Thinking outside the box

The opportunity for further investment is there, but how can investors get the best from the maturing market and continue generating the profits they have grown accustomed to? This was the key concern of Warsaw's recent CEDEP Forum

Over the past decade, as Poland's real-estate market has matured, developers have found that projects that once offered easy profits no longer deliver the goods. Today's new developments have to reflect the greater sophistication and higher expectations of the market. Developers also need to come up with new ideas and adopt a more a market-oriented approach in order to ensure a project's success.

What customers want

During the recent CEDEP Real Estate Forum for Poland 2007 held in Warsaw, the future of Poland's retail market was a major topic of discussion. Representatives of major market players exchanged their views on how they see the market's future and discussed what kind of new developments may be expected and, most importantly, what kind of developments the customers want.

Piotr Kaszyński, partner and head of retail in Cushman & Wakefield Poland, observed that retail operators are still hungry for new developments. More quality space is needed, as well as developments which provide "a comprehensive shopping experience." He added, however, that retailers' goals might differ in different parts of Poland. "But in general, retailers who came to Poland and began their operations on the local market are very happy, and are thinking of further expansion into several neighboring countries," Kaszyński said.

Location, location, location

Thomas Löffler, managing director of GENI Poland, agreed that the majority of retailers are satisfied, although some of them, especially those that own hypermarket chains, have been suffering losses. Löffler added that, according to some predictions, the situation won't change over the next few years. "Many tenants of shopping centers are happy, but it depends a lot on the brand, the region of Poland and the center's location," explains Löffler.

Now that Warsaw's Złote Tarasy shopping complex has finally opened, developers are asking themselves whether the capital needs any more large-scale shopping centers. The majority of experts believe that Warsaw still has potential and that there is room for at least one more big shopping complex. "There is a possibly that there is space for another shopping center, but you need to look very closely at where you would put it," says Guy Speir, leasing and marketing director for Quinlan Private Golub.

Speir added that Poland's current market is such that if a developer is looking for an opportunity to develop a new project, it is necessary to know exactly who the likely customer base is going to be. It is also exceedingly important to take location into consideration - much more so than a few years ago, when developers could more or less guarantee the profitability of any new retail project. This, according to Speir, is particularly true of the capital. "There are particular areas of saturation that developers should avoid in Warsaw," he explained.

Moving to the provinces

The experts tend to agree that more opportunities lie outside the capital. According to Löffler, new investors from abroad most often look for opportunities in the capital city or other big cities, and only later do they move into provincial markets. However, he says, they would do better to head straight for the provinces. "We work for some companies that we've promoted immediately in smaller cities like Białystok," said Löffler. "Auchan and Makro Cash and Carry went there six or seven years ago. These were some of their most successful outlets in Europe."

Löffler adds that expansion outside the capital has become a market trend already and everybody is moving into smaller cities. "When Białystok is full we will discuss other cities," he says. "The new market players should have a strategy of going to provincial cities and building 'third-generation shopping centers.'"

A new shopping experience

With market experts agreeing that smaller cities offer retailers the best chance to maintain their profits, what should their approach be towards developed cities such as Warsaw? According to the experts, if the projects are well designed in terms of location and target demographic, Warsaw could still become home to a few more major shopping malls.

Grzegorz Trawiƒski, head of corporate banking Poland at Eurohypo AG, says that developers and owners of shopping malls should consider providing their customers with a more comprehensive shopping experience. "I have the impression that not every existing project is fulfilling the expectations of the final customer, and this element must be verified through research," says Trawiński.

Small is beautiful

Agata Sekuła, head of retail investment CE with Jones Lang LaSalle, said that in her opinion, smaller supermarkets are the future of the retail market in Poland and this kind of development could deliver the highest profits to investors. "The convenience of a neighborhood shopping center is something highly appreciated by customers," said Sekuła.

Sekuła believes a shopping complex should be anchored by a supermarket rather than a hypermarket, because in this way it people living in its immediate catchment area would be more likely to shop there. "This is the future for many districts in Warsaw," says Sekuła.