Keeping your finger on the pulse
Leasing
Aneta Cichla, ‘Eurobuild CEE’: What’s kind of shape is the Polish retail sector currently in?
Rafał Pruba, leasing department director, ECE Projektmanagement Polska: I‘ve worked in the retail sector for many years and it’s obvious to me that there is a certain cycle – some concepts take off, tenants introduce new products, while others have to pull out of the market for various reasons. It was, is and will continue to be much the same. I’m more curious as to whether the owners of brands that were launched many years ago are aware of the need to adapt their business models to the generational changes taking place and the new expectations of a younger generation of customers. I believe that their needs have to be constantly taken into account and their shopping habits should be scrutinised so that right goods and services are made available to them – and if this isn’t enough, then it should prompt a change in this business’s philosophy and approach. The latest generation has grown up with technology and the online shopping market – and that’s something that we always have to remember. The second question that bothers me is this: will we, as landlords, be able to provide tenants with adequate space for their latest formats? We are all on a constant learning curve and have to monitor how customers’ expectations are changing – and with them, the retail business itself. And we cannot be afraid of such changes. The market has been growing steadily over the last few years, which may have lulled the sector into taking its eye off the ball somewhat. So today we have a market that is more dynamic and thus at the same time less predictable.
Is it a difficult market for landlords?
It is currently difficult because the dynamic state it’s in generates many important issues for us that require a rapid response. Competition has emerged in the form of e-commerce, the growth of which is now accelerating significantly. Shopping centres, however, will not become obsolete any time soon, although they will have to assume a more multifunctional character and will probably have to discard the ‘shopping’ element.
How are the expectations of tenants who are introducing modern retail formats to the market changing in terms of the space offered to them?
New concepts are very interesting for us owners. There is the combination of brick-and-mortar and online retail in some cases that already exists on the market. This seems to be the way forward, since when it is introduced to shopping centres it can improve the attractiveness of their tenant mix in the eyes of customers. We are very open to such ideas, while the earmarking of more space for storage is not a problem for us and can be easily incorporated into lease contracts.
There has been much talk recently about the greater multi-functionality of retail buildings. What is your opinion about the introduction of zones that are not entirely designated for retail?
One thing is for sure: our shopping centres will not be filling up with office and co-working sections. I think we’ll leave the development of office space to the specialists. The mall of the future, understood as a multi-functional facility, will be more like innovative theme parks, with formats devised for children and parents and ideas for occupying customers’ time. The question is, will these formats be satisfying in monetary terms for both parties? Many ideas along this line are being mooted. And it is, of course, crucial to have the right food & drinks mix.
You operate shopping centres across the whole of Poland. Are there any specific differences between individual regional markets in terms of customers’ expectations when it comes to the tenant mix?
The issue is not one of regional differences. It’s more about the times. We opened Galeria Dominikańska in 2001 and our latest mall, Zielone Arkady, in 2015. Over the years, the mix has been altered by brand development and the evolution of the market. Of course, many leasing schemes can be replicated, but we have to adapt many of their aspects to shoppers’ requirements in a given city or town. So our job is to do this the right way and respond in the best way to the needs of local consumers. We have to bear in mind such conditions as the location of the building in cities or towns. The tenant mix of suburban centres differs to those in city centres. The purchasing power aspect and the local competition are also factors that determine the regional differences.
How are you taking into account the Sunday trading ban in Poland, which is being gradually imposed each year, in lease contracts?
The act is applicable to retail chains that have been operating on the Polish market since March 2018. It significantly reduces the number of shopping days and of tenants that can sell their products. As the owners and managers of retail buildings, it’s our duty to allow retailers that can and want to operate on the Sundays subject to the ban to do precisely that. The impression I’ve been getting is that the legislator did not take into account all the possible circumstances when this law was being introduced. I haven’t ruled out introducing terms specifically concerning the trade ban in lease contracts. At the moment we are in negotiations with tenants over this issue. We have a situation in which, say, only 30 out of 200 tenants are allowed to operate on non-shopping Sundays. Ten to fifteen of these will be food and beverage outlets. So how do you open a mall with 200 stores for just 15 tenants? And who will want to come to it? Opening a centre for a small group of tenants generates costs for the owner because the infrastructure of the building has to be in operation. Individual tenants will not be able to bear these costs and will certainly not be interested in contributing towards paying them. ν
