Size matters

The impressive wave of long-anticipated shopping centre openings across the CEE region recently has cast a shadow on the growth of another important branch of the retail market. “Retail parks have been very successful around the world, but in Poland this sector remains under-developed. Retail parks represent the next level of development in modern retail. They have one major advantage – in comparison to shopping centres these schemes are much easier to build. The construction work usually takes a year to complete,” claims Grażyna Melibruda, associate director of the retail agency at King Sturge. Large-scale projects such as Inter IKEA Centre Group Polska’s Park Handlowy Targówek in Warsaw or Helical Poland’s Europa Centralna in Gliwice (up to 67,000 sqm) might give the wrong impression to shoppers: size doesn’t actually matter – at least when it comes to retail parks. An increasing number of real estate developers, including Saller, C.R.E.D.O. Group and Parkridge, are now working on creating networks in Poland of much smaller parks. “We intend to develop a further 40 retail park projects under the FamilyPoint brand. In the next two years we are planning to open parks in Głogów (4,800 sqm gla), Żary (4,700 sqm), Puławy (7,680 sqm), Słubice (15,000 sqm), Poznań and Jaworzno,” reveals Rainer Garger of Austrian-based company Tradeland Development. The company opened its first retail park under the FamilyPoint brand in March 2010 on ul. Krakowska in Wrocław. “I believe the Polish consumer is about to learn of the advantages of retail parks, such as the convenience. With this in mind they have a good future ahead. Also at this point there are relatively few retailers in Poland who use retail parks as their main expansion channel. I believe the competitive rent levels will help,” Rainer Garger argues.
The main idea behind retail park projects is convenience shopping. The ideal tenant mix includes fashion, shoes, drugstores, pet stores, sports, electronics and interior design outlets, while tenants can count on much lower rents, at least as low as EUR 12 per sqm. Nevertheless, as some investors argue, the retail park concept remains somewhat questionable for some non high-end retailers, who have expressed concerns that the format is still rather an unfamiliar one in Poland. “The retail parks already in operation in Poland have differing track records – some of them have proved to be successful, while other projects have not had the expected results. We consider all kinds of locations, but the truth is that customers in Poland are more accustomed to shopping centres. We want to be where the customers are – therefore lower rent is not the main reason for a retailer to prefer a retail park over a shopping centre. The lower rental costs are very important, but this does not help if you are not satisfied with the number of customers,” points out Klaudia Wóźniak, expansion manager of the Charles Vögele retail chain.
British-based investment company Bywater Properties (formerly Ethel Austin) is also planning to focus on the retail market in Polish towns. The firm, which already has a portfolio of retail facilities and office buildings in Poland and the United Kingdom, has raised EUR 50 mln from private investors for its upcoming projects. In Poland, Bywater Properties is looking to develop smaller retail facilities of around 2,000 sqm anchored by discount retailers. “We are in discussions over a number of retail pre-purchase and development-funding deals that should be completed next year. We can see an opportunity in medium-sized towns of 30,000 or more inhabitants to expand our portfolio of existing retail centres. We are particularly focused on the Silesian region and the TriCity, where there are potential advantages through clustering with our existing ownerships,” claims Richard Walker, the managing director of the company. Initially,  Bywater Properties is planning to develop up to ten shopping centres, with construction work on the first project scheduled to begin in early 2011. Investment costs for each of these projects are likely to come to around EUR 2-3 mln.  As Richard Walker adds: “There continue to be opportunities in the market although smaller deals are often challenging because of vendor expectations and lease structures which do not meet our institutional standards. We frequently find that leases have been negotiated without proper cost  recovery or reconciliation provisions. We are also seeing pressure from retailers for leases in PLN. We are happy to take on this liability if anchor retailers appreciate that there are consequences for the end-investor in terms of the financing costs and the liquidity of the investment product.”
Mladen Petrov