Rebuilding, extending and modernising

Small talk
As EPP prepares to take over the management of 12 shopping centres with 0.5 mln sqm of space, we spoke to Agata Sekuła, a board member for real estate investment and commercialisation at the company about the future of a retail market that has undergone profound changes over the last few years

In May, EPP will be taking on the management of 12 shopping centres with a combined area of almost half a million sqm. What will this involve?

Agata Sekuła, a board member for real estate investment and commercialisation at EPP: That’s right, we’re taking over the management of nine M1 malls and three Power Parks. These centres have long-established positions on their local markets and their combined area comes to more than 470,000 sqm, which means that the increase in the scale of our operations will be quite significant. We are planning to reorganise and modernise the space due to the changes in their tenant mixes and the age of the properties as well as to meet ESG requirements. We want to expand the range of the goods offered by bringing in new brands while refreshing the interiors and exteriors of the properties.

The retail market has recently undergone a huge transformation. What is now the most important trend on this market?

I would start by saying that the last few years have, unfortunately, been a time of reduced development activity when it comes to shopping centres. One of the last completely new malls of over 50,000 sqm gla was opened by us in 2019 – and this was Galeria Młociny in Warsaw. In truth, individual retail projects have been announced, but they only appear after a few more years. The market is now concentrating on rebuilding and extending malls as well as changing tenant mixes and adding more services to existing centres. There’s no sign of this trend coming to an end in the near future. Investment in existing centres is also being focused on modernising them to meet ESG requirements as well as reducing their running costs. At the same time, we are seeing a lot of activity when it comes to the tenant mixes in shopping centres. New brands are coming to Poland and last year saw the largest number of debuts for the last four years, which is important in a very diversified sector. However, in the investment market not much has happened. Even though shopping centres are seeing good results, investment activity last year remained at a low level – and not just for the retail sector. I expect that there will be more investment transactions in 2024, as we are seeing a marked improvement in the investor appetite for retail across the world.

What are the main challenges involved in managing a retail centre today?

For us, the most important task is to always make the tenant mix more attractive. In order to do this, we have to act on several fronts, such as ensuring the range has both Polish and international brands that have been active in Poland for many years, upgrading existing stores so that they feature the latest formats, and including brands that are debuting in Poland, which for our centres includes restaurants and entertainment. When it comes to the more mundane challenges, we have to deal with the rising running costs for our centres, especially when it comes to labour, and much of that is due to the doubling of the minimum wage. We are also spending a lot of time looking for new ways of reducing emissions and improving the energy efficiency of our centres. It’s also conceivable that the retail park segment will continue to grow rapidly, and as they extend their range of goods they will continue to take shoppers away from malls.

So how are malls responding to such strong competition?

One key change in the retail real estate market is indeed that retail parks and convenience centres are now dominating the new supply. The growing number of such centres has been changing the catchment areas of malls and forcing them to make changes to their range of services and goods by introducing additional tenants and adding services to their entertainment and food sections that are not found in smaller formats. In the last few months alone, we have modernised and increased the number of seats in the food courts of three of our centres and in some of them we’ve introduced new entertainment and leisure tenants, such as Happy Jumper trampoline parks and Play City games rooms. It’s also worth mentioning the large entertainment section in Kings Cross Marcelin in Warsaw, which is about to open soon. On the other hand, we are happy to make use of the advantages of having retail parks in our portfolio, such as their lower construction costs and quicker development time. We are using them to add to what our malls offer whenever we have a suitable plot and interest from our tenants. In this way we have improved what we offer in Galeria Twierdza in Zamość; and we are now preparing another retail park project with an attractive tenant that will complement what another one of our centres offers.

You’ve created your own wine brand. Could you tell us something about this?

A few years ago, my fiancé and I were given the once in a lifetime opportunity to create our own blend with the help of a professional oenologist. It was a really exciting and challenging experience. At first, when we mixed wines from different grapes, the effects fell far short of what we’d intended. It was only after several attempts that we managed to achieve a taste close to what we were looking for. Unfortunately, there are now only a few bottles left of this wine, which is labelled MY – so you could say that our efforts were successful.

Interview: Anna Zamyłka