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Adam Zdrodowski: The turmoil in the international financial markets has already had an impact on real estate investors' and developers' international activity. Has that been visible in the Polish retail property market as well?

Marek Noetzel: I would say that the retail market in Poland is rather stable at the moment. Substantial demand for modern retail space, especially in larger cities, is clearly visible, although there are some signs of an adverse impact caused by recent developments in the currency markets. It should be noted that tenants generally pay their rents in foreign currencies, mainly in euro, which means that the złoty's recent decrease in value has hit them hard. On the plus side, the cost of construction is beginning to go down because of a global decrease in the demand for natural resources.

Given an exchange rate that is more or less stable, rents in major cities will probably be growing because of the limited supply of retail space there and new tenants entering the market. Retail markets in smaller cities, by contrast, are more competitive and investment processes there may become longer. Everywhere, however, there may be some problems with financing new projects, which will certainly make developers modify some of their plans.

How saturated is the Polish retail market?

It is certainly far less saturated than many other European markets and a lot of work is definitely still ahead of us. If we take a look at the CzechRepublic, for example, we see that relatively small urban centers are in the developers' focus now and even towns with populations of 20,000 to 40,000 are seeing the development of large retail parks.

In Poland, this process is only beginning, but the trend will continue for some time. It must also be remembered that there is still room for new modern retail projects in the country's largest cities, especially when we take into account plots owned by Polish State Railways, which are usually centrally located. I am also expecting the emergence of huge supra-regional projects following the development of road infrastructure that will increase catchment areas and open new possibilities.

So, putting the current financial crisis aside, does Poland remain an attractive retail location for foreign investors?

Definitely. Poland is a large country with a population of some 38 million whose purchasing power is growing, which creates numerous investment and development possibilities. Cities with populations of from 40,000-140,000 will attract most of the new projects, but larger cities such as Warsaw, Katowice and the Tri-city urban area will see the development of new retail projects, too.

What about the quality of new retail projects in Poland? Are these projects keeping up with world standards?

In my opinion, new retail projects in Poland are often even better than similar developments around the world. The quality of architecture of some of them is really high, which results from the necessity to distinguish oneself from the competition. There are examples of projects in the market, such as Stary Browar in Poznań, for example, which, apart from their attractive retail offer, feature superb architecture. This makes them places people like, places in which they want to spend their time.

Stary Browar is an example of a revitalization project. Is revitalization a popular trend in the retail market?

Revitalization is becoming a trend and will involve both redevelopment of railway stations and post-industrial areas, mainly in Silesia but also elsewhere. These kinds of projects are highly attractive, as the properties are usually centrally located. However, they are also more difficult; because of the buildings' nature and history, the projects take more time. In the case of post-industrial properties, there is often a problem with contamination and in Silesia there is additionally the problem of coal mining, which is not always well-mapped.

Do large-scale mixed-use projects - combining retail, office and residential space - have a chance of becoming successful in the market?

There have been some attempts at such projects in Poland, but no schemes of this kind have been realized so far. That stems in part from some legal problems concerning co-ownership of common areas by apartment owners, on the one hand, and retail tenants on the other.

What, then, are some of the factors which make a retail project successful?

Certainly the project's scale, architecture and, above all, location with good transportation links to other parts of the city. What is also important is a well-selected mix of tenants and a grocery component, either a hypermarket or delicatessen - that always attracts clients to a shopping center.