Chopping and changing

Aneta Cichla, ‘Eurobuild CEE’: Could you tell me what leasing shopping centres is going to be like in the future?

Rafał Pruba, leasing department director, ECE Projektmanagement Polska: Market surveys indicate that the profiles of shopping centres are to undergo some dramatic changes. Lease contracts will be signed for shorter periods, such as for three years – and this will be a requirement of both parties, the landlord and the tenant. Years ago they would sign long-term lease contracts that guaranteed stability to both parties. Now, however, the signing of a ten-year contract might even lead to problems, such as in when the market changes to such an extent that you need to react quickly. Shorter contracts allow for more flexibility. However, they also have their drawbacks – they do not provide the same level of stability. Everything is changing very rapidly these days and terms and conditions have to be adapted to this new environment. I expect that this is the direction the retail market will take. The ability to respond quickly to the changes ahead will gain in significance at the cost of stability and predictability in the retail business.

Will new trends such as extended entertainment and food sections have an impact on the tenant mix in your centres?

The traditional shopping centre model, that is, a multi-storey facility with a strong fashion segment – including footwear, underwear and children’s clothing – dominating the tenant mix will undergo a transformation. Fashion often takes up 50 pct of a mall’s area. In my opinion this is going to decrease at the expense of other developing brands. In Germany, an entire level in one of our centres is now designated to food & drink tenants of various formats. I don’t know whether this will also happen on CEE markets because this mostly depends on consumer purchasing power. However, considering how well the food zones operate in our centres, provided there is a well-laid out mix of entertainment and eatery concepts, this should be a trend of the future.

You are responsible for the leasing of your shopping centres, so you are close to retail chains. Please tell us how tenants are coping with the growth in omni-channel sales?

Tenants are coping with it well. Larger and smaller chains usually have brick-and-mortar as well as online stores running simultaneously. Now this branch is being extended into traditional retail. We have launched pilot programmes at ECE designed to help us integrate online and offline retail. We are continuously monitoring the relationship between the two forms of retail because it has a real impact on the operations of our centres.

Will a new kind of store emerge in shopping centres? I mean, similar to the concept that is being prepared by the CCC group for its Eobuwie stores. Will other tenants also follow?

I encountered this trend for the first time with Eobuwie, which is apparently extremely innovative and combines online sales with a traditional form of retail. This is a significant move. However, it is a logistically difficult and costly enterprise. Not every tenant will be able to afford it. Will other retail chains also head in this direction? I don’t know and I think it’s difficult to predict what will happen in this rapidly changing world.

Does the current balance of power in leasing space favour mall owners?

Everyone is fighting for their own territory in this business and everyone wants to negotiate the best terms and conditions for themselves. We are managing to make the necessary compromises for this. Our malls are fully leased. However, this does not mean that the process is any easier. The heavy saturation of retail space and the increasing power of online retail have strengthened the tenant market. In Poland online sales come to app. 6 pct and in the UK this is as much as 20 pct. However, these figures are rising fast, and as they grow negotiations over new space will become more and more difficult.

Are you suffering because of the lack of new brands on the Polish market?

Some brands are emerging on our market, while others are disappearing. This always happens on the retail market. I believe that there are currently 250–300 retail chains on the Polish market that are currently developing. This volume has not changed for some time. It is clear that the emergence of new players on the market is a desirable situation. We can take a lot of credit in this respect. Brands such as New Yorker, Douglas, C&A and Deichmann opened their first Polish stores in Galeria Dominikańska. We are interested in new brands emerging and there could certainly be more of them. However, if a developer has a good product, they won’t have any problem leasing it.

How do you see the consumer of the future?

If someone creates an online tool today that captures people’s imagination, there could be another revolution similar to that of the iphone or the emergence of social media, which significantly changes shopping habits. What we are seeing these days is a generation of 18-,19-year-olds – the consumers of the future – who have their eyes glued to their smartphones and live in the virtual world. We, the operators of shopping centres, have to think about how to get their attention in terms of both traditional retail and what a shopping centre offers. After consulting with tenants I have come to the conclusion that there will be a shift towards more entertainment and catering services to create places where you can spend your free time.

But so-called digital natives are supposedly returning to shopping centres...

Judging by my son’s peers I can’t confirm that, although this might be the case. Vinyl records have made a comeback, so perhaps they’ll get bored of the internet?

I would like to congratulate you on your new role at ECE. What will you be involved in from now on?

I am head of the leasing department in Poland. I will also be responsible for our shopping centre in Vilnius. My new responsibilities also include representing the leasing department at meetings and in front of the company’s board meetings at company headquarters.