Real estate Lokale Immobilia
13:12 11 March 2019
Post by: WBJ

Retail market/ Prime locations, dominant malls

In 2018 Atrium European Real Estate splashed out on several investments in Warsaw, and the company will continue to focus on Poland in the coming years, say CEO Liad Barzilai and majority shareholder Chaim Katzman. By Adam Zdrodowski

Retail market/ Prime locations, dominant malls

Last year marked the tenth anniversary of Atrium European Real Estate’s presence in Poland. And for the leading owner, developer, manager and operator of shopping centers in Central and Eastern Europe, it was arguably its busiest year in the country to date. In 2018, Atrium spent almost €500 million in Warsaw alone, continuing its €300-million program of redeveloping and extending three major malls in the Polish capital, and acquiring a prime retail asset located in the very center of the city.


In the autumn of last year, the company completed the second phase of the extension and refurbishment of the Atrium Promenada shopping center in the Praga Południe district and opened a new 8,600-sqm section of the Atrium Targówek mall in the Targówek district. The Atrium Reduta center in the Ochota district also grew by an additional 4,000 sqm of leasable space, and in line with the latest global trends towards transforming shopping centers into meeting destinations, a couple of the company’s malls got new dining and entertainment areas.


Last but not least, in October 2018 Atrium finalized its acquisition of the Wars Sawa Junior retail center in downtown Warsaw from a fund managed by CBRE Global Investors. Valued at €301.5 million, it was one of the biggest investment deals in Poland last year. And the company is already planning further investments. “We will continue to be active in Poland, both on the redevelopment and investment side,” revealed Liad Barzilai, the CEO of Atrium European Real Estate.
Atrium’s Central and Eastern European portfolio currently consists of 34 properties: a total of almost one million sqm of retail space valued at a combined €2.9 billion. While the company is present in Poland, the Czech Republic, Slovakia and Russia, its business strategy involves a focus on the former two countries, with Poland and the Czech Republic already accounting for 84 percent of its portfolio. Poland’s share in the portfolio increased from 55 percent in 2014 to 66 percent in 2018.
Last year Atrium announced its exit from Hungary (where it sold 20 small retail assets) and Romania (where it offloaded one major shopping mall), which allowed the company to raise capital for the Wars Sawa Junior acquisition in Warsaw. Between 2014 and 2018, the Polish capital’s share in Atrium’s portfolio grew from 20 percent to 29 percent. It is cities like Warsaw and Prague – locations that stand out due to their strong demographics and growing purchasing power – that Atrium believes in, Barzilai explained.


In the coming years, the company will focus on large cities, where – following the worldwide trend of urbanization – more and more people now live and work. Atrium concentrates on large shopping centers that are dominant in their catchment areas, and the average size of assets in Atrium’s portfolio almost tripled between 2014 and 2018, Barzilai said. He added that the company will continue to modernize and extend its top assets in the near future.

'RETAIL IS NOT DEAD'

According to Atrium’s representatives, despite the bad press it often gets, retail has a future. “Retail is not dead,” Barzilai argued, adding that the sector has been evolving and adapting to new challenges, with some secondary locations having suffered from the growth of e-commerce. Prime locations, by contrast, have actually been gaining in significance as retailers fight for brand recognition and increasingly see the need to be present in places with heavy pedestrian traffic. This is reflected by the fact that some e-retailers are opening brick-and-mortar stores.


According to Atrium European Real Estate’s management, we are currently witnessing an increasing polarization of the shopping center market, with prime assets continuing to gain in significance and many of the weaker malls losing out as retail gets radically transformed. Chaim Katzman, chairman of the board of directors and majority shareholder at the company, pointed out that while many shopping centers have been closed in the US in recent years, they were often in locations where key retailers now do not want or do not necessarily need to be.


FIRST-CHOICE LOCATIONS

Similar processes already are, or soon will be, taking place in other parts of the world. Many retail chains have cut down on the number of locations they want to be present in, but in those shopping centers where they have stayed their stores have actually gotten bigger, Katzman said. Therefore, from the perspective of developers and investors, it has become crucial that one bets on exactly those malls which leading retailers cannot afford to be absent from, he argued. In his opinion, it is today easier to find such assets in large cities than in small urban centers.


According to Katzman, while some shopping centers in smaller cities nowadays offer attractive returns on investment, it is only the biggest agglomerations – where demand is set to continue to rise – that can guarantee sustained growth in the future. Over the last decade, Atrium sold the vast majority of its retail assets in CEE that were located outside the biggest cities. In Poland, in the long-term perspective, the company wants to be present in the first-choice cities of Warsaw, Gdańsk, Wrocław and Kraków.


It is no coincidence that last year Atrium decided to acquire the Wars Sawa Junior center, Barzilai said. With the annual footfall in and around the property amounting to approximately 60 million, the asset perfectly fits the company’s strategy, he added. In the medium-term, Atrium wants to redevelop Wars Sawa Junior to make the most of the site’s huge potential. “We will be able to reveal our plans when the design and the administrative permits are in place,” Barzilai said.


More work remains to be done in the Atrium Promenada shopping mall, which is expected to grow by around 45,000 sqm. The Atrium Targówek shopping center will also probably see further investment, although Atrium has not yet revealed any specific plans. The company will definitely continue to work on the transformation of its centers into must-visit locations with a focus on placemaking being part of its strategy. “We want our malls to be the third destination in peoples’ lives, after home and work,” Barzilai stressed.

atrium european real estate

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