PL

Living the change

Retail & leisure
More than 142 mln customers visited Immofinanz’s retail parks and shopping centres in 2018 – an increase of almost 20 mln on the previous year. We spoke to Dietmar Reindl, the COO of the company, to find out what it is doing to maintain this growth and cope with the challenges of a changing retail landscape.

Rafał Ostrowski, ‘Eurobuild CEE’: Your European portfolio of retail parks has recently exceeded 90 centres including development projects. You now have plans to increase that number to 100. How and when do you expect to achieve this goal?

Dietmar Reindl, COO, Immofinanz: More-or-less within the next 18 months. In 2019, we increased the number to 90 locations in nine countries – a total of more than 650,000 sqm of leasable space and a book value of app. EUR 900 mln. But 100 is by no means the end of our plans. The demand from retailers is very dynamic and, with our very solid financial base, we’re in a comfortable position for continued expansion.

Will this be done through acquisitions or organic development?

Both. We recently announced the purchase of six fully leased retail parks in Slovenia and Poland with 54,000 sqm of leasable space. This transaction was done at a very attractive yield of 8.6 pct. All the acquired properties have an appealing tenant mix, with anchor tenants like Deichmann, Takko, KiK, DM, New Yorker and Spar, which are already well-established in our Stop Shops. These new properties will now undergo standard rebranding in line with our Stop Shop concept. In addition to this, we’re developing other retail parks and expanding existing facilities. For example, our tenth Stop Shop in Serbia, in the city of Sremska Mitrovica, was opened at the end of August. It has 7,000 sqm gla and was fully leased from the day it opened – as was the case with the other retail development projects we’ve finished in recent years. And in the Czech Republic we have recently completed a 6,600 sqm extension to the Stop Shop in Třebíč. This fully-leased centre now has almost 22,000 sqm of leasable space with more than 4 mln visitors per year and is Immofinanz’s biggest retail park in terms of size.

Which parts of the CEE region will you be particularly focused on? Are you also planning to enter any new markets?

In terms of our current exposure in nine countries, we’re already very well positioned in countries like Slovakia, where we have 16 Stop Shops, Slovenia and Hungary with 14 each, and Austria with 13 locations. But this doesn’t mean we’re not going to buy additional properties if they fit perfectly into our platform and have a good market position in their catchment area. In some other countries, such as Poland or Croatia, which we’ve just entered with two locations, there’s the potential for further growth. And we’re also not ruling out expansion into additional markets. We’re already looking at a number of opportunities and doing market research in other Western European countries.

What’s your recipe for making your parks attractive to tenants?

This is our decentralised concept that focuses on smaller and medium-sized cities, as well as our high degree of standardisation, the size of our retail platform, our cost effectiveness and our extensive marketing expertise. Our brands are a guarantee of best service and quality. Thanks to our positioning in the convenience segment and the high degree of standardisation of our properties, we’re able to offer attractive rental and operating costs. This, in turn, allows retailers to exploit additional market capacity with a high level of productivity.



The Stop Shop retail park in Požarevac, Serbia

How do you make your retail properties resistant to market changes, including the onward march of e-commerce and technology?

First of all, we’re not fighting against market change. We live the market change and are constantly adapting our retail products to reflect the needs of our customers. Of course, we have followed online retail closely in recent years and have integrated these developments into our brand strategy and portfolio structuring. This explains exactly why our retail properties are concentrated in decentralised locations in Central and Eastern Europe. We’ve established a presence in regions where the shopping centre density is significantly lower than in Western Europe. And this is precisely the strength of our decentralised structure: the fast and easy access to a Stop Shop on your doorstep. One characteristic feature of our retail parks is that our tenants operate in the discount and convenience sector, where the shipping costs, including the free return of the merchandise for the consumer, are generally higher than the product costs. The numbers more than confirm the soundness our strategy: the turnover of the retailers in our properties grew by 5.6 pct in the last financial year. That means we’re outperforming the overall in-store retail turnover in these countries by around 40 pct. In total, more than 142 mln customers visited our retail parks and shopping centres in 2018. That represents an increase of almost 20 mln visitors, or 16.7 pct, over the previous year. As an illustration of this: 142 mln visitors represents roughly the entire population in four of our core markets – Austria, Germany, Poland and the Czech Republic. On a like-for-like basis – in other words, adjusted for acquisitions, sales and completions – that translates into a very satisfactory growth rate of 4.8 pct up to roughly 128 mln guests.

You also have ten Vivo! centres in the region. What are your plans for the development of this format?

Our Vivo! shopping centres combine convenient shopping with an entertainment offer and also feature Europe’s best retail brands as strong anchor tenants. At the moment we are refurbishing and modernising two Vivo! shopping centres – in Bratislava and in Cluj in Romania. These projects also include the further optimisation and enrichment of the tenant mix. For example, Peek & Cloppenburg and several Inditex brands will be opening new stores in Cluj this autumn and will strengthen the positioning of Vivo! Cluj as the number one fashion and shopping destination in the Transylvanian region. And our shopping centre in Bratislava will soon have Lidl as the new food anchor as well as several well known fashion brands as new tenants.

Your largest retail development project in Poland right now is the 14,000 sqm Stop Shop in Siedlce. This should be opening next spring. Why have you decided to develop a larger park than your standard projects and how is the commercialisation of this centre going?

The overall leasable space of a Stop Shop is always designed to meet the specific local needs and catchment area. In general, the average size of our Stop Shops is growing because we are increasingly becoming the convenient and easy local alternative to long distance shopping. In other countries, such as Hungary, the Czech Republic or Serbia, we also have locations of roughly 14,000 sqm. With regard to our current development project in Siedlce, it was the very strong demand from retailers that led us to fully utilise the available land from the outset and create more than 14,000 sqm of leasable space. This Stop Shop will open in spring 2020 and we already have an excellent occupancy rate of 97 pct about half a year before the opening.

How different will this project be to other retail assets in your portfolio?

Stop Shop Siedlce will be the benchmark for our new type of Stop Shop, where our customers have access to a full selection of retail in a convenient shopping experience. This means it will feature many famous brands as well as play areas, free wifi, restaurants and cafés. As has been mentioned, one of the factors behind our success is the high degree of standardisation. Our tenants as well as the shoppers can rely on the standard and quality of our services. Each and every one of our Stop Shops represents a wide range of products with good value for money, excellent transport connections as well as extensive parking.



Immofinanz opened its tenth Serbian Stop Shop in August in Sremska Mitrovica

The other of your two current retail development projects in Poland is Stop Shop Zielona Góra. Why have you chosen this location and how do you want to make sure the centre will be a success?

We always do extensive market research before acquiring a site. The Stop Shop in Zielona Góra will have a catchment area of around 270,000 local residents and will be located in the rapidly expanding eastern part of the city. The purchasing power there is above the Polish average, and the city’s population is growing. As a result, we’re already seeing strong interest from potential tenants for the location.

What are your further development plans regarding Poland? Have you set yourself any targets regarding the scale of the investment or the number of centres?

As I‘ve already indicated, we plan to continue to expand our Stop Shop platform and could also add one or two more Vivo! centres in the future. In general, we’re focusing on the overall growth of our leading retail platform and not on absolute numbers in a single country.

How is the Sunday retail ban, which is gradually being introduced in Poland, impacting the performance of your shopping centres and retail parks? Is it also having any influence on your development plans?

Of course, changes to the law such as the Sunday trading ban are not an ideal scenario for the sector, but we’re coping with it well through our marketing activities and have shifted the footfall originally seen on Sundays to Fridays and Saturdays. There was a similar retail ban in Hungary several years ago, but it was eventually lifted. The pattern, however, was the same: people changed their shopping behaviour and adapted to other days than Sunday.

Do you manage your centres yourself or through external managers? How important is the management aspect in your retail parks and is there anything you put particular stress on in the way your centres are managed?

We’ve set international management standards for our retail brands, which are supported by ’best in class’ marketing activities in the Stop Shops and Vivo!s. Our focus is on group-wide brand strategies and the central production of all advertising – and that gives us a European brand profile. By the end of 2020, we expect to be welcoming our millionth Facebook follower. This management quality is very much appreciated by our tenants as well as our customers.

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