investment, opened the mall before it had received the required licence for operating the centre, only to close it on the same day and reopen it to customers much later. The opening of Lublin Plaza was postponed by several weeks since part of the mall was flooded by a torrential downpour which struck the city in May. Magnolia Park opened a week late (after many earlier less precise pledges, including 2005 and then the spring of 2007). But even then shoppers witnessed a number of incidents, including the collapse of the roof, closed outlets and problems with the sewage system.

Wrocław led the field out of all the Polish cities in 2007, taking first place in terms of the size and quality of new shopping and entertainment space. Three shopping centres opened their doors in the city in the space of a few months: Pasaż Grunwaldzki of the Kielce developer Echo Investment, Arkady Wrocławskie by LC Corp and Magnolia Park. The capital of Lower Silesia saw the city’s retail space increased by a total of more than 150,000 sqm.

Investment trends

Agnieszka Michalczewska, who is manager of the retail department at King Sturge, remarks that: “Next year we shall witness the opening of several shopping centres, mainly in cities with populations around 100,000 and even smaller. The buildings will be smaller in scale, but their opening will be events of significant local importance.” Openings of shopping centres in large conurbations no longer generate excitement among the citizenry, nor do they cause a special commotion in the city due to traffic jams and wild crowds forming on the first day of business. Even the opening of Złote Tarasy, which some thought would paralyze Warsaw, passed off with only a whimper.

According to Ewa Derlatka, senior analyst at DTZ: “The growth of new formats is evident in large cities where the saturation of third generation shopping centres is substantial.” This is why investors presently see their opportunity in developing local convenience shopping centres which satisfy all the requirements from groceries up to such services as hairdressers, banks and medical care. Anna Wysocka, director of the retail department at Jones Lang LaSalle, adds that: “Developers are currently interested in such convenience centres and large malls with upmarket delicatessen stores, and are becoming interested in medium-sized cities where modern retail is absent.”

The big three

2007 was a period of consolidation in terms of hypermarkets. Albert and Hypernowa had already vanished from Polish streets in 2006 after being bought out by Carrefour Polska. Leader Price, owned by Casino, was the next to be acquired by Tesco of the UK, while the Metro consortium – owners of the Real hypermarket chain - bought out and rebranded Casino’s Geant network. The final result of all this activity is that three hypermarket chains, Real, Tesco and Carrefour, will be left to battle it out in 2008. The competition is over not only the quantity but also the quality of new projects. There was practically not a single free-standing hypermarket opened last year in which shopping malls held less than 10 outlets. The 2007 total was 98,000 sqm of large-scale outlets.

Delicatessen supermarkets are increasingly joining in with the market rivalry and for places in shopping centres. Ewa Derlatka of DTZ adds that: “Bomi is setting up shop in the Rzeszów Millenium Hall and the Alfa Centre in Białystok. An Alma delicatessen store was opened in the Warsaw Skorosze centre in late December, while Stokrotki Premium, which sells delicatessen products, already operates in the Plaza centres in Lublin, Sosnowiec and Rybnik.”

Rents move steadily upwards

The appearance last year of good quality projects situated in city centre locations resulted in a rise in rents. Ewa Derlatka claims that: “Rents rose to around EUR 90 per sqm when Złote Tarasy opened in retail units of around 100 sqm.” A similar growth trend is also visible in other cities. Following the opening of three shopping centres in Wrocław, rents spiralled from EUR 45 to around EUR 52 per sqm.

Poland accounts for 5 pct of the total area of shopping centres in Europe, which is much larger than that of any other Central and East European country – according to the GfK Polonia report on shopping centres. Poland is sixth on the European list of future planned shopping centre openings.

Grand city style

More than every second Polish citizen says 2007 was a good year and that 2008 will be even better. Prosperity is increasing, as evidenced in the changing structure of spending. We are increasingly spending money not only on homes and health protection but also entertainment and sport. Renata Kusznierska, director for Central Europe at DTZ, expresses the view that: “This drives consumer demand, with customer needs and requirements simultaneously mounting. Cities with populations of 100,000 and the almost 50 in which more than 50,000 people live need accessible shopping centres without have to travel long distances, thereby letting them shop and spend their time in the grand city style.” The demand for shopping and entertainment is also a motivating factor for Polish and international retail chains, such as Zara, which are interested in expanding into (admittedly) smaller but also less competitive markets.

Crossing the magic threshold

The past 12 months were a period of acceleration, but analysts are expecting 2008 to be a record-breaking year. 11.4 mln sqm of retail space is to be opened throughout Europe, which is 38 pct more than in 2007. Russia will be the leader on the ranking list, according to a report on shopping centres in Europe drawn up by Cushman & Wakefield. More than 4.6 mln sqm will be delivered in the country by the end of 2008. Russia is closely followed by Poland, where if all the pipeline projects are completed, a record 1.3 mln sqm of retail space would appear on the market. Ewa Derlatka elaborates: “This would be the largest number since 1993 when the era of modern retail space opened in Poland. And it would be crossing the magic threshold of 1 mln sqm, but would also mean that the supply would be greater than the 1 mln sqm of new retail space in the record year of 1999.”

The most important centres to be opened include Galeria Malta (153,000 sqm total space) by Spanish developer Neinver in Poznań, Millenium Hall (135,000 sqm total space) in Rzeszów from Conres and Poznań’s Metropolis (120,000 sqm total space) by Echo Investment. Ewa Derlata suggests that the majority of the new space will be in Poznań and Opole (more than 100,000 sqm each), as well as in Upper Silesia (more than 80,000 sqm). In Łódź, a mere 5,000 sqm of retail space will be delivered - with the enlargement of Galeria Łódzka. n