Looking at the larger picture

Adam Zdrodowski, ‘Eurobuild CEE’: How has Atrium Group changed since the management board changes a few years ago?

Josip Kardun, CEO, Atrium Group: I think that compared to three years ago, when we had a lot of financial tidying up and restructuring to do, we are now much more focused on the real estate market as such, on development and investment. We have also brought a number of new people on board since then.

Was Atrium Group hit by the outbreak of the global financial crisis of 2007–2008?

Russia was the only market where we were hit by the crisis – elsewhere in Central and Eastern Europe we were affected only to a limited extent. We had a difficult time in Russia, but now the market there is bottoming out. We are still present in the Russian market, with app. 10 pct of our portfolio located in the country. We do not feel compelled to sell off our assets in Russia, but the truth also is that we are not investing there. The things we are doing in Poland we would probably not be able to do in Russia, which is a pity. Our main focus at the moment is on Poland, the Czech Republic and Slovakia, which have proved to be much more stable markets than Russia.

In general, what are the prospects for the retail property market in Central and Eastern Europe?

In my opinion, we are going to see more consolidation of the market in the next few years. There will be less development and there will be an increased focus on the extension and refurbishment of existing shopping centres. Large, dominant shopping centres will be getting ever larger, which may be a problem for small and medium-sized developers.

Is retail still an attractive asset class for the international investors active in the region?

I would say that commercial real estate in general is still very attractive for the international investors, including pension funds, who are active in the CEE region. Real estate, especially retail property, may be quite expensive to buy at the moment, but it offers attractive returns on investment. Poland remains an attractive destination. In 2011–2015, Atrium Group invested app. EUR 650 mln in repositioning and increasing its portfolio in Poland and will continue its investment in the country over the next few years.

Currently around 60 pct of your portfolio is located in Poland. Will you want to balance the portfolio to some degree in the near future?

We would like to do more in the Czech Republic, but the market there is much smaller than in Poland and it offers less investment opportunities.

What about potential further acquisitions in Poland?

At the moment we are mostly focused on extensions in Poland. Our strategy for the country envisions doubling the average asset size in the portfolio from the current 25,000 sqm to more than 55,000 sqm. Acquisitions are now expensive in Poland, but if we found a very good asset in the country we would potentially be ready to buy it. We are also planning selective disposals of assets in Poland, provided that the right prices are offered, as the company is increasing its focus on the largest cities in the country. Warsaw is the priority at the moment – over the long-term, we want about 50 pct of our portfolio in Poland to be located in the city.

How are shopping centres going to change in the years to come?

Food court areas will keep growing and will eventually make up around 10 pct of the total space in the average shopping centre. The thinking behind this is to attract and keep visitors in the centre – shopping centres will be meeting points for people, while apps will be available informing you that your friends are in the same shopping centre. In contrast, the size of hypermarkets has been shrinking due to changing eating and shopping habits. People are busier today, they tend to eat out rather than at home and so they prefer to buy less food but more often. Smaller grocery store formats where you can quickly get a few things for the evening are becoming more popular. However, let me just stress that change is an inherent part of this business. We now have fourth-generation shopping centres that reflect the fourth big adaptation of the retail property market to changing shopping trends. Nothing is dying in the shopping centre sector – shopping centres just keep changing all the time and they are getting better.

Are the shopping centres in Poland in any way different from those in Western Europe?

I would say that prime shopping centres in Poland today look pretty much the same as the best shopping centres in Western Europe. Centres in Poland are undergoing the same changes that their Western European counterparts started to undergo a few years ago, but the process of adaptation to current trends is faster in Poland than in Western Europe.

Josip Kardun

Josip Kardun was appointed CEO of Atrium Group in December 2014, having previously (from February 2014 to November 2014) served as the COO and deputy CEO of the company. He joined Atrium from ECE Projektmanagement, where he spent seven years in a number of senior positions. Prior to joining ECE, he was employed by Sonae Sierra. Since last year, he has chaired the executive board of ICSC Europe. He holds a law degree from Goethe University Frankfurt.