Multi-task manager to the rescue!

Although retail chains may insist that the shortening of the shopping week has not had a negative impact on the sales results of shopping centres and individual tenants, and that footfall has actually increased regularly in spite of it, the reason most often given for such a happy state of affairs is the health of the economy rather than ʻanything property managers have contributed. Au contraire…

On the front line

“It’s the managers of shopping centres that have been focusing on tenants’ issues with the Sunday trading ban as they increasingly demand reductions in the rent or service charges due to the lower revenues from the shortening of the working week,” points out Ewa Szafrańska, the director of asset and property management at Cream. To make matters worse, such requests to reduce fees have often been made in the middle of the budget year, when the shopping centre’s financial plans have already been approved by the banks and their owners, so any adjustment entails a restructuring of the budget. So it’s no wonder that such claims have to be dealt with carefully by managers. “We treat each request for a reduction individually and try to determine whether there are grounds for this and whether the monthly turnover of the store has actually decreased,” adds Piotr Karpiński, a senior director and head of the Poland property management department at CBRE. “Paradoxically, stores have been able to make up for the day off on other days of the week – since consumers still have to do their grocery and clothing purchases anyway and so just postpone them to another day. However, in that case they will then no longer buy a coffee or go to the playroom with the children, which translates into lower turnover for the kind of tenant that can operate on Sundays,” argues Piotr Karpiński.

Furthermore, the shopping centre market at the moment is clearly a tenant’s market – when deciding whether to extend their contracts or relocate, they usually have several other offers up their sleeve. It should therefore come as no surprise that tenants’ expectations of the various discounts or reductions possible to them are very high. “These expectations can include rent holidays or financial contributions from the owner of the building in the fitting out of their stores – so negotiations on these issues are usually quite thorny,” reveals Ewa Szafrańska.



Ewa Szafrańska, the director of asset and property management at Cream

Work and pay

According to some managers, the new nationwide legislation on the minimum wage, which has led to a significant increase in the costs of cleaning companies and security agencies, have been more severe for shopping centre owners than the Sunday trading ban. For managers it has set them a real test of their know-how and cost optimisation skills. And also of their diplomacy, because there are many myths and misunderstandings surrounding the raising of the minimum wage that need to be patiently explained to people. “There’s a phrase doing the rounds in the media – ‘a salary of PLN 4,000’ – that has become fixed in the minds of many employees, and this has been leading to wild expectations and unrealistic demands being made on employers. After all, it only applies to certain positions and forms of employment. On the other hand, we know that the salaries of such employees cannot stand still. Finding people willing to work for the lowest national salary (PLN 2,600 gross) in large cities has simply become impossible – unskilled workers have many alternative ways of earning now,” adds Jan Bielecki, the commercial director of Ever Grupa.

Companies that provide such services for shopping centres as cleaning and security are also suffering from the rising cost of labour and staffing problems related to unskilled workers, which, in turn, sometimes have an impact on the quality of the services or their price.

“The general market trend of shortages of people willing to work is being exacerbated by increased social benefits, including the 500+ family allowance, which have encouraged many people with large families to leave the labour market – it’s simply no longer worth it for them to seek employment. Interest in casual work has also dropped among students, who had previously been eager to earn extra money working in shopping centres at weekends – but now one day of work per week is not as profitable as two days of working in a pub or even a small shop,” points out Piotr Karpiński of CBRE.



Carrefour Polska has extended Galeria Słowiańska in Zgorzelec and enlarged the restaurant area

According to managers, the Sunday trading ban has yet to have a major impact on the organisation of services for small shopping and convenience centres, mainly due to the fact that common areas in such facilities are small or non-existent.

“There’s also no security in such buildings, and when it comes to the cleaning we usually have a flat-rate agreement with the service, so reducing the number of shopping days has not affected mutual arrangements. As far as the leased space is concerned, of course tenants have to deal with these issues on their own. It’s also worth noting that the footfall was rather low in local centres on Sundays anyway, so the closing of these centres didn’t cause any further reduction in it in most cases – and even if it did occur, it was compensated by the increased popularity of such buildings on weekdays,” explains Robert Dudziński, the head of the asset management department at New Gate Investment.

As has been the case in other sectors, shopping centres have responded to the staffing shortages and rising labour costs by automating certain processes, for example, by buying cleaning machines that reduce the number of man-hours required. Surveillance systems are also being more widely introduced, with ever more sophisticated cameras and detectors being installed. “One of our branches in Western Europe is testing a robot-guard that is packed with electronics. It patrols the corridors of the buildings at night and is able to detect threats earlier and more effectively than a security guard could. When it comes to such advanced tech, there is still the cost barrier in Poland – and human labour is still relatively cheap; but as these technologies become more widespread their prices will fall, so they should soon also be available in Poland,” predicts Piotr Karpiński.

Lifestyle issues

The shopping centre customer has also become more demanding – those malls that were the top destinations for visitors just a few years back are now often seen as no longer meeting basic needs and requiring refurbishment. Most of these are older shopping centres that were designed mainly for retail, with the gastronomic and entertainment functions introduced later as though as an after-thought. “The top malls today are primarily lifestyle centres where you spend your free time and do your shopping. Adjusting these buildings to the expectations of today’s consumers involves changes to the tenant-mix and sometimes also the redevelopment or expansion of the centre and thus considerable investment expenditure,” says Ewa Szafrańska of Cream.

One common practice is to group together those operators that are open on Sunday in the same part of the building, which often makes it possible for this section to be separated from the closed part of the mall, thus simplifying the security and cleaning issues as well as increasing the potential numbers of visitors.

“A café that operates in-between closed stores has little chance of survival – customers will not want to go for a coffee in a funereal atmosphere between closed shops, especially after dark. Such a tenant needs relocating. Any further re-leasing or extension of the lease agreements has to involve separating the all-week and Sunday sections,” explains Piotr Karpiński of CBRE.

Ironically, the same law that prohibits Sunday shopping obligates the centre to open on this day if at least one authorised tenant wants to operate on it. However, it has been the case that such tenants have themselves requested the closure of the entire centre on Sundays because the building is empty at that time – and so a hairdresser or café, which are visited by just a few customers a day, would be unable to cover their costs.

Will the total ban on Sunday retail, which is to come into force at the beginning of next year (when it will apply on the last remaining shopping Sunday of the month), aggravate the situation of tenants further? “I don’t think so,” replies Piotr Karpiński without hesitation. “It seems that what was supposed to happen has already taken place, and retailers have been able to cope with most of the negative effects during the transition stage. Consumers have also learnt not to go to the mall to do their shopping on Sundays – even on the remaining shopping Sundays – to avoid finding the doors closed. That’s why large-format stores are already closed on these days, apart from maybe on the upcoming pre-Christmas Sundays, but these will also be trading days for large-scale retail next year,” points out Piotr Karpinski.



The food court of Galeria Askana in Gorzów Wielkopolski, one of the centres managed by Cream

Managing all kinds of stuff

The current situation on the large- format centre market is also increasing the pressure on managers to reduce their operating costs, mainly for the heating and electricity but also for the security and cleaning services. Of course, such changes couldn’t possibly have the slightest impact on the comfort of customers or tenants, could they! However, according to Ewa Szafrańska: “Our company provides services that combine auditing with the implementation and introduction of systems that annually reduce these costs by up to several hundred thousand złoty, and the record is almost PLN 700,000!” she claims.

This example shows that the responsibilities of the shopping centre manager are increasingly taking on those of an asset management specialist – the property manager has to think about all aspects of the centre’s functioning, including the management of its value, which up to now has always been the responsibility of the owner. “In general, the management of retail real estate has been undergoing a change of mindset into a more proactive approach for several years now – it’s no longer just about racking up the trolleys or following the owner’s instructions. Managers have actually been turning into hosts, since it will only be by adopting this approach that a shopping centre’s success can be guaranteed on the current market,” insists Ewa Szafrańska. ν