Growing pains

Developers have been building up the larger Polish cities with shopping centres. The last town of 100,000 inhabitants to see the development of a large and modern mall, which will open at the end of November 2015 is Jaworzno. This will be Galeria Galena, the owner of which is P.A. Nova of Gliwice. However, this does not mean that such companies have given up on big cities. Retail space saturation in large cities such as Poznań and Wrocław considerably exceed the average for Poland, but they are still attractive for developers, such as Apsys or Unibail-Rodamco. Meanwhile, smaller towns, where retail parks or convenience centres, often located near transport hubs or estates, used to be eagerly built, are experiencing less and less popularity. Such facilities are still being developed, but with diminished enthusiasm. The market saturation is posing much greater challenges for developers of smaller facilities. The brightest star on the Polish market is Warsaw, where this market is growing vigorously and briskly and continues to give developers the hope to builder large projects. A few – Globe Trade Centre, Master Management and Morelia Investments, Immochan – have either started or are preparing new retail projects.

An area of 590,000 sqm is currently under construction in Poland. The largest cities include more than half of this volume – 252,000 sqm, claims JLL in its H1 2015 summary of the retail market. At the end of Q2 the modern retail stock in Poland amounted to 12.54 mln, most of which – 8.96 mln sqm (72 pct) – was attributable to shopping centres, 3.39 mln sqm (27 pct) to retail parks and large format commercial warehouses, while 0.19 mln sqm (1 pct) were outlet centres. A total of 16 projects had been opened this year by the end of June (new facilities and extensions) with a total area of 176,800 sqm. These include: Tarasy Zamkowe in Lublin, Outlet Center Białystok, Galeria Neptun in Starogard Gdański, Galeria Corso in Świnoujście, Era Park in Wieluń, Galeria Sanok and Galeria Głowno. Completed conversions and extensions included: Centrum Handlowe Ogrody in Elbląg, Galeria Pomorska in Bydgoszcz, Galeria Sudecka in Jelenia Góra, Atrium Copernicus in Toruń, Galeria Venus in Świdnik, Factory Ursus in Warsaw, Wola Park in Warsaw and Magnolia Park in Wrocław. Meanwhile, Sukcesja in Łódź, Galeria Galena in Jaworzno, Nowy Rynek in Jelenia Góra, Vivo! in Stalowa Wola, Zielone Arkady in Bydgoszcz, Dekada Malbork, Galeria Jurowiecka in Białystok, Ferio Wawer in Warsaw, Supersam (conversion) and Park Handlowy Bielany in Wrocław (extension) are still to be opened this year. Developers are currently working on: Galeria Północna in Warsaw (Globe Trade Centre), Posnania (Apsys Polska), Wroclavia (Unibail-Rodamco), Serenada in Kraków (Mayland Real Estate), Galeria Wołomin (Rockcastle Global Real Estate Group and Acteeum Group), Gemini Park Tychy (Gemini Holding), Centrum Handlowe Skałka in Tychy (Apollo-Rida), Forum Gdańsk (Multi Development), Galeria Metropolia in Gdańsk (Przedsiębiorstwo Budowlane Górski), Galeria Aviator (Rank Progress), Nowa Stacja (ECC), CH Manhattan in Pruszków (Rekord) and the extension of CH Morena in Gdańsk (Carrefour Polska). According to data supplied by Colliers International, 745,800 sqm of shopping centres with planned opening dates before the end of 2017 were under construction at the end of June.

Colliers International reports that a dozen foreign chains made their debuts in Poland in H1. The fashion offer of Warsaw shopping centres was added to by the British Superdry chain, which opened in Złote Tarasy in June, a store of French chain Kiabi, which opened in Blue City in April, and from the same country a Courir sports footwear shop, which has been operating in Galeria Mokotów since June. In addition, an Esprit Bodywear lingerie salon made its debut in Kraków (Galeria Krakowska), while the first shop in Poland of the Spanish Décimas chain was opened in the Magnolia Park shopping centre in Wrocław. With the opening of Nowy Rynek in Jelenia Góra the brands present on the Polish market will be joined by Czech sports brand Sportisimo. Auchan, meanwhile, is consolidating the chain it acquired from Real and Schiever Poland, and a company affiliated with the chain is to introduce a new format, Bi1, to the Real hypermarkets that could not be converted due to the lack of approval from the Office of Competition and Consumer Protection (UOKiK). Bata and Centro, however, have pulled out of the market. The average vacancy rate in the eight largest conurbations was around 2.7 pct at the end of H1 2015, with the highest level registered in Kraków and Poznań (both 3.7 pct). Warsaw, on the other hand, has the least vacant space (1.5 pct). Out of seven large towns (200,000–400,000 inhabitants) Bydgoszcz has the highest vacancy rate (6.4 pct), while Lublin has the lowest rate (2.5 pct). The average vacancy rate in three smaller but dynamically developing towns – Biała Podlaska, Olsztyn and Rzeszów – amounted to 3.9 pct, 1.3 pct and 2.7 pct respectively at the end of H1, reports Colliers International. Prime rents for 100 stores sqm offering clothing and accessories in the best malls in Warsaw increased to EUR 110 per sqm per month. In other main conurbations monthly rents range from EUR 40 to EUR 55 per sqm, according to JLL.

The sector is pleased with the investment demand. Since the beginning of the year a few projects have changed owners, including the Riviera shopping centre in Gdynia, which was bought by Union Investment Real Estate from Foncière Euris and Rallye. The German fund had also previously purchased Focus Park Rybnik and Sarni Stok in Bielsko-Biała and is one of the most active players. Rockcastle, a new fund on the Polish scene, invests on a smaller scale but is just as bold. It has already bought Galeria Tomaszów and Fabryka Wołomin (both projects were purchased in cooperation with Acteeum Group). This is a sign that new investors want to have their assets in every type of location across Poland.

At the beginning of the year, it looked like the retail investment market couldn’t possibly beat the volume for 2014, when the figure reached EUR 570 mln. However, in H1 investors
spent EUR 285 mln on purchases in Poland. “The largest transactions were the purchase of Focus Park in Rybnik by Union Investment and the acquisition of a 50 pct stake in Neinver’s Polish properties – Factory Annopol in Warsaw and Futura Park and Factory Kraków – by TH Real Estate,” said Agata Sekuła, director of capital markets retail properties, CEE, JLL. “Considering the transactions that are already nearing completion in terms of negotiations, it is very probable that last year’s total volume will be exceeded in Q3,” adds Agata Sekuła. Apart from the centres listed above, others changing hands included Karolinka in Opole and Pogoria in Dąbrowa Górnicza, which BlackRock sold to Rockcastle. This has not been the only purchase by this investor. In cooperation with Acteeum Group, it has also purchased Fabryka Wołomin (from Fulcrum Properties) and the design of Galeria Tomaszów (from Galeria Mazovia). Union Investment is another fund currently buying up properties. This year it has fund acquired Focus Park Rybnik (from Aviva Investors Polish Retail) and Sarni Stok in Bielsko-Biała (from the CBRE Property Fund). In addition to this, Park Handlowy Młyn has also changed hands, sold by Helical Poland to Mitiska REIM. Meanwhile, LCP (London Cambridge Properties) has bought nine Mila supermarkets from the portfolio of Investpol 700 Market-Detal. One purchase still being decided upon is that of Centrum Handlowe Krokus in Krakow, which is to be bought by Mayland Real Estate from Valad Europe.

What the retail sector still needs to face are issues related to management. A developed market appreciates the skills required for the adjustment to the rapidly evolving reality as far as retail is concerned. Online shopping, the move away from large shopping centres, the decrease in footfall in these centres, the need to introduce omnichannel sales – these are the factors that shopping centre managers are urgently having to deal with.

Shopping habits, the amount of time spent in a shopping centre, as well as the way we use them have all been undergoing changes, thus owners and managers have new challenges ahead of them. One of these is the proportionate growth of online shopping. The answer is omnichannel sales, that is, combining all the various sales channels. This involves e-commerce, m-commerce and traditional sales. New technology and ways of accessing customers are gaining in importance. Mapping, eye-tracking, free wifi, internet transaction sites, interactive applications, wearable devices, geolocation, beacons, electronic wallets, mobile ethnography, interactive screens, info-booths, interactive floors, multi-touch tables and virtual 3D changing rooms – these are modern tools now being used in shopping centres in highly developed markets. “Innovative technology may turn out to be useful in obtaining information about the efficiency of the passageways, the optimal locations of shops, the influence of signs and advertising on sales, the effectiveness of the interior design and the attractiveness of the range of goods offered by retailers. These systems can help shopping centres managers to measure the traffic in the individual areas of the centre, identifying the most often visited places and the least popular ones, which provides important information to the landlord and manager when deciding upon rent rates, moving the traffic from one floor to another, promoting the brands from worse locations in the mall or choosing suitable equipment for the most occupied places as well as for the traffic management in the car park. New technology not only makes it possible to obtain more data, but also to analyse it better and reach conclusions that could contribute towards generating better revenue,” explains Joanna Kłusek, the director of the retail property management team at Cushman & Wakefield (formerly DTZ). More advanced analyses make it possible to establish, for example, the most frequently visited types of store, the consumer behaviour in individual shops, the way customers access the shopping centre, the most commonly chosen ‘paths’ for moving around the centre, how much time customers spend shopping and how much they spend on other activities.

Fabrice Bansay

CEO of Apsys Polska

The shopping centre market is becoming more and more competitive and demanding. The number of facilities has been growing but consumer habits and behaviour have also been changing. An increasingly faster pace of life, the rise of new technologies as well as the growing importance of mobile devices as a shopping channel re-define consumer expectations towards shopping centres. They also change the face and role of the retail facility management. Modern malls need to provide customers with unique experiences by way of introducing innovations in every aspect of its operations: from innovative architecture, to a new scope and quality of the services offered, to a broad range of non-shopping activities available within malls, including the entertainment offer. Only this approach will allow customers to feel they are living their preferred lifestyle. Shopping centres need to open up to new technologies while improving the shopping experience offered to customers by investing in delivery solutions and linking online shopping with shopping in a mall. The click-and-collect service, which enables to buy a product online for later collection in-store, is an excellent example of a mall innovation. The integration of online and offline sales channels is an important step here. I am sure that those industry players which will be able to provide the services that meet expectations of modern customers will have the bright future.

Ewa Karska

director of the shopping centre department, Carrefour Polska

Modern customers are now increasingly looking for extraordinary shopping journeys and experiences. Their expectations towards shopping centers are swelling every year, not only in terms of the retail offer, but also in terms of the new functions the modern malls now need to serve. Carrefour’s strategy is aimed at extending, remodeling and re-commercialising our shopping centers so that they meet those new market trends and customer expectations. A great example of such approach in our portfolio is Galeria Morena in Gdańsk. Opened in 2002, the mall is now undergoing a massive remodeling, extension and repositioning process in order to become one of the most significant multifunctional shopping centers in the Tri-City area. In Q2 2016 we will open a completely new 33,000 gla mall with more than 80 shops and lots of new amenities. It will be a great leisure and entertainment facility, a great meeting spot and a place to spend your family time in. It will feature not only a 3D cinema and a modern fitness centre, but also several children’s playgrounds, new food zones, as well as an open-air terrace with lots of entertainment options. The most important thing here is to properly market the new mall. For this reason we are to introduce new retail brands to the property, update its logo along with visual identification. Its design will now be modern and more family-friendly. What is more, our new mall will use several modern eco-friendly and energy-efficient solutions and will also encourage customers to become more green. The shopping mall repositioning is a great challenge for both developers and investors. But it can also breathe a new life into the existing properties. For many of them it is the inevitable future.

Katarzyna Michnikowska

senior analyst, consultancy and market research departments, Colliers International

After more than 20 years of development, we now have a mature and highly competitive Polish shopping centre market. As the purchasing power of residents grows, new opportunities will emerge in the largest conurbations in terms of new projects as well as extensions/modernisations of existing facilities. Over the next few years there will be a dozen or so mixed-use projects integrated with the existing urban fabric, functionally and technically combined with transport hubs, new residential and office buildings, cultural and art centres, public space and green areas. Examples of such projects include the Forum Gdańsk and Warszawa Główna projects. On the other hand, we can expect a change in the quality of existing properties – extensions, renovations and modernisations, increasing the comfort and extending the possibilities of shopping and spending free time. Such work is currently being carried out at Carrefour Morena in Gdańsk and the Panorama shopping centre in Poznań. Developers will also be continuing the construction of small convenience centres in smaller towns and at housing estates in large cities. According to preliminary estimates, 620,000 sqm gla (28 pct of which will be extensions) is to be completed in 2015, 500,000 sqm gla in 2016 (18 pct of which will be extensions) and 450,000 sqm gla in 2017 (20 pct of which will be extensions).

Agnieszka Michalczewska

partner, Aspenn

Poland is an attractive market for new retail brands. This is confirmed by this year’s debuts, including Sportisimo, Kiabi, Superdry, Decimas, Optique Ray Ban & Oakley, Le Coq Sportif, A’Tab and Icon Fitness – a new concept from Holmes Place. The first locations for their stores are usually in Warsaw or the other largest regional cities. Quite often they choose the best shopping centres and the best high street locations. It can also sometimes happen that a particular brand enters the Polish market through an existing chain of shops, as was in the case with Le Coq Sportif. Everything suggests that there will be more and more debuts. A few serious players have already announced their plans to expand onto the Polish market – and these include Forever 21, Uniqlo and new brands from the H&M group. The main obstacle for these companies in terms of their development on the Polish market is the foreign currency and the currency exchange risk, which is of particular importance when it comes to low margin products. There can also be some difficulties in terms of obtaining the right premises, because the best and the largest malls enjoy the highest leasing levels, although there is more rotation these days compared to a few years ago. Shopping centres are now constantly looking for ways to make themselves distinct, which is why they are introducing pop-up stores and temporary boutiques for young designers. These are not concepts that generate a lot of revenue, but they are treated as a necessary variation of the offer.

Jacek Wesołowski

country manager development, Immofinanz Poland

Immofinanz will continue to mainly focus on the development of its two formats in its retail portfolio: Stop.Shop retail parks and Vivo! centres, which are being developed in smaller towns. As far as the Stop.Shops are concerned, we have opened four parks in Poland and are working on a fifth, which will be in Świnoujście. In the case of Vivo!, our first project in Piła turned out to be a huge success, and so we are opening the second shopping centre under that format in Stalowa Wola in November. Furthermore, we are planning to concentrate on the location for a Vivo! in Krosno. We are currently faced with considerable saturation in terms of retail projects in some of the largest cities and towns, even though the level for Poland is still lower than Western Europe. In the future we will have to the need to modernise existing centres will take on a greater significance. This will of course mainly apply to centres built some time ago and that now need to be adapted to be able to compete with the latest, technologically advanced centres that will have much stronger leisure sections.

Anna Malcharek

managing director, Gemini Holdings

Gemini Holding plans on starting the construction of its third Polish project in Tychy soon. It truly is a great region to develop a retail project. It is one of the very few places in Poland where modern retail space is still under-supplied. The project we work on assumes the creation of a regional shopping centre which will be built upon the extension of the retail offer already available locally, namely the existing Tesco, Obi and Saturn large-scale stores. The centre’s total retail area is to exceed 60,000 sqm. Currently the project’s commercialization is being carried out, along with the architectural and master planning work. The efforts are being coordinated in the way that would allow us to optimally take advantage of the omnichannel retail model. Due to the continually growing online sales, omnichannel retailing will soon become one of the predominant trends shaping the market. Thus the model’s use and management will be crucial for the future growth of both developers and tenants. What is also determining the retail landscape these days is an increased investors’ eagerness to adjust existing outdated projects to contemporary consumer needs (through modernizations, re-commercializations, etc.) rather than creating brand new schemes.

Bożena Kozłowska

senior consultant, market research department, Knight Frank

The Polish retail market has undergone dramatic growth. Because of its changing specificity and the intensifying competition on the local market, there will be a wave of extensions and modernisations of existing centres over the next few years, which, in fact, is already taking place. The adjustment of formats for the current requirements of consumers is already evident in outlet centres, which now include the functions that had only previously existed in traditional malls so far, e.g. extensive food zones or play areas for children. At the same time developers have mostly become interested in the main conurbations again, because of the changing market demand. An area of 0.5 mln is currently being developed in the main urban centres and they will become the leaders in the near future in terms of the volume of new supply. Developers have started the construction of a few large projects (Posnania, Wroclavia and Galeria Północna), while other malls are being planned (Galeria Młociny, Galeria Wilanów). The modern shopping centres appearing on the market at the moment feature an extended shopping offer, such as entertainment and cultural functions. Shopping in mixed-use projects is becoming more and more popular. Many developers have identified the need for adapting traditional retail formats into modern and open ones like the Art Norblin and Bohema projects in Warsaw.