Pumping up the volume

Adam Zdrodowski, ‘Eurobuild CEE’: The retail property market in Poland has been defined by the intensifying competition in recent years. Does the sector still offer investment opportunities for international real estate investors and developers?

Scott Dwyer, CEO, Atrium Poland Real Estate Management: Well, in Warsaw the vacancy rate in the office sector is in the mid-teens, while in the retail sector it is 2 or 3 pct, so offices are no substitute for retail. There are two things happening in the marketplace: one is that ownership is concentrating to more long-term holders and the other is that the development of new shopping centres is happening more in the smaller cities, as the economics in some of the larger cities are less feasible. From our perspective as a dominant landlord and operator, the supply will regulate itself as new developments are now more difficult to carry out – with the land prices, incentives and debt terms pressuring equity returns.

As the market in the country becomes increasingly saturated, how can shopping centre developers and owners gain a competitive edge over the other market players?

Some of the large cities, including Poznań and Wrocław, are pretty much saturated, but Warsaw is still largely undersupplied. Our strategy is to focus on Warsaw and to increase the leasable space of our shopping centres and create more urban places to be. Today, retail itself is not enough, you need to provide a wider range of amenities – otherwise people will not come.

Will the extension of existing malls remain a crucial part of the market?

Yes, extensions make financial sense, and they also make commercial sense because tenants are more willing to come to or expand in an existing shopping centre than with a new one. The market now is splitting – shopping centres are either getting larger or they are becoming more local. We intend to develop a total of 75,000 sqm in extensions in Poland within the next five years, of which a combined 60,000 sqm will be added to our three shopping centres in Warsaw.

Are you only interested in extending the shopping centres in your current portfolio, or would you also consider the development of a new shopping centre project in Warsaw or one of the regional cities in Poland?

We developed a new shopping centre project – Atrium Felicity in Lublin – a few years ago, so we have the capacity to do this. Extensions are actually more difficult to do as you have to integrate the existing centre with the new section and ensure the smooth operation of the existing centre during the extension process. Ground-up developments are easier to execute – you design, you build, and you do not have to worry about the existing tenants, because the tenants in a development all turn up on the same day. When it comes to extensions, you often need to do them in stages. In Warsaw, we would potentially be interested in the development of a new shopping centre project if that made financial sense and added leverage to our portfolio. However, our main goal at the moment is to focus on the extension of our existing assets.

Are you planning any shopping centre acquisitions in the next few months?

We are looking for existing shopping centres with a good repositioning story, but the pricing is rather hot at the moment. We are focusing on nine shopping centres in our existing portfolio. As for the remaining assets, some may be sold in the future if we are offered the right price, but we are in no hurry to sell. There is no target for the number of assets that we want to have in our portfolio – we simply want to have the right shopping centres in the right catchment areas.

Do you want to be in any particular cities where you are not yet present?

I think that we now have the right geographical coverage with three of our best shopping centres located in Warsaw and another six in major regional cities across Poland. This makes us different from our main competitors, who are either focused on Warsaw or on regional cities.

What will Atrium Promenada, your flagship shopping centre in Warsaw, look like once the whole extension process has been finished?

We are extending Atrium Promenada in seven phases – after completion, the retail space in the shopping centre will double from the initial 44,300 sqm to app. 90,000 sqm. The existing part of the centre will also be modernised. When the process is finished, both the outside and the inside of Atrium Promenada will be completely new.

What about the changes planned for your other two shopping centres in Warsaw – Atrium Reduta in Ochota district and Atrium Targówek in Targówek district?

What we are doing in Atrium Targówek is a 9,000 sqm extension and after that we may think about taking another step. What is missing in Atrium Reduta is the leisure component – we will add additional space there to accommodate a cinema and a food court.

Are you going to increase the gla of any of your shopping centres outside Warsaw?

We are looking at Galeria Biała in Białystok and at Focus Mall Bydgoszcz in Bydgoszcz, but I cannot comment yet on the scale of the potential extensions.

Scott Dwyer

As the CEO of Atrium Poland Real Estate Management, Scott Dwyer is responsible for managing 21 commercial real estate assets with a total value of EUR 1.5 bln together with several major redevelopment projects. Prior to joining Atrium, he worked for Heitman (as a European portfolio manager), ING Real Estate (as general manager for development and restructuring activities) and Unibail-Rodamco (managing director for Central Europe). He is a graduate of the University of Technology in Sydney and a Certified Public Accountant (CPA).

Atrium Promenada, the flagship asset of Atrium Group, is the largest shopping centre located on the eastern side of the Vistula river in Warsaw. The centre comprises 44,300 sqm of leasable space and houses more than 180 stores and service outlets. Work on the expansion of Atrium Promenada was launched last year and will eventually involve the doubling of the current gla to a total of more than 90,000 sqm. According to Atrium Group, the extension process will further strengthen the dominant position of Atrium Promenada in eastern Warsaw, which will epitomise the concept of a modern mall as a meeting point and “the place to be” in a given location.