Warsaw shopaholics look to the malls
Downtown Warsaw has never been a fascinating place for shopping. The city's high streets of Nowy Swiat and Chmielna can hardly match rivals such as ulica Florianska and ulica Grodzka in Krakow or ulica Piotrkowska in Lodz, let alone the glitzy shopping meccas of London's Oxford Street or Milan's Galleria.
Despite a lack of glamor in the past, Chmielna and Nowy Swiat were the main shopping hubs simply because there was no other choice. But all that changed in the last couple of years with the arrival of modern shopping malls. Although they tend to be in remote suburban locations, the new malls have successfully attracted tenants and customers from downtown locations.
"A new generation of shopping mall offers what Polish customers have always wanted to shop and have a bit of fun," said Monika Jedrzejczak, retail specialist at Healey & Baker, the U.K.-based real estate consulting firm.
Most of the new malls have restaurants, cafes and often cinemas along with retail outlets, said Stefan Przedrzymirski, associate director at Jones Lang LaSalle (JLL), a real estate consulting company.
Downtown Warsaw lacks one area that has all the stores, restaurants and entertainment complexes. Consequently, suburban malls are filling the void.
To date there are about 470,000 square meters of suburban retail space, according to data provided by JLL. A further 156,000 square meters are under construction and by 2003 existing retail space is estimated to be at about 790,000 square meters, JLL said.
By comparison, the center of Warsaw has only 50,000 square meters of modern retail outlets, according to figures from Knight Frank real estate agency. Also, the downtown assets are often owned by the city and only rented out to private contractors, which are reluctant to invest in state-owned properties. As a result "the city center is still chronically short of suitable high street units," said JLL in a recent report on the retail market.
Traditional high street businesses in Warsaw could also soon find themselves faced with more competition closer to home. Shopping malls are now being developed closer to the city center. Recently, the Warsaw-based Globe Trade Centre developer opened the 70,000 square-meter Galeria Mokotow mall on ulica Woloska in Warsaw, while I.T. International Theatres opened the 53,000 square-meter Sadyba Best Mall on ulica Powsinska. Both these malls have retail, entertainment centers and multiplex cinemas.
Other shopping malls are also expected to come to the city. The Central European Property Fund is planning to develop a $100 million, 72,000 square-meter Wola Park mall on ulica Gorczewska by 2002. French developer Cefic plans to build 110,000 square meters of retail space in the Arkadia shopping mall near Rondo Babka by 2004.
The biggest project called Zlote Tarasy is planned between the central railway station and Holiday Inn. Dutch developer ING Real Estate will invest zl. 1 billion ($220 million) in the mixed-use Zlote Tarasy.
These new investments will inevitably pose a serious threat to Warsaw's traditional high streets, property sources said. "The whole retail structure may change," said Jedrzejczak of Healey & Baker, adding that parts of ulica Marszalkowska and Aleje Jerozolimskie will be unable to keep pace with developments.
But even though downtown locations are becoming less popular among retailers and shoppers alike, the number of people browsing retail outlets in the city center is still high, said Piotr Kaszynski, retail agent with Healey & Baker. He estimates that 100,000 pedestrians a day walk down ulica Nowy Swiat. In shopping centers this figure is several times lower.
Some 80,000 customers visit the Klif shopping center weekly, the company said last year. On weekends, though, Galeria Mokotow sees as many as 70,000 customers daily, said Kaszynski of Healey & Baker, hired by Galeria Mokotow to market the project.
But despite fewer window shoppers in the big malls, those who do visit the malls are more likely to make purchases. "When people come to shopping malls they spend money," said Atilla Balogh, managing director of the Tchibo Warszawa coffee company. In Poland, Tchibo operates three coffee shops in shopping malls and two in city centers. Balogh said that in terms of the number of customers and revenue, the locations in shopping malls are more successful. "This is unique for Poland as in other markets usually locations on high streets are more popular," he said.
Also while retailers' revenue in shopping malls are higher, their costs are lower, property sources said.
Prime rents on ulica Chmielna range from $60-$90 per square meter, according to Healey & Baker. In shopping malls, rents are $25-$30 square meter. Many retailers said the large malls seem to have no problem attracting customers or tenants. "For years Poland lacked good retail space, now it's changing," said Przedrzymirski of JLL. "Now tenants have a better choice." Not surprisingly, the vacancy rate in modern retail centers is estimated to be close to zero, he said.
Shopping centers also have other benefits over high street locations, property sources said. Shopping malls have security, free parking, shops and a plenty of space everything that is lacking in central Warsaw. "Why shouldn't people go to a mall when they have Cubus or KappAhl (stores) there," said Jedrzejczak of Healey & Baker. "They like more space and that offers them a wider choice."
Property watchers said that unless high streets in Warsaw change tack they would continue losing money to shopping centers.
Przedrzymirski of JLL said that the only way to save the downtown is investing in the area security, easy access and better cooperation with city authorities.
"If the city authorities change the surroundings, provide security and make it easier to get there, shopping streets like Chmielna won't die out and will have a chance to revive," he said. "In every European city, there is a street like that, so why should it disappear?"
