From storage to stores

POLAND Panattoni Europe is almost exclusively associated in the CEE region with being one of the main players on the Polish, Czech and Slovakian industrial development markets. But the company is now making a significant move into a new area: the development of retail parks. Indeed, in Italy it has already opened its first 15,000 sqm retail park in Pordenone, with another one due to be completed this October in Voghera near Pavia (also in northern Italy). Now it is preparing to launch its first Polish retail project, also a retail park. Panattoni has been planning to move into this area for some time, having last November appointed Andrzej Lasocki as the development manager of the company's retail division. Since this time Panattoni has been looking for suitable sites across Poland for such developments, according to Mr Lasocki. "We are now in the process of securing a number of plots for developing Polish retail projects for rent," he explains. "At the moment we are focusing on developing retail parks, which would feature stores dedicated to food, DIY, sports equipment, electronic and other household goods. But at the same time we are considering single-tenant projects, such as for food or DIY chains." Panattoni is planning to move into this market as soon as possible, but in such a way as to make sure that it works effectively for the company. "We are checking every site that we know that is possible to buy and have had offers from the biggest cities - Poznań, Warsaw etc., but we are looking more closely at medium-sized cities with populations of around 100-200,000. These will provide the sites for one-storey facilities, so the price of the land has to be relatively low," says Mr Lasocki. The company is currently in advanced negotiations over such a site, but has so far declined to reveal exactly where.

First Poland, then the world
So why has Panattoni chosen Poland? And why retail parks and not shopping centres (an area of activity of its former industrial development rival Parkridge)? The explanation given by Andrzej Lasocki for the company's interest in Polish retail is the familiar one about the size, the depth and the capacity of the market. "The density of modern retail space in Poland is much lower than in Western countries, but not the population or the size of the market. There are still a few 100k+ cities with no major DIY store - so obviously the room exists for such development. The market is growing, as is the spending power - and tenants can see this." He adds that if Panattoni's retail projects work in Poland, then the company will probably take a closer look at the Czech Republic and Slovakia with regard to similar schemes. As for the choice of retail parks over malls: "We are not considering galleries at the moment - these are more risky and time-intensive projects, especially when it comes to the pre-development process. Maybe next year we will look at this. Retail parks, however, take a short time for pre-development and have lower costs. There are only a few tenants and this is much closer to our current company activity... And the whole process is shorter and cheaper - we don't need to spend 3-5 years on a single project," he claims. Panattoni hopes to use its experience from Polish logistics projects, such as with construction costs, timing and the quality of the realised facilities. As Mr Lasocki says: "We can easily transfer our experience of land acquisitions, the re-zoning process and permitting - which is very important because in Poland the whole process is quite specific and the legal provisions are not always clear. Without such knowledge and expertise it would be much more difficult." The lower costs involved in building retail parks are not only important for the developers of such projects, but for tenants as well, who in these difficult times might be looking for a cheaper alternative to renting space in shopping centres. However, this is qualified somewhat by Mr Lasocki:
"Galleries have some of the same tenants, but generally there is a different kind of tenant in retail parks, who expects lower rents and service charges."

Getting real
Panattoni has, however, encountered one obstacle in the way of its retail expansion plans - convincing the owners of suitable sites to be more realistic about the actual value of their land now that demand has fallen. "It is difficult to persuade the seller that no-one is going to build a large shopping centre on the site because the market is turning to smaller projects," claims Andrzej Lasocki. "If the owner has had some offers in the last few years with high prices, it can be hard to explain that the land is actually worth only half of what has been previously offered. However, more and more vendors are coming to understand the current market and environment we are operating in." In the opinion of Panattoni's retail development manager, the unrealistic price expectations of the site owners is, though, the only limitation on the company's retail expansion plans. Otherwise he does not see there being any limit on the volume of the company's investment outlay in this area. "There is definitely a group of tenants who wants to rapidly expand in Poland and wants all these factors in place - and at the moment the only option that fulfils all these criteria are retail parks - and this is what we want to take advantage of."
NN