RETAIL DEVELOPER’S
GUIDE
Karina Kreja, Associate Director, CBRE:
After two decades of dynamic development the Polish retail market is now mature. Despite increasing competition it still offers considerable
development potential, albeit far more selective than in the past. We address the following publication to both seasoned and future retail
developers to support them in their retail investment plans. It is essential to understand that shopping center planning is a complex process that
requires in-depth knowledge of both consumer and competitive market.
Hanna Bomba-Wilhelmi, CEO, RegioPlan Consulting
Location determines a shopping centre’s success, but the choice of a right location is only the first step. An in-depth knowledge of the catchment
area is equally indispensable. One step leads to another and each decision determines the range of further alternatives. It is essential for a
developer to embrace this process in its full complexity in order to deliver a successful and durable scheme that will first and foremost serve the
customers well. The fact is, that the consumers determine whether the tenants or the owners of centers will be successful or not.
Dariusz Gardener, Managing Director, ADV POR:
Despite growing competition from the part of other developers, the shopping centers remain very attractive for construction sector. However
this is the market that requires deep expertise especially with regards to the specialized projects. That is why we decided to work with CBRE as
exclusive advisor and agent on our first outlet project in Lublin. The knowledge and contacts of consultants led by Magda Fratczak resulted in a
good concept that has already attracted huge tenants’ attention. We plan to work with CBRE in future on our next retail projects.
Dr. Nils-Christian Hakert, COO, Atrium Real Estate
Atrium Real Estate has a large portfolio of shopping centers in the CEE region, which has been constantly and successfully growing.
RegioPlan has been conducting the shopping center analyses for the whole portfolio not only in Poland, but in other CEE countries as well.
These analyses represent a great second opinion for management decisions and big support for our marketing. RegioPlan team has a great
knowledge about the Polish market, is highly customer-oriented and a pleasure to work with. A great team I can highly recommend!
4 INTRODUCTION
6 STARTING WITH THE LOCATION
8 MARKET POTENTIAL ASSESSMENT
9 FROM CATCHMENT TO TENANT MIX
11 DESIGNING THE BEST LAYOUT
12 VALUE ADD INVESTMENT
13 DEVELOPER’S CHECK LIST
14 MARKET PRACTICE
KEY TERMS
KEY SHOPPING CENTRE FORMATS
INTRODUCTION
COPING WITH A MATURING MARKET
Koneser Warsaw
After two decades of rapid development the Polish retail market is
now reaching maturity. The end of 2012 saw total shopping centre
stock increase to 9.5 million sq m of GLA comprised in 380 schemes
of which 38 are specialized formats, including retail parks and
factory outlets. Undeniably, times are increasingly challenging for
retail developers. With consumer demand easing in response to the
prospect of the prolonged economic slowdown and market saturation
symptoms already observed in a number of locations, shopping centre
development is losing its reputation as one of the safest real estate
investment sectors. Additionally, the level of risk attached to retail
scheme construction is being reassessed, with a number of uncertainties
emerging from the combination of reduced levels of financing,
continuously moderate retailer demand as well as quickly changing
consumer habits.
For a market that has so far developed in extremely favourable
conditions, difficult times are approaching. Clearly, the gap between
market leaders and those lagging behind is growing. With prime
shopping centres such as Manufaktura or Galeria Mokotow trading
at a yield below 6%, other shopping centre transactions are often
being completed in double digits. From an investor’s perspective, the
ongoing ‘run to safety’ translates into decreasing prime yields while
the spread for secondary and tertiary products is widening. This mirrors
tenants’ demand, with the best schemes enjoying negligible vacancies
and waiting lists while an increasing number of shopping centres are
suffering from persisting high vacancies. In terms of client interest, the
best schemes in Poland record footfall levels of over 30 million visitors
per year while the majority of schemes fail to reach the 5 million visitor
threshold that in the recent PRCH Footfall Index research has been
indicated as the 2012 average.
Outlet Centrum Lublin
At that same time an alternative retail concept is providing competition
for shopping centre schemes. Format-wise, the recent strip mall
expansion is the most prominent trend that also marks the growth of
small (under 5,000 sqm of GLA) convenience and neighbourhood
formats. Also, the market has seen several completions of themeoriented projects with household equipment centres at the lead.
This publication is aimed at supporting shopping centre developers as
well as other market players engaged in planning, commercialization,
construction and strategic elements of a shopping centre concept.
Tapping on the market expertise of CBRE and RegioPlan Consulting, it
aims at guiding them through the key elements of this complex process.
Outlet Centrum Lublin
IS IT WORTH BUILDING ANOTHER RETAIL
GALLERY?
Retail investment in Poland
3000
The answer in general is yes, as market niches persist, but a developer
needs to be increasingly selective and sophisticated in order to hit
the market with the right type of product. Already market saturation
is high in a number of medium-sized Polish cities such as Opole,
Rzeszow or Legnica. Still, in many other locations tenant demand
remains unsatisfied, as the existing retail offer does not match their
requirements. For example, approximately 1/3 of the stock is located
in 1st generation, hypermarket-anchored schemes, while the majority
of expanding tenants are looking for retail gallery space, where
fashion, accessories, as well as other comparable goods are the key
merchandise.
2500
2000
1500
1000
500
0
There is also a major mismatch location-wise between tenant’s
requirements and shopping centre provision, as 2/3 of currently
constructed projects are to be delivered in medium and small cities,
whereas purchasing potential remains the highest in the eight key
urban centres of Poland, presented in more details in CBRE’s annual
‘Poland Retail Destinations’ report. Warsaw, Silesia and Szczecin
all record very low vacancy levels that indicate a landlord’s market.
For example, in Warsaw the lack of quality shopping centre space
has already had a very positive impact on its high streets but also
pushes shopping centre rents up, whereas elsewhere they remain
stable or have slightly declined. Although the entry threshold for the
mature markets is higher than in the case of a new location, there
are additional incentives available to any developer building in large
cities, such as considerably lower market risks and higher returns.
2006
2008
2009
2010
2011
2012
Poland - Key Statistics
Population (‘000)
38 200
Unemployment Rate (%)
Moreover, the current market environment clearly promotes several
formats that were previously overlooked. Small or large strip malls that
were often neglected in the past are now rapidly expanding in both
city centre and out-of-town locations. Retail parks, also with minimum
common space required, are recording an increasing pipeline.
Furthermore, a number of hybrid schemes, such as Szczecin Outlet
Park with a Helios cinema leisure addition, are emerging to fit best in
their local context. At the other end of the shopping centre spectrum,
a new generation of inner-city galleries that combine a retail function
with a transport hub are on the increase, with two flagship projects in
Katowice and Poznan now at the advanced stages of construction.
12
Monthly Average
Gross Salary (EUR)
904
Modern Shopping
Centre stock (million sq m)
9.5
Average vacancy rate (%)
2.9
Prime rents
-Warsaw
(EUR/sq m/month)
75-95
Prime rents
-Poland
(EUR/sq m/month)
30-45
Source: GUS, CBRE, 2013
Retail formats evolution in Poland
in ‘000 sq m of GLA
12000
10000
8000
6000
4000
2000
I Generation II Generation III Generation
Source: CBRE
2013*
2011
2009
2007
2005
2003
2001
1999
1997
1995
0
1993
The retail developers’ list is continuously being extended with many
new players, often being established companies from the residential
sector or experienced main contractors, who are now trying their
chances in the retail sector. But the times of the ‘build and they will
come’ approach are now over, as both tenants and investors are
increasingly selective. The market is ever stronger in discriminating
between prime and non-prime schemes. Even experienced developers
have seen their centres suffering, when built without sufficient market
intelligence. It is essential for a shopping centre’s long-term success
that a thorough and comprehensive assessment of its potential is
undertaken.
2007
Source: CBRE
STARTING WITH THE
LOCATION
LOCATION, LOCATION, LOCATION
Location determines success! There is a suitable location for every use
and it is a precondition for any successful business. While seashore
rocks represent a stable and weatherproof location for a lighthouse, the
optimal location for a shopping centre is characterized by high ranking
accessibility, visibility and parking spaces. Even though these aspects
are relatively easy to measure, a great number of shopping centre
developments suffer compromises when the location is considered.
Seemingly irrelevant and justified by economizing on the often limited
resources, these compromises are sometimes fatal, particularly once a
competitor comes into play, who has respected all of the success factors.
In other words, too many compromises relating to the location make a
shopping centre vulnerable to better located competition.
Types of Catchment Areas
CATCHMENT AREA DELIMITATION
Sufficient knowledge about the catchment area is the basis for every
successful investment decision when it comes to shopping centre
development. The catchment area defines the market capacity of a
retail project and provides crucial information on demographics and
purchasing power.
5 km
3 km
There are, in general, three different ways of delineating a ‘catchment
area’, with varying validity regarding the actual market potential for
a project. The simplest method is to draw circles around the location.
That however, ignores topography, and is hardly suitable for a detailed
location analysis. A very common approach is the concept of drive-time
zones, which can be realised with most GIS tools available on the market.
Drive-time zones are based on the actual road network and are more
suitable for the assessment of a location, as they represent a realistic
picture regarding accessibility.
A drawback of this method is the disregard of one very important factor
which influences the catchment area: the competition. The drive-time
zone does not stop at a competing shopping centre in the vicinity,
whereas a potential customer most probably does. In the eyes of a
customer, competitors represent ‘intervening opportunities’, which many
are not willing to ignore in order to visit another centre, located at further
distance. This fact, in reality, limits the actual catchment area. Taking
this into consideration, the Huff model, based on the delimitation of
catchment areas, represents an approach which takes account of the
latter circumstances, thus preventing an overestimation of the market size.
10 minutes
catchment
Source: RegioPlan Consulting
Huff Model Based Catchment Area
for Stadion Narodowy
City area Warsaw
Primary catchment
Secondary catchment
Drive - time zone
Existing shopping centre
Projected shopping centre
Catchment vs. Drive-Time Zone
Number of Inhabitants
1 600
800
600
400
200
total drive time zones
total catchment
20 minutes zone
10 minutes zone
secondary catchment
0
Source: RegioPlan Consulting
Purchasing Power
per Inhabitant in €, in 2012
9 000
8 000
7 000
6 000
5 000
4 000
3 000
2 000
1 000
Source: RegioData Research
Szczecin
Poznan
Wroclaw
Lodz
0
Krakow
For plausible results a reliable data provider is essential. Experience has
shown that official data provided by national statistics often deviates
from the real picture for various reasons. This especially concerns official
consumer spending data as the official statistics fail to grasp factors such
as the black market or direct money transfers, which however have a
significant impact on the total disposable income of inhabitants.
1 000
Warszawa
Once the catchment area is drawn, we proceed to the estimation of the
total market potential. This value represents the total amount of money
being spent by private households on retail trade. To get an even better
idea of the potential, one can break down this number into different
retail sectors, and even further into different product groups. The basis
for calculating the market potential are the number of households, the
average consumer expenditure per household, retail sector and the local
level of wealth, represented by the purchasing power index. As shown
in the accompanying chart, the purchasing power varies considerably
between the different regions of Poland, even between the largest cities.
1 200
primary catchment
QUANTIFICATION OF THE RELEVANT
MARKET POTENTIAL
1 400
Poland Average
As shown on the map above, a 20 minute drive-time zone of a
fictional small scale project at Stadion Narodowy covers large parts of
the city of Warsaw. Yet, its actual catchment area is much smaller as
several large scale competitors limit the potential reach of the fictional
shopping centre, especially in respect of areas east of the Vistula
River. Consequently, the actual catchment area comprises of about
600,000 inhabitants, while the 20 minute drive-time zone includes a
population of about 1.5 million people. To conclude, drive-time zones
are an important tool for estimations, but cannot replace the catchment
area method. Even though delimiting a real catchment area can be
cumbersome and time-consuming, it represents the model which gets the
closest to reality.
MARKET POTENTIAL
ASSESSMENT
Example scoring model for the location
100
80
60
40
20
maximum total points
center 2
project P2
0
project P1
The retail market in many Polish cities is rapidly becoming saturated.
Each existing centre has its particular strengths and market position.
Development projects, on the other hand, are numerous and often
difficult to predict, particularly relating to the likelihood of the realisation,
the quality of the concept and its success. In considering the variety,
it is essential to know who the real competitors are; how they stand in
comparison to each other; and how they relate to the planned shopping
centre project. To answer that question, RegioPlan Consulting applies
a simple and effective two-dimensional diagram, based on two scoring
models. One model assesses the quality of location for each existing
centre and all known projects, while the other assesses the quality of the
concept. Only a combination of both factors determines the impact of a
relevant competitor. An example is illustrated in the diagram below.
analysed project X
COMPETITION ANALYSIS
Environment
Access Individual
Access Public
Plot
Source: RegioPlan Consulting
Example scoring model for the concept
100
80
60
40
maximum total points
center 2
project P2
project P1
Anchors
Other Tenants
Layout and Interior
Source: RegioPlan Consulting
Productivity in €/sqm, min/max/average
9 000
7 500
6 000
4 500
3 000
1 500
Source: RegioPlan Consulting
electronics
sports
0
clothing
Once the catchment area and the competitive situation are determined,
the next step is a simulation of the purchasing power flows. These flows
are represented by achievable market shares, which lead to the turnover
expectation for each retail sector. Finally, the turnover potential can be
transformed into a GLA potential by applying the average productivity
in EUR/sq m by retail sector or even by tenant. In other words, this
provides the answer to the question: ‘Which GLA can be realised per
retail sector to achieve at least an average productivity per sq m?’ The
result generated reflects both the optimal total size and the optimal
merchandise mix.
Branch Mix
drugstore/perfumery
DIMENSIONING OF THE PROJECT
0
analysed project X
Assuming ‘X’ to be the analysed project, the assessment shows a relatively
good location and a superior concept as compared to all other centres
in the market or in the pipeline. The competitive projects ‘P1’ and ‘P2’ as
well as the centre ‘1’ seem to be weaker, either concerning the location
or the concept. Consequently, they do not represent a severe threat at
the moment. But what about the existing centre ‘2’? It obviously has the
best location in town, but currently a rather outdated and unattractive
concept. From a strategic point of view, this centre could be refurbished
in the future.and cou
ld thus become a potential major threat.
20
food
Source: RegioPlan Consulting
FROM CATCHMENT TO
TENANT MIX
DEFINING RETAIL FORMAT
Merchandise mix, defined on the basis of purchasing power in
an effective catchment area, is a starting point for a retail format
definition. Initially, potential brand and tenant mix is defined
and is then confronted with the market. Also, the overall market
potential defines the maximum supportable floor space size of a
planned scheme, a key indicator that should always be taken into
consideration. Obviously, not all potential in the catchment needs to
be tapped into by a new scheme, but all proposed concepts should
fit into the existing demand. At this stage it is necessary to step
back again and have a another close look at all of the existing and
potential competition.
In-depth knowledge of the existing and planned competition
is essential. Brands’ presence, as well as footfall and turnover
performance, gathered from the operating shopping centres all
support an informed decision-making process, however this data is
often impossible to collect without the professional help of a market
advisor such as CBRE, that is able to combine first-hand information
coming from leasing, management and capital markets business
lines. Also, the qualitative observations of a seasoned advisor have a
great value at this stage of the decision-making process, as often it is
possible to determine the most and the least successful components
of the competing projects even without quantitative data. Confidence
coming from experience is valuable and often intuitive ideas prove
crucial, particularly when supported with a thorough analysis.
Retail formats in Poland
1%
9%
38%
29%
23%
Ist generation shopping centres
2nd generation shopping centres
3rd generation shopping centres
Outlets
Retail parks and theme-oriented
Source: CBRE
Warsaw retail market composition
BUILDING A NARRATIVE
A shopping centre, unless it is a neighbourhood scheme, needs to
differentiate clearly from its immediate competitors. In an ever more
competitive retail environment shopping centres are increasingly
required to build their own identity based on location and brand.
Therefore a consistent, strong narrative is needed in order to appeal
to both tenants and customers. It is impossible to target everyone and
clear choices need to be made. For example, a retail gallery could
be budget and family lifestyle oriented, target top market slice, or
combine some characteristics, but can never be all at once. Lack of a
clear shopping centre brand results in client confusion, which is always
a drawback.
Key shopping centre profiles that currently dominate the Polish retail
landscape are: 1st generation hypermarket-anchored with a service
gallery, 2nd generation scheme anchored with a hypermarket and
mid-market fashion gallery, as well as 3rd generation retail gallery
with a sizeable leisure component. However, the spectrum of
available formats is much wider and many other concepts, including
hybrids, or specialized and theme-oriented schemes, are feasible
if catchment and competition analysis indicate numerous available
market niches.
16%
21%
2%
8%
13%
40%
Ist generation shopping centres
2nd generation shopping centres
3rd generation shopping centres
DYI/retail warehousing
Outlets
Retail parks
Source: CBRE
TENANT MIX SOLUTIONS
Once the market analysis has been completed and a shopping
centre’s best potential profile identified, a preliminary tenant mix
concept can be sketched. To create an initial tenant mix CBRE
takes into the account tenants’ favourable conditions, that is a
consideration of rental levels including optimum leasing space and
location preferences, not only with regards to the key layout elements,
such as entrances, but also in relation to other retailers.
Two key tenant groups in a tenant mix include:
Anchor(s) are typically the largest and key stores in a scheme,
and main internal traffic generators. The presence of anchors
is one of the main defining characteristics of every shopping
centre. Anchors are typically the first to be invited to a project,
often on very favourable conditions. Typical anchors in
Polish schemes are hypermarkets and large fashion tenants.
There are no department stores as shopping centre tenants
in Poland, but it is common that hypermarkets double in
their role and offer a wide variety of other than FMCG or
complementary merchandise. Anchors usually occupy from
20% to 40% of a centre’s GLA, and, depending on the size of
a scheme, can take up to 12,000 sq m.
In-line tenants, including all other than (primary and
secondary) anchor tenants present in the scheme, which
usually lease retail space for market level rents, and are
offered typical units. However, the rental differences even
between in-line tenants remain considerable. For example,
often similarly sized tenants coming from different market
segments can pay considerably different rental levels as their
profit margins and sales profiles vary.
Key Anchores
Category
Operator
Hypermarket
Tesco, Carrefour,
Real, e.Leclerc,
Auchan
Supermarket
Piotr i Paweł, Alma,
PoloMarket, Stokrotka,
Biedronka
DYI
OBI, Praktiker,
Leroy Merlin
Saturn,
Euro RTV AGD,
Media Expert
Inditex Group,
LPP Group,
C&A, H&M
Electronics
Fashion
Source: RRF, CBRE
Tenants presence per category
2%
2%
2%
2%
3%3%
3%
3%
3%
3%
5%
5%
33%
33%
5%
5%
6%
6%
6%
6%
Other key tenant groupings that have a vital importance to both
tenant mix and a scheme layout are based on their merchandise and
service offer, including key categories such as grocery, fashion, home,
restaurants and food court, complementary services, and leisure.
From the financial perspective, preliminary tenant mix is an essential
element in the project foundation process, as it gives the first insight
into its future financial performance, with an initial assessment of
achievable rental levels as well as cash flow estimations. Therefore,
preliminary tenant mix closes the analysis stage and serves as the key
reference when the decision on a project’s financing is made.
12%
12%
9%
9%
11%
11%
Fashion
Shoes and leather
Health & Beauty
Accessories & Jewellery
Food specialty
Multimedia
Services
Food
Other
Home Accessories
Children & Maternity
Electronics
Source: RRF, CBRE
Other
Anchores
Other
Anchores
Category
Cinema
Bowling
Children
playgrounds
Foodcourt
Fitness
Source: CBRE
Examples of
tenants
CinemaCity
Mulitkino,
Helios, Imax
Independent
tenants
Fantasy Park,
Kidsplay,
Kinder Planet
McDonald’s,
KFC,
Burger King,
NorthFish
Pure,
Gymnasion,
Fitness Academy
DESIGNING THE BEST
LAYOUT
FROM TENANT MIX TO LAYOUT
A preliminary layout can be put in place once the first tenant mix has
been completed, after all key occupiers have been identified and their
size, as well as their position in the scheme, has been initially assigned.
However, both tenant mix and layout creation are fine-tuning processes
that are closely interlinked and typically are considered together through
a number of layout versions. Depending on the project’s complexity,
the tenant mix (re)drafting process takes from several to dozens of
re-iterations between leasing and design teams. The most successful
project achieves a relative balance in customer traffic levels across a
scheme, be-tween entrances, anchors and tenant’s clusters (such as a
food court or boutique fashion cluster), providing equally good retail
conditions for every unit in the scheme.
The preliminary layout includes all key features of a given location, such
as access points to the site, a building location on a given plot, various
entry points to the site and buildings, delivery zones, car parking,
as well as other key determinants such as shopping mall (horizontal
and vertical) traffic. At this stage a specialised software package,
for example based on Space Syntax theory, can be used to simulate
traffic flows, but more often the expertise of both leasing agents and
the management team is employed in order to anticipate levels of
customers activity in various parts of a centre.
Top 10 tenants in Polish shopping centres
Category
In % of
Schemes
Multimedia
81
CCC
Shoes
73
Triumph
Inmedio
Fashion
61
Apart
Accessories
59
Deichmann
Shoes
52
Vision Express
Health & Beauty
52
5àSec
Services
50
Orsay
Fashion
49
Reserved
Fashion
48
Tenant
Inmedio
Euro RTV AGD Electronics
Source: RRF, CBRE
Source: RRF, CBRE
Examples of layout solutions
Fashion
Shoes
The anchor and other key tenants’ views are important in the layout
fine-tuning process, whereas the majority of in-line tenants, who join the
project later, have considerably less say with regards to their position
and unit shape. Preferably, they are grouped in clusters to create the
equivalent of an anchor in terms of a traffic flow. However, such key
features as unit size and proportion, visibility, frontage and signage, as
well as lighting and air-conditioning, must be provided in accordance
with market standards.
Grocery
Home Appliances
Media
Children
Restaurants & Bars
Accessories
Health & Beauty
Services
Other
Preliminary layoutFinal layout
Foodcourt
47
VALUE ADD
INVESTMENT
Despite the high value-add potential of refurbishments, such
investments are very complex and often involve greater risks than new
developments. Developers of green field projects can be largely flexible
in designing access roads, ensuring visibility and sufficient advertising
area, as well as in determining the centre layout and position of anchor
tenants. Refurbishments on the other hand considerably narrow these
elements of flexibility.
Architects may also face structural limitations, whereas the leasing and
marketing teams might in some cases have a tough time dealing with
the established negative image of a given retail destination. Moreover,
non-cancellable, long-term lease agreements may seem favorable
from an economic and legal perspective, but for the restructuring of the
tenant mix such agreements can become problematic.
To diminish these risks, it is necessary to carry out a careful due
diligence analysis and to address relevant experts for each particular
area. As a location analysis expert, RegioPlan Consulting believes
retail centres should undergo a thorough check of their location, their
competitive strengths, and their ability to generate sufficient turnover.
At the very initial phase, investors considering a refurbishment should
answer the following yes/no questions. The more questions that are
answered with “yes”, the lower the number of compromises that may
have to be made and consequently the risk of failure is reduced.
2,0
1,0
2013-2017
2008-2012
0,0
2003-2007
At present, the leasable area of shopping centres, retail parks and
hypermarkets opened until 2002 amounts to about 4.1 million sq m.
Even though some of these investments have already been revitalized,
the Polish retail real estate market offers tremendous opportunities
for successful refurbishments. Possibilities for extension need to be
examined at each site in advance, and should form the part of a
comprehensive assessment of the property and location. Compromises
in layout, tenant mix, or architectural design represent risk factors and
need to be avoided by all means.
3,0
1998-2002
Refurbishment and revitalization of shopping centres will be gaining in
importance in the next few years. Not only does this apply to shopping
centres of the “first generation”, but also to hypermarkets, which have
been growing rapidly in number between 1996 and 2005. Since 2005,
however, the expansion of this format has experienced a substantial
slowdown, which is a consequence of the high hypermarket density and
changing consumer needs. Well-patronized hypermarkets with great
accessibility, surrounded by undeveloped plots (representing space
for expansion) are now coming to the attention of many real estate
developers.
Retail stock growth
in million sq m of GLA
-1997
REFURBISHMENT OPPORTUNITIES AND
PITFALLS
Hypermarket
Retail Park
Shopping Center
Source: RegioPlan Consulting
Current retail stock by age
in million sq m of GLA
Under Construction
(2013 - )
New additions
(2008 - 2012)
Maturing schemes
(2003 - 2007)
Mature stock
(1998 - 2002)
Old performers
(1993 - 1997)
0
Source: CBRE
1
2
3
4
DEVELOPER’S
CHECK LIST
Location
o
o
o
Does the site have an intact image as a retail destination?
Do you have full control of the land required for the retail facility, including accesses and parking spaces?
Does the location offers sufficient space to achieve the adequate size necessary for the intended market positioning?
Building
o
Does the existing building offer the structural (especially in terms of statics, storey height, vertical connections, sightlines, mall width, etc) and technical (IT, home automation, etc.)
conditions necessary for creating a modern shopping environment?
o
Given the existing building structure, is it possible to implement a compromise-free solution for access roads, parking spaces, optical image and visibility of the building and the advertising space?
Competitiveness
o
o
o
Given competitors’ performance, is it possible to achieve the targeted market positioning or strengthen the existing one?
Can, even in a tougher competitive situation, a sufficiently high productivity and rental income be achieved?
Are you ahead of competitors with your concept or are others already filling that market gap?
Tenants
o
o
o
Does the centre have a critical mass of existing tenants who are suitable for the new market positioning of the project and who should remain in the centre?
Can you attract at least one of the top three out of the five leading tenants in the most relevant retail sectors for the targeted positioning?
Is there a time window of concurrent lease contract expiries, which is favorable for the realization of the refurbishment?
Strategic issues
o
o
o
Does your intended concept meet the expectable demands of real estate investors?
Do you have a clear exit strategy?
Is your financing structured accordingly?
MARKET PRACTICE
KEY SHOPPING CENTRE
FORMATS
LEASE LENGTH AND TERMS – Typical lease contract period is 5 to
10 years with an option to extend. Most rents are denominated in Euro and
paid in zlotys, but service charges and other payments (e.g. marketing fees)
are often denominated in the local currency. Only the oldest leases can still be
denominated in dollars. Rents are typically the subject to annual indexation by the
European (Eurostat) price index.
TRADITIONAL SHOPPING CENTRE – a scheme that is planned, built
and managed as a single entity, comprising of units and common areas, with a
minimum Gross Leasable Area (GLA) of 5,000 sq m and at least 10 shops and
services.
RENTAL PAYMENTS – Rent is payable monthly in advance, and is quoted
without VAT.
SERVICE CHARGES – Service charge payments cover ordinary building
maintenance costs such as repairs, cleaning and security. Denominated in zlotys,
they typically reach between 25 – 50 PLN /sq m/month.
MARKETING COSTS – Additional regular payments covering shopping
centre management expenses on advertising and events. Denominated in zlotys,
typical mar-keting payments vary between 5 – 20 PLN /sq m /month.
TENANT’S COVENANT – Covenant strength is very important within the
Polish market. Rental deposit, bank or parent company’s guarantee equivalent
to 3-6 months’ rent, service charge, marketing costs and VAT is expected from all
tenants.
INCENTIVES – Incentives include capital contributions towards shop fitting and
rent-free periods, individually negotiated between the parties. Anchor tenants can
expect a fit-out contribution.
KEY TERMS
1ST GENERATION – Hypermarket – driven (accounting for 40-50% of the
total GLA) scheme together with a small, service-oriented accompanying gallery.
2ND GENERATION – A shopping centre driven by a retail, typically fashion
gal-lery, that represents over 70% of the total centre space.
3RD GENERATION – A lifestyle scheme enhanced with and often driven by
a leisure element, such as a multiplex cinema, fitness element, or increasingly – a
food court offer.
SPECIALISED SCHEMES:
RETAIL PARK – Consistently designed, planned and centrally managed scheme
that comprises of mainly medium - and large-scale specialist retailers (“big box”
or “retail warehouses”).
FACTORY OUTLET – Shopping centre scheme where manufacturers and
retailers sell merchandise at discount prices that may be surplus stock, priorseason or slow selling items.
THEME-ORIENTED - A consistently designed, planned and managed
scheme that can either be leisure-based or non-leisure-based. This scheme
includes some retail units and typically concentrates on a narrow but deep
selection of merchandise within a specific retail category, such as home furniture
or hobbies.
OTHER FORMATS:
MARKET TRANSPARENCY – the property market has strong and
transparent fundamentals regarding property titles but a degree of opacity persists
with regards to the availability of market information. The information on historical
freehold and perpetual usufruct transactions registered as Notarial Deeds is freely
accessible to the listed property valuers, but there is no public record on lease
transactions.
RETAIL SPACE GLA – gross leasable area in sq m refers to the area leased to
tenants and includes all other construction elements.
TURNOVER – Sales volume, reported on a monthly or quarterly basis. Average
shopping centre turnover reached approx. 850 PLN / sq m / month in Q2 2012.
FOOTFALL – The number of shopping centre visitors, typically reported on a
monthly or quarterly basis. Estimated average monthly footfall in Poland reaches
420,000 visits.
TENANT MIX – The composition of tenants in a scheme and their position
relative to each other.
LAYOUT – A shopping centre’s layout is the design in which the interior is set up.
It is important to provide good shop window exposure, a good width of the malls
and clear communication.
NEIGHBOURHOOD CENTRE – often small or very small (below 5,000
sq m of GLA) scheme that serves almost exclusively its immediate catchment and
concentrates on a FMCG offer complemented with services or value fashion
merchandise. Typically anchored by a supermarket grocery store (below 4,000 sq
m of GLA).
CONTACTS
For more information regarding CBRE and RegioPlan Consulting reports or any other CBRE and
RegioPlan Consulting services please contact
Karina Kreja Associate Director - Development Consultancy
Rondo 1 | Rondo ONZ 1| 00-124 | Warsaw
DDI +48 22 544 8064
M +48 500 000 643
Nada Mumdžiev
Senior Account Manager
Theobaldgasse 8 | A-1060 | Vienna
DDI +43 1 586 04 53 - 22 M +43 699 15860412
[email protected]
http://www.cbre.pl
[email protected]
http://www.regioplan.eu
Joanna Mroczek
Director - Head of Research & Consultancy
Rondo 1 | Rondo ONZ 1| 00-124 | Warsaw
DDI +48 22 544 8061
M +48 500 000 583
Hanna Bomba-Wilhelmi
CEO
Theobaldgasse 8 | A-1060 | Vienna
DDI +43 1 586 04 53 - 17 M +43 699 15860417 [email protected]
http://www.cbre.pl
[email protected]
http://www.regioplan.eu
About CBRE Group
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and
investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors
and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate
services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research
and consulting. Please visit our website at www.cbre.com.
About RegioPlan Consulting
RegioPlan Consulting is one of the leading European companies for retail location consulting and retail market analyses in Europe. Drawing on 25 years of international cross-industry experience, RegioPlan experts provide consulting services to retail trade and service companies, retail real estate developers and investors.
The scope of services ranges from market feasibility for new retail developments, over refurbishment and redevelopment concepts, to expansion concepts and
market analyses for retailers. RegioPlan also provides market intelligence and reports on consumer and retail market.
Disclaimer
CBRE Sp. z o.o confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt
their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their
accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and
cannot be reproduced without prior written permission of CBRE.
RegioPlan Consulting GmbH confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. However,
not all data has been verified and we make no guarantee, warranty or representation about them. Anyone who uses the data should independently verify their
accuracy and completeness. This information is presented exclusively for use by RegioPlan clients and professionals and all rights to the material are reserved and
cannot be reproduced without prior written permission of RegioPlan Consulting.