Room for more

The Warsaw market can still absorb several new large-scale shopping mall schemes By Adam Zdrodowski Warsaw Stock Exchange-listed developer Globe Trade Centre (GTC) will soon officially launch construction on its Galeria Północna shopping center project in the Polish capital, which will deliver approximately 64,000 sqm of leasable retail space in the first half of 2017. Located in the Białołęka district of the city and valued at around €160 million, the planned scheme will be the first new retail development of this scale in Warsaw since the opening of the Złote Tarasy investment in 2007. Over the last few years, large new  shopping center projects were mostly developed in the major regional cities across Poland, but now it seems that such schemes are finally going to start coming back to the Polish capital. Warsaw has changed significantly in recent years, with the growth of new housing neighborhoods in peripheral districts, including the Białołęka district in the north-eastern part of the city and the revitalization of some of the neglected central areas, having created new opportunities for retail space development. Several investments have already been announced. GTC itself is currently also planning a large shopping center project called Galeria Wilanów which it hopes to develop in the fast-growing Miasteczko Wilanów residential area. The development, for which the company is now trying to secure a building permit, will comprise almost 80,000 sqm of GLA. GTC wants to launch construction on the scheme as soon as all the administrative hurdles have been cleared. The city center itself will see a few major changes as well. A new mall will probably be built as part of the huge mixed-use complex which Polish State Railways and Immofinanz Group are planning to develop on the former Warszawa Główna railway station site in the central Wola district. Negotiations regarding the joint investment are still underway. Another shopping center development is likely to spring up on the site of the existing Tesco facility located in Kabaty, the southernmost part of Warsaw’s Ursynów district. A number of other locations across the city are now being talked of in the market. [caption id="attachment_77247" align="alignright" width="430"] Galeria Białołęka, Image:GTC[/caption] New locations emerging Developers and analysts argue there is still room for new large-scale shopping center projects in Warsaw. Jacek Wachowicz, management board member at GTC, noted that as early as 2009, a JLL study pointed to Białołęka and Wilanów as two of the most promising locations. The districts are now two of the fastest-developing parts of Warsaw in terms of population growth and both are evidently suffering from modern retail space shortage, Wachowicz said. According to Beata Kokeli, a senior director at the retail space department of CBRE, apart from Białołęka and Wilanów, there are at least three other locations in Warsaw where large-scale shopping center projects could definitely be developed in the coming years. She mentioned the Młociny neighborhood in north-western Warsaw’s Bielany district, as well as the Ursynów district which currently does not really have any large modern retail scheme that would cater to the needs of its affluent population. Kokeli also pointed to Praga on the right side of the Vistula River as an emerging retail location. The previously neglected area is being revitalized and the recent opening of the second subway line is expected to help attract more real estate investment there. Several major residential and commercial projects, including Centrum Praskie Koneser and Port Praski, are already under construction. Praga is another area of Warsaw which will, in the short-term perspective, become ready to accommodate a new retail investment, Kokeli said. Anna Wysocka, head of the retail agency at JLL Poland, said that Wola also remains an attractive location. Admittedly, there are already several malls in the district but the growing Odolany and Czyste housing neighborhoods have the potential to absorb new space. Apart from this, the eastern Wawer district, with the largest area of all the districts in Warsaw, is still under-supplied. However, when the planned southern Warsaw ring road is completed, Wawer could become part of the catchment area of Galeria Wilanów, Wysocka said. Low saturation rate The Warsaw retail market has been stable in recent years, with no new major developments having challenged the position of the largest existing malls. However, despite the stagnation, the market has been diversifying of late, Kokeli said. She pointed out that new mixed-use and specialized schemes, including Plac Unii City Shopping, which was developed by Liebrecht & wooD and BBI Development, have been delivered since 2007. Also, Warsaw’s high streets have been changing, Kokeli said. According to CBRE data, there are currently 42 shopping centers in the Warsaw agglomeration (of which 32 are located within the city) which comprise a total of approximately 1.4 million sqm of retail space. The retail space saturation rate in the Polish capital turns out to be relatively low when one compares Warsaw with the largest regional cities in Poland, and amounts to 422 sqm per 1,000 inhabitants. This is a similar level to that seen in Szczecin, Kokeli said. Anna Hofman, a senior negotiator at the retail space department of Cushman & Wakefield, said that among the eight largest agglomerations in Poland, Warsaw and Szczecin feature the lowest retail space saturation rates. The retail space saturation rate in the Polish capital is lower than in such regional cities as Kielce, Lublin, Poznań and Wrocław. Meanwhile, when comparing the purchasing power of the inhabitants of the same cities, Warsaw is the undisputed leader. This demonstrates that there is still much room for the development of new retail space in the Polish capital, be it in large-scale shopping centers or in smaller retail formats including convenience centers. In the opinion of Kokeli, it is more difficult to compare Warsaw with other capital cities in Europe because in many Western European countries high streets are much more developed than in Poland and are the main shopping destinations for the inhabitants of those cities. A bumpy road Why did Warsaw have to wait so long for new large-scale shopping center projects? According to Wysocka, when the Złote Tarasy scheme opened for business in 2007, both developers and tenants came to the conclusion that the market had already become saturated. Today, the situation is quite different – the dynamic growth of the city’s residential market in recent years has created substantial demand for new retail space in the Polish capital, Wysocka said. Warsaw has been seeing its population grow and the purchasing power of Varsovians has increased. The strengthened position of the Polish capital as the business center of the CEE region has been attracting more and more business and leisure travelers to the city. Consequently, occupants, including fashion concepts, are currently looking for new locations on Warsaw’s retail map and are finding it difficult to secure sufficient space, especially when seeking large areas, Wysocka said. [caption id="attachment_77252" align="aligncenter" width="468"] Image:GTC[/caption] However, other property market experts also point to complicated land ownership, administrative and legal issues as the main reasons for the fact that no large-scale shopping center development was delivered in Warsaw over the past eight years. In the opinion of Kokeli, land-related issues are the main hindrance to the development of large retail investments in Warsaw. There is a limited amount of large sites in the city which have a clear legal and urban planning status, she said. The protracted administrative procedures a developer often has to go through further aggravate the situation. The process of enacting a zoning plan which will allow for the development of a large-scale retail project can be very time-consuming, said Hofman. The process usually involves many different parties which represent conflicting interests and the public administration officials often act in an ambiguous manner. “In the case of some schemes, the investment cycle can even take more than ten years,” Hofman said. Old and new Nevertheless, the obstacles are not putting developers off. Attracted by new retail opportunities which have emerged in Warsaw in recent years or are appearing in the city right now, they continue to plan new projects of all kinds. Apart from new large-scale shopping center schemes, developers are now involved in the repositioning and extension of a number of existing Warsaw malls, as well as in the development of new local shopping center investments, including Ferio Wawer. Andrzej Jarosz, marketing and communications director at Mayland, argued that Warsaw has the potential for the development of large retail projects in basically all kinds of locations – in the downtown area, in specific districts and in the suburbs at express road junctions. While Mayland itself is now focused on the development of the Serenada shopping center project in Kraków, it is also working on several planned retail schemes in Warsaw. The results of that work should be disclosed to the public within the next few months, Jarosz said.