In-house or outsource?

There are already over one hundred retail centres in Poland and most of them are managed by companies which have links to their developers. Independent managers, however, are emerging and are striving to win a share of this lucrative market

Most Polish shopping centres were built by foreign developers, and because they want to maintain control over them once they open, they often set up management companies to run the enterprises. So, for example, Cefic is in charge of the centres owned by parent company the ERE group, Metro Real Estate Management runs the M1 centres developed by Metro AG and Immochan manages Auchan hypermarkets. Developers insist that managing their own properties has many advantages, including that: they are able to coordinate a centre's marketing strategy, they can standardize reporting procedures and they can keep their fingers on the pulse of the operation. Many of these companies indeed, often remain in charge of the centres even after they've been sold off, meaning they can continue to profit from them regardless of who the owner is.

The SMC case

It might seem from the above that there is hardly any competition in this market and that anyway, independent managers wouldn't have anyone to offer their services to. Grzegorz Dudziak, Operations Director for Shoppingcenter Management Company, acknowledges this predicament up to a point: "We are dealing with a transitional situation in Poland where most facilities are managed by firms linked to developers, though I do believe that the market is opening up to companies such as ours. We've been managing a small number of medium size centres of around 25,000 sqm so far but we're hoping to extend our portfolio to twelve such schemes over the next two years." Shoppingcenter Management Company was founded last March as one of the first independent retail management companies in the country. Its shareholders are two companies operating on the European commercial real estate market: the British firm Donaldsons and the Dutch WPM, which between them manage 250 shopping centres totalling 4.5 mln sqm. SMC's office in Prague co-ordinates operations in the Czech Republic, Slovakia and Hungary and the branch in Poland manages five centres here: Sarni Stok in Bielsko Biala and Ogrody in Elblag belong to Ahold, while Plejada in Sosnowiec, Galeria Pomorska in Bydgoszcz and the Decathlon building in Warsaw's Reduta shopping centre, were constructed by TK Development. Combined, these operations consist of around 300 tenants and 130,000 sqm. Grzegorz Dudziak tells us that SMC's cooperation with Ahold and TK Development has come about because its owners manage centres for the developers in Western Europe.

Independent virtues

Though in-house managers say that the standardization of their activities in all their centres is a big advantage, external managers maintain that they too apply similar uniform practices and use the same budgeting and reporting procedures at all the centres they run. If they employ diverse marketing strategies, however, this is because local circumstances themselves vary. "We apply the same organizational structure in all the centres we manage, that is one director, two managers and two assistants. When managing a large centre, however, we have to adjust our structure to the owner's requirements," says Grzegorz Dudziak. His further claim that outsourced management firms are cheaper than those in-house, is often supported by developers themselves.

Counting on Polish developers

There are sixty seven million square metres of retail space in Europe, of which only 2.6 million can be found in Poland, which places it nineteenth in terms of its square metres per capita. Managers are therefore hoping that new centres will soon be developed and the demand for specialists will consequently grow. "A lot of Polish developers have no experience in retail facility management, so perhaps we can count on their interest," says Dudziak. It would seem however, that even small developers are keen to manage their own centres. The Tri-City development group Hossa, is about to launch its first retail centre, Madison Park in Gdansk, and this will be managed by Patronat, which was founded by the developer several years ago. Patronat already manages the Atrium Gdanskie, Company House and Centrum Biurowe Hossa office buildings, as well as some of Hossa's residential properties.

Investors' various approaches

Though on the whole developers seem reluctant to place their centres in the hands of external management firms, investors are rather less unanimous. "It is part of our strategy to manage our own facilities," says Ib Bungaard of Foras Management Company whose parent firm Foras Holding owns three retail centres: two in Warsaw - Targówek and Reduta and one in Bytom - Plejada. "In-house control over your own property is added value. Perhaps it would be cheaper to employ an external company but when your real estate portfolio is substantial, it is worth doing the job yourself and it allows for prompt action when problems occur." Heitman, however, which bought eleven retail centres from Casino and Apsys earlier this year, does not want to limit itself to just the one manager it 'inherited' from the previous owner, though Apsys, who have been managing the facilities until now, will remain 'in office' for another five years. "We focus on making strategic decisions and leave the day-to-day management of the real estate to companies who are qualified for the job," says Halinka Stanidis, Vice-President of Heitman Real Estate Investment Management.