Reality check

There was a lightness in the hearts of the mall developers present at Eurobuild’s retail conference. However, a new rival might just be about to rear its head

A  shopping centre is a public institution. The success of shopping centres in Poland results from the fact that public spaces have been developed that the authorities had given up on, believes Grzegorz Makowski, a sociologist from the Institute of Public Affairs. He is also the author of the book ‘The temple of consumption. The origin and social significance of the shopping centre’, which opened this year’s retail sector meeting that took place in the Warsaw InterContinental hotel on May 12th. While addressing the assembled market players as a theoretician, he referred to the ‘godfather’ of the shopping centre concept, Victor Gruen, an architect and urban planner from Vienna, who finding himself in the USA after World War II, noticed that there was not enough public space in the suburbs of American cities for social life to blossom. If we add to this picture the consumerist character of American society, many years of shopping centre prosperity were then guaranteed. Shopping malls can function as a surrogate park for older Americans (the so-called mall-walkers), while replacing backyards and similar areas for younger citizens. At the same time there have been cases documented in the US, where shopping centres have been closed down and transformed into public places by the local authorities. “If somebody had asked me only a year ago, at the time when I thought that the crisis in Poland would get deeper, which direction the market would evolve, I would have said in the same direction as the US,” commented Grzegorz Makowski. The opening point for the first discussion was a presentation by Alexander Rafajlovic of Cushman & Wakefield, who detailed the most important data for CEE markets. “Is the crisis over?” asked Jorg Banzhaf, managing director of ECE Projektmanagement. “It’s hard to say, I do not know. However, everyone should be happy that the mad times, including 2007, are now well and truly over. Then the market situation was not normal.” The state of the market continues to influence developers’ activities and plans as they endeavour to adjust to the new conditions. Adrian Karczewicz, representing Echo Investment, pointed out that his company is planning to sell three shopping centres that cannot be extended further. The designs for a number of projects have been redrafted, such as the extension of Galeria Echo in Kielce into a centre on a much grander scale, while the Korona shopping centre in the Romanian city of Braşov has been made smaller – from a planned leasable area of 55,000 sqm, now only 40,000 sqm gla is to be built. Market players are continuing to assess the potential of towns of fewer than 100,000 inhabitants in different ways. Adrian Karczewicz can hardly see any space for new projects in such locations, while Yann Guen, board member of Mayland Real Estate, emphasizes that not only the town should be taken into consideration, but also the potential of the catchment area around it. The enthusiasm of the developers present was dampened a little by Henrike Waldburg, head of acquisitions and sales of the shopping centres department at Union Investment Real Estate, who argued that investors are still only interested in acquisitions of products with low rates of risk, i.e. the best shopping centres in the biggest cities.

In the future a shop assistant will become an advisor, and this provides some light at the end of the tunnel for traditional retail, such as outlets in shopping centres, as opposed to internet shopping. This was the opinion expressed by the participants of the next discussion panel, entitled ‘Virtual cash, real profits’, which was dedicated to people buying on-line. According to the research cited by the panellists, the value of internet shopping amounted to PLN 13.5 bln last year and grew by 22 pct compared to 2008. In Poland, app. 2 pct of sales take place over the internet, while for the whole of Europe the figure is app. 5 pct – so it has quite a significant development potential and therefore the competition for shopping centres is becoming fiercer and fiercer. “Shops have become show rooms for more and more customers, where people look at the goods but do not buy them,” emphasized Jerzy Warchałowski of Google Polska. However, Piotr Chojnowski of TNS OBOP robustly defended traditional shopping, as did Anna Stolarczyk from Vision Express, whose products – primarily glasses – are hard to buy with a mere click of a mouse, without even trying them on. Anna Bogdańska, head of Merlin.pl, commented on the role of marketing on the internet, e.g. by means of social media. “Shopping on the internet is a chance for widening the market, but is not a threat to traditional retail,” remarked Magdalena Jończak of Deloitte Business Consulting. Krzysztof Badowski of Roland Berger Strategy Consultants Poland, Piotr Kulawiński, head of Redan, Eduardo Brito, chief operating officer of Jeronimo Martins Dystrybucja and Marek Klajda representing ACNielsen Polska, all expressed the opinion that the crisis had not been so deep and in fact has affected their businesses in a positive way. Their financial results are improving, while their networks continue to grow at full steam.

Next, it was time for the spade work specialists, that is, shopping centre property managers, who have learnt how to open up dialogues over the last one and a half years. Agnieszka Mielcarz, representing the Forum Gliwice shopping centre, emphasized that last year was not a time of cost-cutting but of the effective use of available resources, during a discussion moderated by Elżbieta Dmowska-Mędrzycka, board member of the Polish Council of Shopping Centres. Is the state of the residential sector influencing the retail business? It turns out that it is, but not as much as it might seem at first sight. It might have been thought that after the primary residential market stalled last year, specialist centres, such as building and interior design malls, would have suffered. However, there was little in the way of gloominess over this, with the slump being regarded as only temporary and also because Poles are continuing to renovate their houses energetically. Arnaud Boule of Bricoman Polska pointed out that there had been two-digit growth in 2009, and Jacek Klimek of Nomi insisted that there was strong interest in the CEE region. He was not alone among the panellists, as Sławomir Kapusta from 
EC Harris and Magdalena Zasiewska of PricewaterhouseCoopers, also agreed that the sector has a bright future in front of it, albeit over a rather long-term perspective. Last but not least, the discussion moved on to the modern technologies that now support property management. One of the first things to be pointed out was the possibly surprising fact that a beautiful centre is not synonymous with an effective one, taking into consideration that one of the speakers was an architect, Marek Tryzybowicz from the Bose International Planning & Architecture studio. Moreover, a large footfall does not always translate into more revenue for tenants. How can this be remedied? Ian Elliott of Make It Real suggested one way to do this – making use of the promotional potential mobile phones. As usual, the discussions on the subjects brought up during a whole day filled with presentations went on long after the conference closed. ν (And)