Equilis sets its sights on expansion in Poland

Chełm is a town of 60,000 people in Lublin Province, located less than 30 km from the Ukrainian border. Equilis Poland, considering its first joint investment in Poland with Acteeum Group, spent a long time looking for a suitable location. Chełm was chosen. Why? Because the retail market in large cities is saturated, analyses have shown that the mall in Chełm will reach up to 300,000 visitors and border traffic with Ukraine and Belarus. When the cornerstone was laid for the future facility in March 2019, they hoped for a stable return on their investment.

“We opened Galeria Chełm at the time of the introduction of the first lockdown in Poland. We were heartbroken. We consoled ourselves with the fact that we have built a versatile, modern and environmentally friendly facility, which will sooner or later gain the sympathy of the residents of Chełm and the surrounding area. Today we are reaping the fruits of our consistency. The complex has matured, established itself in residents’ minds and is thriving,” says Anna Dużyńska, the CEO of Equilis Poland.

To back up these words, the Belgian developer cites the footfall data. Between January and September of this year, a record was set for visitors – more than 1.6 mln people crossed the thresholds of Galeria Chełm, the same number as in all of 2021.

“The statistics are encouraging. Analysing year-on-year visitation figures, we have an increase of almost half. In addition, we exceeded our daily visitor target from May to August. Since May, we have also seen an approximately 20 pct increase in turnover compared to our 2019 benchmark before the facility’s opening. In August, we had the highest monthly footfall numbers ever. The centre has been 100 pct commercialised since its inception,” Anna Dużyńska explains.

By investing in Chełm, Equilis demonstrated business intuition. The region will also develop rapidly in the coming years, thanks to EU support. Approximately EUR 440 mln from the EU’s European Funds for Eastern Poland 2021-2027 programme will go to the Lublin region. The money will be used to develop infrastructure, strengthen the competitiveness of businesses, use energy generated from RES, improve the residents’ quality of life in the scope of climate change, increase transportation accessibility of the macro-region and increase the use of tourism potential for development.

“Brussels’ appreciation of eastern Poland proves that investing in the east of Poland is a good decision. Thanks to the stream of euros, the conditions for doing business in Chełm and the surrounding area will only improve,” adds Anna Dużyńska.

Heading for omnichannel

Galeria Chełm has an area of 17,500 sqm, offering 55 retail and service units and more than 550 parking spaces. It is a ‘power centre’ facility on the Chełm bypass, in a major traffic junction location. Among the tenants are well-known brands such as Lidl, CCC, Smyk, Rossmann, RTV Euro AGD, Martes Sport, Reserved, Sinsay, House, Cropp, Home&You, Diverse, Pepco, Swiss, KiK, 4F, Ziaja, Esotique, Deichmann, as well as several services and dining establishments.

According to the Polish Council of Shopping Centres, shopping malls have recovered from their pre-pandemic losses. Turnover increased by 16 per cent in July 2022 versus July 2019, but it should be noted that we have double-digit inflation. On the other hand, the increase in turnover should be appreciated, as some of the trade during the pandemic moved online.

“Shopping malls still dominate Poland’s retail landscape. However, challenges are ahead, such as fighting for the consumer’s increasingly distracted attention. Omnichannel has become a reality. As a result, the way people shop has changed. Customers still want to buy in physical stores, although price bargains are being sought using smartphones. Shopping malls will not disappear but will adapt to the future consumer,” adds the CEO of Equilis’ Polish branch.

Time for western Poland?

Equilis is optimistic about the future but sees challenges other than fighting for customers. The rapidly rising energy cost amplifies inflation, and it’s translating into a declining purchasing capacity for Poles.

“The challenge for all players on the market - facility owners, tenants and customers - is the rising cost of maintaining facilities and rising prices for consumers. The goal we set out for ourselves is to reduce operating costs as much as possible. We carry out energy audits to indicate development directions, such as installing photovoltaic modules or heat pumps,” adds Anna Dużyńska.

Galeria Chełm is already an environmentally friendly building, with a BREEAM Design Stage certificate with a rating of ‛Very Good’. “For future projects, we will place even more emphasis on environmental friendliness, moving towards passive construction. However, we are not slowing down and intend to invest in attractive locations. We are targeting retail parks in smaller towns, including ‘power centres’ like Galeria Andrychów,” insists Anna Dużyńska. Equilis’ business model in the retail market involves constructing, commercialising and selling commercial buildings. The company is becoming more comfortable with the Polish market and penetrating the rest of the country following developments in the south and east (Galeria Andrychów and Galeria Chełm, respectively).

“We thoroughly analyse the market. We can already see the potential for building retail centres in towns with over 20,000 residents. We are looking, among others, at western Poland. Still, we are interested in cooperation in any other location in Poland,” says Anna Dużyńska.

Apartments in Warsaw

Equilis also faces many challenges in the housing market. The company is in the advanced process of completing documents for two projects in Warsaw. One is in Ursus, where a housing estate with 1,000 apartments in is planned. The other project is on ul. Głębocka on the boundary of Targówek and Białołęka.

One of the critical aspects of both projects will be investing in the spirit of ESG. On the primary market in Poland, the customer is increasingly aware and demanding. The choice of future dwelling is dictated - in addition to price - by the innovation of the design, consistency with the environment, and application of passive construction solutions. All of this is exceptionally close to Equilis.

“We are looking for solutions that address the challenges of caring for the environment at the design and construction stage. For example, we are analysing the viability of installing heat pumps and photovoltaic panels and looking into the possibility of recovering rainwater. We are investing wisely, aiming for maximum autonomy of the buildings, but at the same time trying to keep the price of housing attractive,” adds Anna Dużyńska.

Challenges for the development industry include significant increases in the prices of construction materials, energy, debt service, and market unpredictability.

“We have experience in crisis management. This was the launch of Galeria Chełm when a state of pandemic condition was declared. As we moved forward with its construction, banks withheld financing. We coped with this problem by mobilising our funding,” Anna Dużyńska recalls.

How does Equilis see the future? The increasing use of tech for the benefit of nature and humans will be a continuing trend. Technological development will also promote property management, taking care of energy efficiency and resource consumption. In each project, Equilis wants to create happy life stories with the foundation of space to build interpersonal relationships, so critically needed after the pandemic, in the age of remote and hybrid work, and in times of confinement in information bubbles.