Western retailers shop beyond Warsaw for space

"If you want to have a store in Warsaw you have to be in the center," said Maciej Dyjas, president of the board of Empik, owned by Dutch holding company Eastbridge. Empik operates 48 stores throughout the country. "We don't have any areas which would be available right now," Dyjas added.
Though Warsaw boasts the country's highest spending power, an increasing number of Western retailers are finding the local property market to be overcrowded, overpriced and complicated when it comes to purchasing land.
"For a European capital, the provision of retailing in Warsaw is underdeveloped," said Richard Petersen, head of Healey & Baker's Warsaw office. "(The City) will have to do something to the center so it doesn't die."
Thwarted by the lack of available and affordable space, retailers are turning to secondary cities that offer sites in good locations at much better prices.
This year, Empik is planning to open stores in Plock, Bialystok and Torun. And in Katowice, Empik is building a 1,600-square-meter "megastore" scheduled for completion in September. The company is also planning to build another megastore this year, somewhere in the range of 1,000 to 1,500 square meters. Though Empik has not yet found a site for its second megastore, chances are good it won't be constructed in Warsaw, Dyjas said.
"The good time for the Warsaw retail market is almost over," Dyjas said.
In the early 1990s, Western retailers thought they had to be in Warsaw, which is no longer the case, according to experts.
"Because Warsaw is the capital city it's certainly the political center," said Ian Troop, general manager of Procter & Gamble in Poland, which works with retailers throughout the country. "But I don't think a lot of retailers are thinking of it as the place they've got to be."
Understandable, given that only 1.6 million of the country's 40 million inhabitants live in Warsaw. And while Warsaw residents have the money to spend, retailers say they can make up in volume by going to high-density population centers such as the Katowice area, where several cities are bound by a solid infrastructure and where residents are used to traveling 10 or 20 kilometers from outside the city into town to shop.
Though retail trade has boomed in the last few years, the retail property market in Poland is lagging behind office property, according to a report by Healey & Baker.
Warsaw's high street locations are on ul. Nowy Ćwiat and ul. Chmielna, near the Old Town and along the main thoroughfares of ul. Marszalkowska and Al. Jerozolimskie. Though many of the international retailers have landed in the city via franchise operators, most of those have focused on sites in high-profile developments.
The LIM Center at the Marriott boasts rents of around $62 per square meter. Down Al. Jerozolimskie at the SwedeCentre, rents for retailers like Adidas, IKEA, McDonald's and Lego run for $45-$55 per square meter. But the city center still lacks single-use retail projects like western-style shopping malls.
"You can walk down Marszalkowska and it looks like there's a lot of space," said Robert Fourt, associate director of the Warsaw office of Gerald Eve International Real Estate Consultants. "But you won't find any Western retailers because you just can't get a hold of it."
Even when retailers do have shops in Warsaw, they find it difficult to maintain a high-profile presence.
"You would be hard-pressed to know there's a Benetton in the city center," said Monika Kavell, an analyst with Gerald Eve, noting that there are few modern shopping centers in Warsaw.
The first project that may bring focused retail to the city center is a proposed 30,000 square meter project to be developed by ING Bank and Samsung. The project, designed to integrate the central train station with a multi-level shopping plaza north of the station, could be completed in four years. Healey & Baker's Petersen says there are already international retailers interested in becoming anchor tenants.
"Once there's one city center shopping mall, and it goes well, they'll all come here," Petersen said.
But retailers already on the ground don't want to wait.
Krak-w, a popular tourist destination has attracted the eyes of retailers because of the better access to high-street sites. Spaces in the Old Town Square rent for around $45 per square meter. Danish clothing store Carli Gry pays $50 per square meter for its location on a high traffic corner of the square. Shops on the elegant ul. Florianska run from $40-$60 per square meter. Retailers like Adidas and Polish jeweler Kruk are focusing more intensively on Poznan, Wroclaw and ü-d.
And when a retailer gets a site in a smaller city, he doesn't necessarily have to be on the main shopping venue.
"If you're one street farther down that's okay," said Empik's Dyjas, noting that although the presence may go down, sales necessarily won't.