So much space, so few brands

by Daniel Tencer

Poland's entry into the European Union will speed up the arrival of new retail names to the Polish market, said Nicolas Monnier, general director of retail development firm Cefic Polska.

"It's very important to find a new tenant mix," added Monnier, who is responsible for the development and commercialization of Cefic's 287,000-square-meter Arkadia shopping complex near Warsaw's Babka roundabout. "A lot of brands that were to come into Poland two or three years ago put their plans on hold because of the downward economic trend, and they are now thinking of coming (here) due to the fact that Poland is joining the EU. I think we will see new brands here after EU accession, and for them it will be a question of having the right strategy, picking the right mall to go into."

The potential for a wave of new retail brands here following EU accession is music not only to Monnier's ears, but to all the developers of the myriad shopping centers under construction in the Warsaw area. Currently there are three large schemes under construction within a few kilometers of downtown Warsaw - ING's Złote Tarasy, Cefic's Arkadia and Blue City. And as pre-leases at the centers begin to build up, it is becoming increasingly obvious that the various schemes will repeat many of the same retail names. Eastbridge Group's Smyk, Empik and Galeria Centrum stores are taking mid-sized locations in Złote Tarasy, the downtown mall next to the central railway station that is set to open soon, as well as locations in Arkadia, located to the north of downtown.

Monnier, however, isn't breaking a sweat over the competition, convinced as he is that the mall he is responsible for developing, Arkadia, will come out on top. With a net lettable commercial area of 103,000 square meters, the €270-million (zł. 1.1-billion) Arkadia project will be the largest shopping center in central Europe - a fact Monnier is not playing up, preferring instead to focus on the potential that a mall of this size can offer retailers.

"What we are trying to offer in Arkadia is the opportunity for chains to have their flagship store, because Arkadia is our flagship mall," Monnier said.

Cefic, which does not work with real estate brokerages, preferring to do all its leasing in-house, has managed to pre-lease nearly 70% of the mall's commercial surface - a substantial achievement, considering the mall will not be open to the public until September 2004. But a cursory glance at the tenant list - Empik, Reserved, Zara, Media Markt, Cinema City to name a few - reveals little in the way of new names in Warsaw retail. And while it makes sense that the mall would have a Carrefour hypermarket, given that Cefic originally came to Poland to engineer and develop locations for the French retailer, many real estate professionals are beginning to question the wisdom of anchoring modern malls with food outlets.

Alan Colquhoun, director of the Warsaw office of real estate brokerage DTZ, says that new shopping center schemes will have to adapt to new realities as Poland becomes part of the EU.

"In the medium to longer term, as income levels increase and a lower percentage of total expenditures goes for food or subsistence items, the inclusion of a hypermarket in a large retail scheme will become irrelevant or unnecessary," Colquhoun said. "There are already a number of larger retail schemes in the United States, U.K. and elsewhere that have no food retailing whatsoever - this is especially true in urban locations, as, I believe, the likes of Blue City and Arkadia are."

But Monnier defends Cefic's decision to place a Carrefour in its flagship mall, pointing out that, in a scheme as large as Arkadia, a Carrefour hypermarket would account for only about 10% of total space.

"We have a strong belief that hypermarkets on a day-to-day basis create a client base for the mall, even if it doesn't do anything for (the mall's) image," Monnier said. "In such a big mall it will be just a part of the center ... and other parts of the mall will have a completely different atmosphere."

Nonetheless, Cefic's positive outlook for Warsaw retail did not extend to its project in Bydgoszcz, a 33,000-square-meter Carrefour-anchored scheme that was recently put on hold indefinitely. TK Development's competing plan for a mall led Cefic to the conclusion that there was no room for another mall on the relatively small Bydgoszcz market.

"TK Development did a good job of leasing," Monnier said. "They brought in the brands of Eastbridge Group - Smyk, Empik, Galeria Centrum - so most of the names, in terms of mid-sized units, are already there."

Meanwhile, with the arrival of Złote Tarasy and Arkadia, the number of Empik locations in Warsaw is about to exceed 10.