Retail investment on the up

Transcription

page 18
Foreign interest
picking up in Belarus
A combination of rising disposable income, the relaxation of property regulations and a low density of modern,
organised developments has created a mine of untapped
potential in Belarus’s retail sector.
Retail as recently been heralded as the CEE investment market sector that is showing the most
promise going into 2015. Strong retail fundamentals across the region in terms of increasing
consumer demand, spending power and tenant
demand are reflected in positive sentiment for investment into shopping developments. However,
retail is still expected to play second fiddle to office
with regard to the volume of deals, but ahead of
the improving industrial sector.
E-commerce remains
the biggest challenge
for retailers and developers
Internet shopping is more and more popular but
-commerce share in Central and Eastern Europe’s retail
e
sales is still lower than in Western European countries.
However, this is changing rapidly. It is expected that this
year the value of Poland’s e-commerce market will exceed
PLN 30 billion.
page 8
4 Editorial
6 Regional quotes
8 Regional investment
12 NEE Overview
Review of Belarus and its capital Minsk
18 NEE Overview
Foreign interest picking up in Belarus
page 30
26 Regional CEE Retail Real Estate Awards
Retail excellence recognised at the 6th annual
EuropaProperty CEE Retail Real Estate Awards Gala
30 Regional E-commerce
E-commerce remains the biggest challenge
32 Regional CEE Investment Awards
CEE’s top investors, developers and professionals
recognised at the Investment Awards for 2014
34 Poland Retail
Poland’s retail development sector spreads its wings
22 NEE Overview
Baltic retail sector is buoyant
38 Poland Retail
PKP developing successful joint venture partnerships
Real Estate
Event Calendar
2014
19-21 November
MAPIC
Palais des Festivals, Cannes, France
www.mapic.com
27 November
EuropaProperty Romania Real Estate –
Investment Trends & Outlook Visions
Conference
Athenee Palace Hilton Hotel,
Bucharest, Romania
www.europaproperty.com
1-2 December
CEE GRI
Warsaw, Poland
www.globalrealestate.org
Poland’s retail development
sector spreads its wings
With the capital’s retail sector maxing out, both
attention and eyes have turned to Poland’s regions,
and in particular, locations falling outside the major
agglomerations. Buoyed by solid financial figures,
the steady increase in purchasing power and growing consumer confidence, the warm glow in which
poland’s retail players bask has been reflected by
what can be judged overall as a rather positive year.
However, to simply view it as a continuation of 2013
would risk ignoring the subtle shifts that the market
has made.
page 34
42 Poland Warsaw
Warsaw’s retail market set to witness spectacular changes
46 Poland Investment
Retail investment will be hot in 2015
50 Hungary Overview
Turning point in retail market
52 Czech Rep. Overview
Limited retail supply despite high demand
54 Slovakia Overview
Positive economic indicators attracting retailers
58 Romania Overview
Increased retail delivery predicted
2015
3-4 February
ULI Europe Annual Conference and Dinner
Westin, Paris, France
www.parisconference.uli.org
12 February
7th Annual EuropaProperty
CEE Retail Real Estate Awards
InterContinental, Warsaw, Poland
www.retailawards.eu
10-13 March
MIPIM
Palais des Festivals, Cannes, France
www.mipim.com
26-27 March
1st Annual EuropaProperty
NEE Real Estate Awards
Renaissance Minsk Hotel, Minsk, Belarus
www.neeawards.com
30 March - 1 April
International Property Show
World Trade Centre, Dubai
www.internationalpropertyshow.ae
15-16 April
11th Annual International Conference
on the Real Estate Development
Esplanade Zagreb Hotel, Zagreb, Croatia
www.filipovic-advisory.com
23 April
SEE Real Estate Awards & Forum
Radisson Blu Hotel, Bucharest, Romania
www.seerealestateawards.com
20-21 May
GREET Vienna
Palais Niederösterreich, Vienna, Austria
www.greetvienna.com
28 May
CEE Energy Awards
www.ceeenergyawards.com
10-11 June
PRHC • ReDI
National Stadium, Warsaw, Poland
www.prch.org.pl
17-18 June
3rd Annual EuropaProperty
CEE Manufacturing Awards
www.manufacturingawards.eu
15 October
PRCH Retail Awards Gala
Warsaw, Poland
www.prch.org.pl
29 October
CEE Investment Awards
www.ceeinvestmentawards.com
62 Bulgaria Overview
Bulgaria’s retail market sustains upward trend
64 Croatia Overview
Economic recovery needed to boost retail in Croatia
66 Serbia Overview
Lack of retail product to meet demand from retailers
68 Russia quotes
70 Russia Overview
Moscow leads by volume of shopping centres
but vacancies on the rise
74 Ukraine Overview
Turbulent times for retail in Ukraine
Editorial
Gary J. Morrell
R
etail development is increasing in CEE owing to growing consumer demand, rising spending power and increasing tenant
demand. There is, however, a considerable variation between
the different parts of Central Europe.
Central & Eastern Europe
Russia-CIS
RETAIL GUIDE
Poland is by far the leading CEE country in terms of retail development in both Warsaw and the many large regional population
centres. There are also four major shopping centres planned in Warsaw alone. In the Czech Republic and Slovakia there are also several
pipeline developments in both the capitals and regional cities.
Publishing House
Premier Media Sp. z o.o.
Al. Jerozolimskie 81
ORCO Tower, floor 13, office 13.01
00-001 Warsaw, Poland
However, the Hungarian retail development market is stagnant
as developers are take a wait and see approach before starting development. Although economic indicators for 2015 are positive and
there is rising consumer confidence, no new projects will deliver
in 2015-2016. Economic indicators for Romania are also improving
and there is a substantial pipeline in Bucharest and the several large
regional cities due to be delivered by the end of 2016.
Although Croatia has been in recession in recent years and spending power has fallen, there has continued to be retail deliveries in
Zagreb. However, due to low consumer demand, the retail market
is now regarded as saturated. But, developers are undertaking projects on the Adriatic coast where there are several large cities, and
also a significant influx of tourists in the summer months.
Serbia suffers from a chronic lack of modern retail product to
meet the substantial demand from international investors. Although vacancy rates in Belgrade are close to zero protracted planning process and legal issues are deterring developers.
Further east, Russia has the highest European shopping centre
pipeline for 2014-2015 despite perceived economic and political issues caused by the Ukraine crisis. Interestingly, Ukraine has
the fourth largest European pipeline, despite its own geo-political
problems.
Concerning retail demand, developers are continuing to meet the
high demands of tenants, and on the lending side banks are exercising very stringent lending conditions such as 50 percent pre-leases.
Retail development growth is also reflected in the popularity of
investing in the retail sector. Unsurprisingly, Poland is the leading
retail investment destination followed by the Czech Republic while
other markets fall behind.
On the rising quality of retail stock, shopping centres in CEE are
generally regarded as on a par with retail centres in Western Europe.
However, the major difference is seen as the depth in the quality of
tenants.
Volume 18, Number 1,
November 2014
Publisher
Craig Smith
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Winston Norman
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7th Annual
CEE RETAIL AWARDS
12th February 2015 • Warsaw • Poland • InterContinental Hotel
500
150
120
25
1
Real Estate Professionals
Retailers
Developers, Investors & Bankers
Countries
Day
www.RetailAwards.eu
International
Business Contracts
For further information contact:
Craig Smith / +48 604 144 769 / craig@europaproperty.com
Kaliszewska
/ +48 601 382 667
/ anna@europaproperty.com
Contacts: Craig Smith / +48 604 Anna
144 769
/ craig@europaproperty.com
/ Anna
Kaliszewska / +48 601 382 667 / anna@europaproperty.com
Regional
Quotes
Beatrice Mouton – European Director, Retail CEE, JLL
The Central European markets remain active both in terms of new developments and retailers interest. The region has seen shopping centre stock
grow by 550,000 sqm in 2014, out of which Poland has had the lion share with
350,000 sqm or 64 percent of the newly built shopping centre stock. However,
markets such as the Czech Republic, Romania and Slovakia also witnessed the
opening of new shopping centres; whilst Serbia’s development activity was
concentrated on retail parks in the regional cities. Central Europe still remains
an attractive market for retailers as new market entries such as Michael Kors,
Neo, Superdry, Twin Set, Harmont & Blaine, Original Marines, Tosca Blue, Mac, La
Martina, CCC Shoes and even H&M continue on mapping out the region with
a particular appetite for capital and larger regional cities. Well established retail
groups are driving the retail demand with the introduction of new concepts
such as H&M with the opening of COS in Poland and LPP, a leading Polish fashion retailer, with Mohito & Sinsay.
Dieter Knittel – Director Europe, Deutsche Pfandbriefbank
2014 was again a good year for retail in CEE. A significant number of transactions took place, demonstrating continued investor interest. This could lead to
an overall investment volume of close to €7 billion. In the prime market segment, the limited number of retail asset opportunities may constrain investment activity. In a number of cities the level of retail space available is already
too high. Poland remains the leading investment market in the CEE region with
nearly 50 percent of transactions this year, followed by the Czech Republic.
Hungary and Romania are starting to pick up. Investors are slowly becoming
active again. To date, the focus in CEE has very much been on defensive investments in prime locations, but investors are starting to move up the risk curve.
Prime yields are expected to be further compressing. As we look forward into
2015, it is to be expected that investment figures will exceed last year results.
Eduard Zehetner – CEO, IMMOFINANZ Group
CEE still has a large pent-up potential for modern retail space that insures a sustainable income for both investors and tenants. Consumer confidence over the
future of the post-crisis economy is rising and creates a steady positive climate.
IMMOFINANZ’s focus for retail developments concentrates on Poland, Romania
and Russia. Therefore we have established three different formats: On the one
hand Class A shopping centers with a minimum of 30,000 sqm gross lettable
area, like Tarasy Zamkowe in Lublin, and on the other hand our broad network of
STOP.SHOP.s and our newly introduced VIVO! centers. STOP.SHOP.s are retail parks
with a minimum of 3,000 sqm suited for cities with up to 150,000 inhabitants,
VIVO! shopping centers are ideal for cities with 40,000 to 100,000 inhabitants and
a good catchment area. International retailers value our large network. In order
to realise the required economies of scale, they need a certain minimum number
of locations when they enter a new country or region. The roll-out of our retail
products allows a joint expansion with our tenants over multiple countries.
Mark Balastyai – Project Director, Futureal
CEE’s economies experienced expansion in the first half of 2014. This expansion was driven by increasing consumer consumption, low inflation rates and
real-wage increases. Signals of growth are apparent from the retailers’ side.
Large international retailers also experienced growth of revenue, and new major brands entered into the CEE markets (especially in the fashion segment),
while smaller retailers are considering to increase the number of their existing
stores. Discount chains are strengthening against hypermarkets. However, new
retail developments are very limited. This is due to the increasing, but limited
purchasing power, the saturated market, and the limited financing availabilities.
Project finance is available but the role of equity, the quality of the new development and pre-leasing are more important than ever.
6 Retail Guide 2014
Regional
Quotes
Jonathan Hallett – Head of CEE Retail, Cushman & Wakefield
There is in general retail development growth in CEE as big projects are
planned in Warsaw, there have been two recent deliveries in the Czech Republic
and a major delivery in Slovakia with further developments under construction.
However, the Hungarian retail market is stagnating and I see no new developments starting in 2015-2016. There are projects planned in Romania, however
like Serbia, retailers often lack depth, due to often being local retailers or franchises that are dependent on the fortunes of the local economy. Therefore prelease requirements that satisfy lenders can be difficult to meet due to development risk. In general it is difficult to buy good income-producing shopping
centres as the occupational market is still not there, as tenants are demanding
and developers are meeting these demands in order to secure pre-leases. There
is a lot of money looking at retail in CEE, and the only difference in quality of
product to Western Europe is that Central Europe lacks occupational depth.
Martin Erbe – Head of International Real Estate Finance, Continental Europe,
Helaba
The retail sector in CEE will play the most important roll in 2015 as it did
in 2014. The simple reason is the Warsaw office market which at the moment
seems to be completely oversupplied with increasing vacancies. Secondary
cities do not offer enough institutional office products. As the logistic sector
is booming as well and yields are under compression many investors will concentrate on retail products. The retail sector offers a wide variety of different
products as well as of many different locations so that each investor type will
find the suitable property for its requirements. The flourishing retail sector in
Poland, with its powerful local demand, will result in many new developments/
extensions across the country. But be careful: some markets might be close to
saturation or beyond.
Martin Sabelko – Managing Director CEE, CBRE Global Investors
Over the last 12 months, there was a significant shift in investors’ interest
in the CEE region. This appetite is growing as recent transactions have indicated. Prime products are no longer the only option as yield compression
makes these products too expensive for those who seek value add. There is
a significant interest in secondary cities and in the case of Poland, the largest CEE market, we can say some of the cities are even of tertiary nature. We
as CBRE Global Investors are mainly active in the core CEE markets, i.e. Poland
and Czech Republic, however, we are also exploring options on the Hungarian
market where the economy is performing well and the real estate market is recovering at a steady pace, unlike Prague or Warsaw where the markets are likely
to overheat in the short-term. Romania is currently offering a nice investment
premium compared to the other CEE markets, yet it still is more of a market for
opportunistic investors rather than institutional ones.
Mike Atwell – Head of Capital Markets, CBRE
So what is the trend going forward? With many of the cities across the region
close to, or at saturation, I see the future is far more focused on asset management plays on existing assets. We are seeing several schemes going through
refurbishment and re-positioning as they try to maintain their market positions.
Retail is an ever evolving sector and always adapting to consumer patterns.
There have been significant changes in the hypermarket sector with key operators exiting the market such as Geant and Real in Poland and store sizes generally reducing. This creates redevelopment opportunities to bring in new brands
and improve tenant mix and generally enhance a center’s appeal. In terms of
liquidity – international investor demand for strong performing retail centers
remains very high and with the scarcity of big city prime retail stock available
in the market we have seen the major core buyers looking at smaller regional
centers. In my view the outlook for retail remains positive across the CEE region.
Retail Guide 2014 7 Regional
Investment
Eurovea, major Bratislava retail centre
Retail investment
on the up
Gary J. Morrell
Retail as recently been heralded as
the CEE investment market sector that
is showing the most promise going
into 2015. Strong retail fundamentals
across the region in terms of increasing
consumer demand, spending power
and tenant demand are reflected in
positive sentiment for investment into
shopping developments. However,
retail is still expected to play second
fiddle to office with regard to the
volume of deals, but ahead of the
improving industrial sector.
In
general, CEE investment volume
is increasing. Retail and office are
traditionally the most preferred
investment destinations and retail is gaining ground on the office markets in terms
of transaction volume with a number of
big deals said to be in the pipeline. CBRE
put CEE regional investment volume for
8 Retail Guide 2014
the first three quarters at €2,129 million for
office compared to €838 million for retail
and €738 million for industrial.
“The summer months have seen a hive
of activity across the CEE region with a preliminary transaction volume of over €1.5
billion recorded in the third quarter. This
brings the preliminary year-to-date regional investment volume to €4.5 billion,”
said JLL.
Consumer spending growth forecasts
for Central Europe and prices for quality
retail schemes are increasing and demand
is spreading from the capitals to regional
cities. This is causing sellers and owners to
consider bringing retail centres to the market and significant activity is expected in
the next 12 months. Investors on their part
are widening their search net in terms of
quality and geography.
The biggest investment deal for Central
Europe in the third quarter was the acqui-
sition of the Eurovea shopping centre in
Bratislava by the Slovak J&T Real Estate
from Ballymore Properties who delivered
the centre in 2010. In Romania Auchan
purchased a portfolio of 11 Real shopping
centres.
Earlier in the year a notable Poland retail deal was the acquisition of the 60,000
sqm Poznan City Center shopping centre
by a consortium of ECE and Resolution
fund from Trigrant, Europa Capital (the
financer of the project) and PKP (who provided the land). Retail real estate investment volume in Poland in the first half of
2014 reached almost €370 million, which
represents a 49 percent year-on-year increase, according to C&W. Activity is expected to escalate based on the volume
of deals now under consideration or set to
come to the market.
“Maintaining high levels of investment
activity in the second half of the year will
Agata Sekula –
Head of CEE Retail Investment,
JLL
There are number of transactions in the retail investment
sector in the pipeline with
expected closing before 2014
year end. For example, the sale
of Focus Mall in Bydgoszcz in
Poland by Aviva Investors to
Atrium European Real Estate
for €122 million. A preliminary
sale agreement was signed
and closing is pending after Antimonopoly approval. We anticipate that total retail investment volume in the region will
reach €1.75-2.0 billion in 2014 out of €6.5-7.0 billion of total investment volumes forecast across all sectors in 2014. So far in
2014 the following investors decided to invest in retail in CEE,
among others: Resolution, ECE Fund, CBRE Global Investors,
Immofinanz, Generali, Meyer Bergman, Futureal, ING Insurance Fund, First Property, Portico Investments, Revetas Capital
and Atrium European Real Estate. As more retail investment
transactions are still to close in 2014 the list will be longer.
Retail is perceived as a defensive real estate sector in many
instances offering growth potential through active asset management, therefore the sector is attractive for various investor
groups. We do not expect it to overtake office in 2014 but do
not exclude it in the future, given that retail transactions are
characterised by larger volumes on average.
mainly depend on the supply of large scale quality retail assets, as strong demand for such properties is set to continue
in the near future. This sector is very likely to witness a handful of major deals,” said Łukasz Lorencki from the Capital
Markets Group at Cushman & Wakefield (C&W) Poland.
With regard to shopping centre stock, Poland is ranked
fifth in Europe with around 560,000 sqm of new retail space
under construction. The average saturation of retail space in
the Warsaw agglomeration is currently 430 sqm per 1,000
inhabitants making, Warsaw the clear leader among CEE
capitals, according to CBRE. Although Poland's real estate
market is attracting strong investment, the limited supply of
product is causing rising interest in Czech and increasingly,
Hungary and Romania. Investors are looking at retail stock
across the region and considering value-add options.
“Core investors are looking at Poland and Czech for prime,
landmark shopping centres, viewed to offer better value
against other core European countries whilst the regional
cities across both countries have opened up with a significant shift of core and value-add capital towards this sector.
Prime shopping centres in Hungary and Slovakia are also
back on the radar for investors searching for stock,” com-
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Regional
Investment
Poznan City Center, Poznan, Poland
James Chapman – Head of CEE Capital Markets,
Cushman & Wakefield
Investors have woken up to the exceptional
consumer spending growth forecasts for the
CE region and prices for quality schemes are
increasing, including those in regional cities.
This is causing sellers to consider bringing
strong centres to the market and so we expect to see significant activity during the next
12 months.
mented James Chapman, Head of CEE
Capital Markets at C&W.
Stronger retail demand fundamentals
are positively impacting sentiment with
regard to retail investment in Hungary as
distinct signs of a recovery in the Hungarian investment market are evident and
a number of deals are underway. In this
way the Dutch ING Real Estate has completed the sale of its remaining 50 percent
stake in the 47,000 sqm Allee shopping
10 Retail Guide 2014
centre in Budapest to Nationale-Nederlanden for a reported €95 million. The German Allianz Real Estate has already bought
a 50 percent share in the leading Budapest
retail centre for €100 million. A retail park
portfolio was also transacted and a number of deals in locations outside of Budapest are being concluded. “Some specialist
investors are keen on retail as the sector is
seen as at the bottom of a cycle with with
improving micro-economic indicators and
rising sales volumes,” said Benjamin PerezEllischewitz, Head of Capital Markets at JLL
Hungary.
Prime Budapest Shopping centre yields
are put at 7.30 percent compared to 5.50
percent for the high performing Warsaw
retail sector, 6.00 percent for Prague and
8.00 percent for Bucharest, reflecting the
perceived higher risk. This compares to
prime office yields of 6.00 percent for
Warsaw, 7.30 percent for Budapest and
6.25-6.00 percent and heading to sub-6
for Prague and a higher 8.00 percent for
Bucharest.
Mike Atwell, Head of CEE Capital Markets at CBRE, argues that retail investors
fall into two categories: “This consists of
those seeking prime retail stock at yields
in the region of 6 percent or lower. These
investors tend to be German funds or retail specialist funds who are likely to have
sovereign wealth capital behind them and
tend to have lower income return requirements. This has been demonstrated by
transactions such as Manufaktura, Silesia
City Center, Galleria Dominkanska and
Poznan City Center."
He continued: "The other type is more
opportunistic retail investors who target
value-add retail with clear asset management opportunities for income growth potential and value enhancement. Examples
are the acquisition of the Charter Hall portfolio by Tristan Capital Partners in Poland.”
With regard to European retail stock,
Russia has the highest European pipeline, Ukraine the fourth highest pipeline
and Poland the sixth highest, according
to C&W. Although around 2.6 million of
shopping centre GLA is expected to be delivered in Russia in 2014 and 2015, including in Moscow Avia Park, which at 235,000
sqm is the largest shopping centre project
in Europe, there remains uncertainty when
as to when schemes will deliver. Geopolitical concerns could lead to the postponement of some projects in both Russia
and Ukraine and investor interest in the
two countries is falling. In the first three
quarters investment volume has fallen by
49 percent to €2,57 million, according to
CBRE.
Whether the supply of investment grade
product shopping centres will meet supply
remains to be seen. “Poland's real estate
market continues to attract strong investment. The limited availability of product in
the prime segment is also making capital
consider the Czech Republic, Romania and
Hungary,” concluded Jos Tromp, Analyst
and Director of CEE Research at CBRE.
NEE
Overview
Dana Mall
Review of Belarus
and its capital Minsk
Gary Burrows, Head of Property & Asset Management for Dana Property Management Services
A shopping centre development boom
is sweeping the Belarusian capital.
This has led the government, quite
rightly, to limit further projects
inside the main ring road.
M
insk is the major international
capital city of Belarus, which
borders the EU to the west, Russia to the east, Lithuania to the north and
Ukraine to the south. Whilst being in such
a central geographical location, it was not,
until very recently, on the international
retail radar as an area for expansion and
growth opportunity. In fact many international brands had absolutely no interest in
Minsk or Belarus as a whole, however, that
is gradually changing.
With its population of just over two million, Minsk is the third-largest city in the
Commonwealth of Independent States
(CIS) behind Moscow, with eleven million,
and St. Petersburg with four and a half million. Minsk has a 99 percent employment
rate and an average monthly income for the
whole of Belarus of $600, which increases
in the capital to $1,000. Minsk has a solid
disposable income that exceeds that of Bulgaria, Romania, Hungary, and many other
EU countries that are mature retail markets.
Belarus has a population of nine million, but its commercial powerhouse is the
capital, Minsk, which produces 40 percent
of the country’s GDP. Consumer spending
growth has been in double-digit figures
for the past three years and the aspira-
tional residents of Minsk have some of the
best qualifications of any EU country. Many
Belarusians, especially city dwellers of less
than 30 years, have at least one degree, if
not two.
Belarus is an IT powerhouse, with most
of the big gaming companies outsourcing
the development of new games to local
companies. Titles like the World of Tanks
and many others are attributed to Minsk.
The VOIP telecom system called Viber, which
provide free calls and messaging is a Belarusian company, and was recently bought
out by Japanese telecom giant Rakuten
for $900 million. Therefore far from being
a backwoods country, it is a vibrant, creative
and emerging market that is pushing its way
forward to greater international recognition.
NEE
Overview
Suffering from retail tourism
As the economy grows and more disposable income is generated, the people
of Minsk are becoming more both brand
aware, with an insatiable appetite for international brands. However, due to the
current lack of fashion brand representation locally, Minsk suffers from retail tourism. Its demanding and mobile residents
travel to more advanced retail destinations, such as Warsaw, Vilnius, and Moscow. Recent research has shown that the
population of Minsk spends over €170
million in Vilnius alone on branded fashion products. With an estimated €400 million gross being leaked out of the economy of Minsk each year, specifically on
fashion goods. There are three main reasons for this. The first is the lack of highquality shopping center stock in Minsk,
the second is a lack of choice for fashion
brands, and the third is that goods are
much cheaper in EU countries.
A basic analysis of supply and demand
shows that Minsk has clear and quantifiable demand for - but a relatively poor supply of - brands. Several reasons for this exist, including the lack of quality retail space,
an untested and little-known market, and
concerns over political stability, currency
fluctuation (though the currency is actually strictly controlled since a major devaluation in 2010). Despite these concerns,
Minsk is currently experiencing a boom in
shopping center development that has led
the government, to limit further development inside the main ring road.
Retail development in Minsk began in
1951 with the opening of GUM in the city
center and has since followed a path of
small schemes, averaging less than 10,000
sqm GLA, right up to the 1990s and 2000s.
These were typically anchored by a hypermarket, but layouts and designs were poor,
and little or no thought was given to sightlines, zoning, leisure, or entertainment.
With low ceilings, narrow malls, and no
pedestrian flow dynamics, they have since
been superseded by second-generation
malls.
The insatiable demand for better quality malls, with more international brands,
with a leisure and quality F&B provision,
is going on unabated. As families have an
ever increasing experiential expectation
and a diverse offer, with a destinational
attitude that parallels mature market behaviours. The retail spending year-on-year
growth from 2011-12 was 17 percent and
Dana Mall interior
2012 – 13 was 18 percent, therefore nobody can refute the growth potential of
the market.
380,000 sqm of shopping center
stock in the capital
These second-generation malls include
Zamok (55,000 sqm GLA), Arena (22,000
sqm GLA), Expobel, a 30,000 sqm GLA
out-of-town scheme, Scala (18,500 sqm
GLA), Europa (20,000 sqm GLA) and Galileo (20,000 sqm GLA) in a difficult location
next to the bus and train station. While
both customers and tenants are migrating to these newer, higher quality, betterdesigned malls, it is nevertheless still fair
to say that design mistakes continue to
plague even these latest shopping centers. As one scheme has a net-to-gross ratio
of 30 percent to 70 percent, it seems hard
to understand how this is commercially
viable. Another example is why developers thought it necessary to build over four
floors when land is available to build on
two floors. In my experience customers get
a “nose bleed” above the third floor, which
always puts the fourth floor at a disadvantage. This seems to be a universal truth,
even for mega schemes such as Dubai
Mall. Having said that, these seem to be
successful schemes, with heavy footfall at
weekends and reasonable evening trade.
While the demand exists, the desire to
continue building shopping centres to
meet current and future demand is driven
by favourable conditions for external investors, a will to enhance and modernise
the city, and an entrepreneurial spirit that
is very capitalist in nature. Minsk’s existing shopping centre stock of over 380,000
sqm, excluding street retail and downtown
pedestrianized areas, is extremely low per
capita for a city of two million people. We
must also consider, however, that at least
40 percent of this existing stock is first generation and of low quality compared to
international standards. There is therefore
only around 204,000 sqm of good quality retail GLA for the population of Minsk,
which is a solid basis for further development and enhancement of the shopping
centre market.
290,000 sqm under construction
Since my arrival in Minsk, in November
2013, I have been astonished by the level of
construction, which, based on the number
of cranes, reminds me of my time in Dubai.
Trying to get accurate numbers is difficult,
however. The Chinese are building over 1.5
million sqm of high-end residential GLA
and investments are coming in from Qatar,
the UK, Russia, and several other EU countries. The result is that at least 50,000 new
residential units are being built. This supports Belarus’s new identity and ideology –
it was not long ago that owning your own
home was an unattainable dream for many
locals. The level of investment in hotels is
keeping pace with all other construction:
Retail Guide 2014 13 NEE
Overview
Dana Mall food court
Ten or more new hotels are currently being built in Minsk, including at least two
Hilton’s and the Kempinski, which is due to
open in November.
There are seven new shopping centre
developments currently under construction totaling 290,000 sqm. This includes
a number of third-generation shopping
centres, which are due to open within the
next two years. These third-generation
schemes have employed international
teams to develop them to international
standards, specifications, designs, and layouts, which will attract the international
retail brands that currently do not exist in
Minsk. This is a paradigm shift for a market
that, up until the late 1990s, had an aging
stock of poor-quality schemes.
New schemes include leisure,
entertainment, and food & beverage
From a location perspective, at least 60
percent of this new development is being
carried out on or around Pritytskogo St. or
the junction with Kaĺvaryjskaja St., which is
the road to Vilnius. With so many schemes
opening within such a small area, it is hard
to understand how the market share will
be divided and what will be sustainable in
the medium to long term. The remaining
40 percent is split between an out of town
location in a scheme called Titan, a few
smaller specialist city center locations,
such as Galleria and two large schemes
on the other side of the city on the airport
road (Independence Avenue). These are
Magnit, at 40,000 sqm of GLA, and Dana
Mall, at 52,000 sqm of GLA, on track to
open September 2015.
The quality of the new stock will invariably be far superior than the firstgeneration schemes and naturally more
advanced, from a technical and design
perspective, than the second-generation
schemes. While a significant proportion of
leisure, entertainment, and food & beverage (F&B) is included in the new builds,
this is still an emerging and relatively alien
concept in Minsk. The main aim of these
schemes seems to be pitched at a mid to
value target audience, with a few highend galleries in the downtown locations.
There is nothing akin to a Westfield, where
you have high-quality spaces that cater
to aspirational and high-end customers
alike include leisure, entertainment, and
high-quality F&B. This type of destination
scheme has yet to be delivered in Minsk.
When it is, however, it is fairly certain to
be a category killer and dominate the
market. The concept for Dana Mall, which
is located on the opposite side of the city
from the Vilnius road, was designed by the
UK architect Benoy and promises to deliver
a game-changing scheme for the city. A recent article from the Middle Eastern Council of shopping centres supported this
view point, suggesting that customers visit
shopping centres for leisure and entertainment more than ever before.
Lack of secure payment methods
As the rest of Europe is pushing forward
with multi-level retailing, e-Commerce is
still a futuristic concept in Minsk, as only
1.4 percent of retail spending is conducted
online in Belarus, compared to the European average of 10 - 11 percent. Even this is
far behind the online sales in the UK, which
peaked last Christmas at 19 percent for the
first time in history. One of the reasons for
this is the lack of e-commerce banking systems and secure payment methods, such
as PayPal. Banks in Belarus are catching
up with this opportunity and have confirmed that they will be up to speed with
European standards within the next 18
months. This comes at an ideal time for
the new generation shopping centres in
Minsk, as they will be able to grasp this opportunity with both hands and learn from
the mistakes of the past. The use of clickand-collect and home delivery should be
a natural process for all new schemes, as
multi-level retailing is embraced as a concept and “clicks and mortar” becomes the
norm. As Darwin might have advised, however, it is only those who adapt and evolve
that will not only survive, but flourish, in an
environment primed for a retail explosion.
This would advance much more quickly
if import duties were relaxed, or special
treatment were found for Western goods
that seem so desirable in Belarus. As a CIS
member, Belarus finds that the most efficient way to open well-known international fashion brands is via Russian franchise
partners, such as BNS (part of MH Alshaya), Fashion House, GreenHill, or Greenmarket. As there is no import duty from
Russia, manufacturing goods in Russia, or
importing them into Russia from counties
NEE
Overview
with which Russia has trade agreements, is
very beneficial to Belarus. However the political tensions between Russia and the EU
clearly pave the way for Belarus to blaze its
own trail and establish direct trade deals,
that allow Western goods to be retailed at
sustainable prices that further establish
the strength of Belarus as an emerging retail market.
However, further work needs to be
done with regard to stopping retail tourism and reverse the existing trend, which
in turn would increase tax revenues. This is
a government-level issue, which can only
be addressed when a critical mass of quality shopping centres is achieved, and a lobbying platform is established, such as the
Belarusian council of shopping centres. It
would work alongside retailers, owners,
and the government to find solutions at all
levels. As an industry, it is critical that we
learn from the mistakes of countries like
Bulgaria, Romania, and Latvia, where the
furor of shopping center development allowed rents to spike and operators fell over
themselves to sign leases with average
monthly rents in excess €100 per sqm, in
schemes that were less than premier. The
unsustainability was obvious in that case
and similar leases in Belorussia today are in
the €30 – 60 range. However, prime rents
in Minsk are now achieving upwards of €80
-90, which is proving sustainable, where
a range of rents meets market expectation
and quality of space. While I cannot see
such mistakes being repeated in Belarus, it
Dana Mall interior
is important to be aware of the past when
considering the future.
Looking outside Minsk, the opportunities only get better. The second-largest
city, Gomel, has a population of 513,000
and virtually no shopping centres to speak
of. The groundswell of residents’ appetite
for brands sees them driving for six hours
and waiting over four hours at the border
just to purchase branded goods. It is amazing to behold and clearly demonstrates
the passion and desire that the people of
Belarus have for fashion.
In summary it can be seen that the green
shoots of retail development in Belarus are
emerging from the soil of Minsk far more
rapidly than most EU countries. As an
emerging retail economy, Belarus needs to
avoid the gold-rush syndrome and the success of this growth will be dependent upon
sensible, sustainable rents, international
quality retail space, with leisure/entertainment as standard and taxation changes
to make the retail landscape attractive for
both the brand hungry consumer and the
international brands seeking a new emerging territory.
Dana Mall interior
Gary Burrows
The author of this article is an international retail property consultant with 25
years’ experience in the retail property
sector. With a career history starting in
retail with Debenhams, moving into shopping centres with Cushman & Wakefield,
before working with names such as Westfield, CBRE, Doughty Hanson and DTZ in
the UK. Burrows then moved into the CEE
regions working with Tesco, TriGranit and
Balmain across sixteen countries, and latterly spent time in the Middle East with Al
Futtaim. Burrows is currently with Dana
Holdings in Minsk as Head of Property &
Asset Management for Dana PM Services
in Minsk.
12:00-13:00 Lunch, registration and
networking
13:00 – 14:00 BPO, Shared Services, IT –
Romania is becoming a top BPO and Shared
Services location. How do these new tenants
impact the office market? What cities and
types of buildings are these tenants looking
for? Which developers and consultants are
taking the lead, and who are really delivering
to this sector? How much space will they
need in the upcoming 24 months?
14:00 14:30 Coffee & Networking
14:30 – 15:30 Manufacturing & Industrial
– Expansion, Renovation, Investment,
Supply Chain Solutions – how does real
estate affect these issues. Who are the most
active companies on the market? What are
opportunities for heavy, light and assembly
manufacturing in Romania? Tax breaks and
HR supply chain management solutions.
15:30 16:00 – Coffee & Networking
16:00 – 17:00 - Tenant Mix Balancing
in Retail Projects – What are the main
differences between new modern projects
and projects in need of refurbishment when
it comes to tenant mix? What are the new
trends and which projects are viable in terms
of destination mix? What areas have the
highest sales increases and how does this
influence GLA allocation? What are the new
Retail anchors in 2015? How come we have
Retail Parks and Entertainment based malls
development in similar areas? Which will be
the active retail investors in 2015? Which
will be the targeted retail projects?
17:00 – 17:30 Closing comments and Q&A
18:00 - 20:00 – 10th annual SEE Real
Estate Awards nomination launch (www.
SEErealestateAwards.com). Whiskey tasting,
cocktails, entertainment.
NEE
Overview
Galileo, located in central Minsk
Foreign interest
picking up in Belarus
Winston Norman
A combination of rising disposable
income, the relaxation of property
regulations and a low density of
modern, organised developments has
created a mine of untapped potential
in Belarus’s retail sector.
In
the first half of 2014 retail turnover reached 140 trillion Belarusian roubles, but while this 10
percent year-on-year growth was impressive, Belarus still lags behind its neighbours. A major factor in this imbalance
– and a great opportunity for foreign investment – is an undersupply of modern
retail projects.
“Although Belarus’s economy is strongly
influenced by the public sector, retail has
become one of the sectors where private
companies are clearly dominant,” commented Andrey Aleshkin, Partner at Colliers International in Belarus. “Over the last
7-8 years, retail and the commercial real
estate development sectors have always
been leaders in attracting foreign direct
investment into the Belarus economy. We
have no doubt that this same activity will
remain until the end of this year, and the
first two quarters of next year. I think the
investors we are most likely to see will be
from the Baltic States, Russia and some
countries from the Middle East. Investors
from Western Europe will be scarce.”
According to Colliers International, retail
is now the most rapidly developing property market in Belarus. In addition, it is an
area in which private capital prevails. Despite the fact that most shopping centres
are located in the capital, Minsk does not
play as dominant a role in this field as it
does on the office market.
Demonstrating this, Minsk has the lowest level of modern shopping area per
resident of any capital city in Central and
Eastern Europe. To tackle this, Belarus has
adopted a policy of actively encouraging
the construction of modern shopping centres. As a result, annual turnover through
shopping malls, hypermarkets and convenience stores is forecast to grow by 4050 percent over the next decade.
“Recently there have been some really positive changes to the market,” said
Andrey Aleshkin, “Retail space per 1,000
inhabitants has doubled and is now more
than 500 sqm. The quality of these developments has also increased.”
It is expected that in 2015 a significant
amount of retail space will be introduced.
“This is not only due to the projects that
were announced for 2015, but also due to
some of the projects that have run-over
from those previously announced by developers in 2014,” Aleshkin explained.
Among them are a number of major
shopping and entertainment complexes.
For example, it has been officially announced that the opening of Green City,
which has 60,000 sqm of retail, has been
postponed to February 2015. “Previously
the object was expected in the 4th quarter
of this year. There is also a similar situation
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NEE
Overview
Manege – a mixed-use complex located in Polotsk, Vitebsk region
with the shopping center Hippo and some
other projects,” said Aleshkin.
A number of major projects have been
announced for 2015. For example, Dana
Mall, Galleria Minsk and Kamennaya Gorka, with a total area over 102,000 sqm, as
well as others. Large developments are
also expected in the regions.
“As a result the retail network has really changed and national retail chains are
developing, and achieving good results.
Companies with the participation of foreign investors have developed successful
projects,” Aleshkin commented. “First of
all, Baltic investors were very active, this is
probably explained by the geographic and
mentality of the population.”
He continued: “Some international companies and brands have entered the market, but this process is not as active as we
expected. In 2014, for the first time in modern history, a Belarusian private retailer has
surpassed the largest state retailer in volumes of revenue. This is really good news
for Belarus.
However, rents in Belarus are quite high,
even when compared to EU countries.
Thus, the average rates for anchor tenants
are €8-20 per sqm without VAT and operating costs; the most popular among retailers are areas in the range of 100-500 sqm
– €10-35; small premises up to 50 sqm on
average €40-100.
In addition, these rates are not only typical for Minsk, but for some regional cities
of Belarus. In some cases, rental rates in
Minsk are much higher – with rates close
to €200 per sqm for the large areas.
According to Colliers, the level of retail
vacancy is low. For example, there are no
premises for the placement of food anchors (supermarket, hypermarket) in Belarusian shopping centers. Also, there are
low vacancy levels in shopping galleries.
Returning to the market transformation,
Aleshkin noted, that vacancy levels have
started to rise in the first generation shopping centers, which were introduced in the
90s and early 2000s.
“These are projects with very small
stores, usually in the range of 9-12 metres,
where traders are individual entrepreneurs. It is clear that it is difficult for them
to compete with the more organised net-
Palazzo Mall shopping and entertainment centre with around 100,000 sqm GBA
work retailers, and the Belarus consumer
has already matured enough to give preference to branded shops,” he explained.
“In this regard, it is difficult to understand some projects, which have been realised with conceptions of such outdated
shopping centres in the last 1-2 years. As
a result, some of them are only half filled,”
he added.
Commenting on how the recent geopolitical troubles have affected the retail sector in Belarus, Aleshkin said: “Belarus has
a somewhat clouded relationship with the
West, sometimes it expressed in sanctions
and outright confrontation. As a result, the
development of retail real estate has very
few investors from the EU or the US. The
exception, as already noted, are investors
from Baltic states.”
According to Aleshkin, this situation
has had a certain negative impact on market development in Belarus. For example,
developers have no incentive to develop
quality schemes. “They don’t want to meet
the international requirements needed for
their projects, which international retailers
require from the shopping centers where
they operate,” he said.
“Of course, the Belarusian consumer is
the loser, because he doesn’t find familiar
and popular brands on the market and
has to use shopping tours to neighbouring EU countries,” he added. “And the market, in general, comes off a loser: even if
local operators more quality, the lack of
competition from international operators doesn’t give incentives to grow and
develop more, to compete with foreign
competition.”
However, foreign interest is picking up,
with UK retailer Mothercare opening a series of franchised stores in the country as
well as Porsche, BMW and Volkswagen
dealerships, and designer stores such as
Canali opening in Minsk, to name a few.
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NEE
Overview
Most shopping centres enjoy full occupancy in the Baltics
Baltic retail sector
is buoyant
Richard Wernick
Lithuania’s largest bank, SEB Bankas,
recently revised the country’s 2015
GDP growth forecast downwards from
3.8 percent to 3.2 percent. GDP growth
forecast for 2014 was kept unchanged
at 2.7 percent. The outlook assumes that
the current EU sanctions against Russia
will not widen. Increasing domestic
market demand, rising wages and
employment, as well as the eurozone
recovery are seen as the main drivers
of growth. The price environment is
expected to remain flat, while average
annual inflation is forecasted at 0.1
percent in 2014 and 0.7 percent in 2015.
O
ber-Haus Real Estate Advisors report that the average vacancy rate
of shopping centres is around 2
percent and most of the shopping centres
enjoy full occupancy Since there are no
new retail projects (other than the second
phase of Domus Proin Vilnius) planned in
2015 or 2016, the current growth in retail
sales allow centre managers to raise rents
and revise the tenant mix with a freedom
that was not possible a few years ago.
The major centres in Vilnius are Akropolis,
Ozas and Panorama; in Kaunas Mega and
Akropolis; and in Klaipeda Akropolis.
The Danish developer TK Development
said that it is engaged in a constructive
dialogue with potential tenants for the
second phase of the Domus Pro shopping
centre in Vilnius, on which construction
will start once a satisfactory occupancy
level has been reached. The shopping centre is expected to have an area of 11,000
sqm, and the completion of the first stage
(7,500 sqm) took place earlier this year.
It is not just shopping centres that are
enjoying a retail boom. The main shopping
streets in Vilnius (Gedimino Avenue, Pilies
Street, Didzioji Street, Vokieciu Street)
have a vacancy rate of around 3 percent.
This allows landlords to raise rents and
find better quality tenants. A similar situation has arisen in Klaipeda Old Town.
A recent Nielsen Global Survey of Consumer Confidence and Spending Intentions showed Lithuania as having the
highest percentage (86) of consumer confidence in CEE. Coupled with rising employment and the adoption of the euro on
1 January 2015 rents will probably follow
the 2014 trend and increase by €5. OberHaus reports that rents for a medium sized
(150-300 sqm) unit in a major retail centre
run from €12.00 to €35.00 per sqm and
up to €50.00-€65.00 for small sized units.
Rents for anchor tenants are €8.50-€13.00
per sqm. Rents for medium sized retail
premises in the main Vilnius streets were
€16.00 –€38.00 per sqm.
Latvia’s second largest bank, SEB Banka,
states in its most recent analysis that the
country will see growth of 2.7 percent in
2015 after this year’s dip to 2.5 percent.
Domestic consumption will remain the
key driver. The price environment is expected to be changeable: average annual
inflation is forecasted at 1.8 percent in
2014 and 3.3 percent in 2015.
Ober-Haus observe that the total modern shopping centre space available in
Riga is 885,000 sqm and the shopping
space is 665,000 sqm at the start of 2014.
The main shopping centres are Alfa, Galleria Riga, Origo, Riga Plaza and Spice
Akropolis. LV SIA, a subsidiary of Lithuania’s Akropolis Group UAB, is currently
developing a multi-functional real estate
project at Maskavas Street. This project
will bring another 60,000 sqm of retail
and 7,400 sqm office space to the market
at the end of 2015. The same developer
intends to construct another mixed-use
complex on Daugavgrivas Street in 2015.
This will produce 92,000 sqm of retail and
91,000 sqm office space. Due to growing
demand, most shopping centres are nearly fully leased, with minimal vacancy rates
between 0 percent and 3 percent.
The high-street sector in Riga is also
flourishing with the vacancy rate reduced
to just 2 percent in 2014. The greatest demand and the highest rents are for retail
spaces of between 50 and 150 sqm in the
city centre.
Nielsen Global Survey of Consumer Confidence and Spending Intentions showed
Latvia as having an improved figure of 76,
whilst still lagging behind its neighbours.
Rents have increased significantly in 2014
with central shopping street site rents
ranging from €15.00 to €35.00 per sqm.
In the prestigious Old Town area, retail
space rents are now €20.00 to €50.00 per
sqm. In shopping centres, rents start at €5
per sqm for large size units (1,000 sqm or
more), from €12.00 to €35.00 per sqm for
medium units (150-300 sqm), and €25.00 €50.00 per sqm for small units (under 100
sqm). Anchor tenants, such as supermarkets, typically pay €5.00 to €9.00 per sqm.
NEE
Overview
EPI Baltic I sells
De La Gardie in Tallinn
Downtown Riga
Lilija Pupinyte, a former Klaipeda city councillor, who is involved in the economic promotion of Lithuania in the UK said
that in her opinion the Baltic Republics offer retailers a sophisticated consumer base with rising income and expectations. The
fact that many “Balts” have worked or studied abroad means
that they are keen to acquire familiar European high-end
brands when home. She added that Lithuania was also an ideal
base for warehousing and distribution due to the investments
made in this sector in the last two years.
Northern Horizon Capital’s EPI Baltic I-fund has completed the sale of the prominent retail property De La Gardie in Tallinn, Estonia. The buyer is an Estonian investment
company Lepidus Invest. Located on one of the city's busiest shopping street De La Gardie on Viru Street is a prime
retail property within the heart of Tallinn's Old Town. The
4-storey building is 2,139 sqm in leasable size with most of
the premises being leased by Lindex, one of the leading
fashion chains in Northern Europe. The property was acquired in July 2006 into the EPI Baltic I real estate fund. “De
La Gardie is a Class-A building with a solid tenant base and
good performance and as such we have been very satisfied to have it as part of our portfolio. The EPI Baltic I fund is
in its exit phase and so we are happy to conclude another
successful divestment in this process,” said Jussi Palmu,
Fund Manager at NHC. The EPI Baltic I fund only has one
property left for divestment, the Gedimino 20 retail/office
building in Vilnius, Lithuania. “NHC will continue on the
market as an active buyer through our Baltic Opportunity
fund which is open also for new investors,” he concluded.
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Regional
Retail excellence recognised at the
sixth annual EuropaProperty CEE
Retail Real Estate Awards Gala
Winston Norman
Celebrating the region’s ever-changing commercial retail real estate market,
and reflecting its evolving nature, EuropaProperty’s sixth annual CEE Retail
Real Estate Awards once again highlighted the continued enthusiasm for
retail real estate in CEE by recognising a wide variety of winners for their
continued market success.
T
he awards, held at the five-star Intercontinental Hotel Warsaw, brought
together some 450 top real estate
professionals from the major retail market sectors in the CEE region, and were
selected by an international academy of
jurors, comprised of senior industry professionals, who presided and deliberated over
the eventual winners, representing some
of the best commercial retail real estate
companies, retailers, projects and people
operating in the CEE region for 2013. The
41-strong independent jury panel of the
CEE Retail Real Estate Awards cast their
votes for one winner in each category.
Property developer Mayland Real Estate
shone the brightest on the evening picking
up three awards. The company received
high praise and recognition for their Riviera Shopping Centre, currently Poland’s
largest retail development. The centre won
the Extended/Refurbished Project of the
Year as well as the coveted Overall Project
of the Year award. Further emphasising
their success in 2013 the jurors also voted
Mayland the Developer of the Year.
Maciej Kielbicki, Managing Director of
Mayland Poland, said: “I would like to thank
the jury for recognizing our considerable
achievements for 2013. It was a challenging year for us, but finally we delivered.”
2013 was a big year for retail development and the project award winners reflected the changing dynamics of the region’s retail development markets. Many
of this year’s nominees formed extensions,
refurbishments, mixed-use and retail park
projects. This year the winning projects
were from Poland, Hungary, and new for
Regional
2013, Turkey, one of the most active and
attractive countries for retail real estate in
the region.
The recently opened, TriGranit-developed and managed, Poznan City Center
won one of the most prominent retail project prizes, Retail Project of the Year in the
large category. Poznan City Center, which
opened its gates on 25th October 2013,
has proven to be a huge success – welcoming more than 5 million visitors since
its opening.
Árpád Török, CEO of TriGranit Development Corporation, said: “The CEE Retail
Real Estate Awards are one of the most
prestigious awards of the real estate development sector in Europe, where international market professionals appraise
and evaluate a number of high profile
projects. It is therefore a great honour for
us that Poznan City Center’s huge success
has been acknowledged and we have once
again been recognised as one of the top
industry leaders.”
ECE Projektmanagemnet collected two
project awards. One for their Arkad 2 shopping center in Hungary, highlighting a possible upturn in the country’s fortunes, and
Maltepe Park in Turkey. The project’s were
awarded in the Turkey Shopping Center of
the Year and Shopping Centre of the Year
in the medium category.
Other projects awarded on the night included Plac Unii, Liebrecht & Wood’s popular office and retail development in Warsaw, which won Mixed-use Project of the
Year, Neinver’s Factory Annopol in Warsaw
for Factory Outlet Centre of the Year, Dekada Grojec in Grojec, Poland won Retail Park
of the Year and Fashion House Warsaw was
awarded Best Performing Factory Outlet
Center of the Year.
Other major accolades were given to
CBRE Global Investors, which was recognised by the jurors for its investment
success in the region. Through 2013 the
company has continued its high-profile
investment strategy of seeking investment
opportunities in existing assets and development projects, for example the current
extension of the Ogrody Shopping Centre
in Elbląg, Poland. The company won two
awards, including Overall Company of the
Year as well as Investor of the Year.
A popular winner for this year’s Professional of the Year award was Dieter Knittel,
Director Europe at Deutsche pfandbriefbank. On receiving the award, he com
Award Winners
Entertainment/Leisure Retailer of the Year: Pure Jatomi Fitness
Multi-Media Retailer of the Year: Saturn
Supermarket Chain of the Year: Alma
Specialty Retailer of the Year (under 100 sqm): Costa by Coffeeheaven
Specialty Retailer of the Year (over 100 sqm): Rossmann
Fashion Retailer of the Year (under 200 sqm): Kazar
Fashion Retailer of the Year (under 500 sqm): CCC
Fashion Retailer of the Year (over 500 sqm): Reserved
Newcomer of the Year: Sinsay
Professional Service Provider of the Year: TPA Horwath
Architectural Firm of the Year: Chapman Taylor
Law Firm of the Year: Dentons
Tax and Financial Adviser of the Year: TPA Horwath
Project Management Firm of the Year: Cushman & Wakefield
Property Management Firm of the Year: Apsys Group
Consultant / Letting Agent of the Year: Jones Lang LaSalle
Bank of the Year: Bank Pekao
Investor of the Year: CBRE Global Investors
Developer of the Year: Mayland
Turkish Shopping Center of the Year: Maltepe Park – ECE Projektmanagement
Best Performing Outlet Center of the Year:
Fashion House Warsaw – Fashion House – Poland
Factory Outlet Center of the Year: Factory Annopol – Neinver – Poland
Retail Park of the Year: Dekada Grójec – Dekada – Poland
Mixed-Use Project of the Year: Plac Unii – Liebrecht & Wood – Poland
Extended/Refurbished Project of the Year: Riviera – Mayland – Poland
Retail Project of the Year medium: 15,000 sqm to 35,000 sqm
GLA – Arkad 2 shopping centre – ECE Projektmanagement – Hungary
Retail Project of the Year large: over 35,000 sqm
GLA – Poznan City Center – TriGranit – Poland
Overall Retailer of the Year: Deichmann
Overall Company of the Year: CBRE Global Investors
Overall Project of the Year: Riviera
Professional of the Year: Dieter Knittel – pbb Deutsche Pfandbriefbank
Bank Pekao – Bank of the Year
Jones Lang LaSalle – Consultant / Letting Agent of the Year
Alma – Supermarket Chain of the Year
CCC – Fashion Retailer of the Year (under 500 sqm)
Saturn – Multi-Media Retailer of the Year
Sinsay – Newcomer of the Year
mented, “I’m proud to be at our company as well as doing business in Poland.”
Global consultants Jones Lang LaSalle
once again picked up the Agency of the
Year award. Beatrice Mouton, Regional
Director, Head of Retail CEE at Jones Lang
LaSalle commented: “We share this award
with all our clients and thank them for their
loyalty, trust and belief in our retail capability. Our success is their success.”
Additional company awards were presented to Dentons, one of the world’s
biggest law firms, which received the Law
Firm of the Year award. Tax and Financial
Adviser of the Year and Professional Ser-
vice Provider of the Year went to TPA Horwath.
The Apsys Group received an award for
Property Management Firm of the Year,
highlighting the growing importance of
good asset management. Cushman &
Wakefield again followed up last year’s
success by collecting the Project Management Firm of the Year award. Chapman
Taylor once again picked up Architectural
Firm of the Year.
Bank Pekao, part of the wider UniCredit
Bank Group, was voted Bank of the Year.
A surprised Marek Koziarek, Managing
Director at Bank Pekao, enthused, “I’m sur-
prised by this result but extremely proud.
I hope we can be as good this year as we
were over the last.”
Accentuating the strength and interest
in the region’s retail sector, 10 key retailers were awarded on the night. Overall
Retailer of the Year went to Deichmann,
which was recognised for their continued
expansion and confidence in the CEE region throughout 2013, and the Newcomer
of the Year award was received by SinSay.
Other major winners for the retailer specific awards included: Costa by Coffeeheaven, Pure Jatomi Fitness, Saturn, Alma,
Rossman, CCC, Kazar and Reserved.
Regional
CBRE Global Investors – Investor of the Year
Mayland – Developer of the Year
Overall Retailer of the Year – Deichmann
Dieter Knittel – pbb Deutsche Pfandbriefbank
– Professional of the Year
Retail Project of the Year large: Poznan City Center – TriGranit – Poland
Retail Project of the Year medium: Arkad 2
shopping centre – ECE Projektmanagement –
Hungary
The retail awards gala and forum was organized to acknowledge and highlight the growing international significance of the
commercial retail real estate market and related industries in the
CEE region from both a development and investment perspective. Awards were presented to companies in the region for their
outstanding accomplishments for the year 2013.
EuropaProperty would like to thank all the participants at the
event and congratulate the winners. The awards for 2014, to be
held in February 2015, are set to be even more competitive in
these increasingly dynamic markets and challenging times.
The EuropaProperty CEE Retail Real Estate Awards for 2013 was sponsored and supported by:
 Premier Partners: CBRE Global Investors, TriGranit
Management Corporation, Mayland, Inter Ikea Centre Group
 Associate Partners:
TPA Horwath, pbb Deutsche Pfandbriefbank, Atrium
 Award Sponsors:
Manhattan Software, Dana Holdings, MK Illumination
 Travel Partner: Airfrance KLM
 Wine Partner: Mielżyński
 Energy Software Partner: IBC
 Luxury Spirit Partner: Polugar
 Exclusive Business Club: Pure Sky Club
 Auditor: EY
 Car Rental Partner: AVIS
 PR Partner: Mosaic PR
 Charity Partner: Stamm Sport Promotion
 Supporting Partners: Rosa, RICS
 Media Partners: Retail SEE Group, BizPoland, BiznesPolska
 Chocolate Partner: Manufaktura Czekolady
 Cocktail Partners: MONIN, Stumbras
 Knowledge Partner: Reidin
E-commerce
In Poland 70 percent of consumers buy over the internet
E-commerce remains
the biggest challenge
Winston Norman
Internet shopping is more and more
popular but e-commerce share in
Central and Eastern Europe’s retail sales
is still lower than in Western European
countries. However, this is changing
rapidly. It is expected that this year the
value of Poland’s e-commerce market
will exceed PLN 30 billion.
L
ast year it is estimated that e-commerce in Poland accounted for
around 4 percent of country’s total
retail sales. Compared to other European
countries it is still relatively low, e.g. in
Great Britain it is almost three times higher
(and is still rising) which indicates significant growth potential for the sector.
“In Poland, 70 percent of consumers buy
over the internet,” said Michal Kramarz,
Head of Retail at Google Poland. “What
is more important is the rising frequency
of internet shopping. We must combine
physical shopping with the internet but at
the moment, very few retailers are making
money on this. If you do it wrong you lose
a lot of money.”
Michal Muc from Savills Property Management, added: “The growing importance
of e-commerce and high development activity are some of the most important factors for developers and owners to consider. Maintaining the centre’s attractiveness
for customers despite that becomes one of
the key issues in centre’s management.”
Books, electronic equipment, clothes,
shoes and accessories and FMCG products
are the most popular products bought
on-line. More leading retail brands are op-
erating also via e-shops, e.g. the share of
e-shopping in total Reserved’s sales is at
2-3 percent, however, it is expected to increase to 10 percent in the next few years.
Other retailers with e-shops include:
C&A, H&M, Tatuum, Aryton, Bialcon, Zara,
Orsay and many others. Also multi-brand
e-stores like Zalando, PerhapsMe and Answear are becoming more popular.
With this dynamic growth of online
sales, the latest Experian’s footfall index
data shows that shopping centre footfall is
weakening in Poland. There was a 6.2 percent negative growth year-on-year when
the cumulative index for January-April
2014 is considered.
Cumulative data for 2013 shows, however, a smaller decline of -4 percent compared to 2012 footfall index. The decrease
Regional
E-commerce
Beata Kokeli – Senior Director,
Retail Department, CBRE
Amazon’s Raimund Paeztmann, “Start with the customer, customer experience drives productivity”
of footfall index should be explained not
only with the economy, consumer confidence and the growth of retail stock in the
country.
The other important factor is the growth
of e-commerce in Poland, which was estimated at about 20 percent in 2013 and is
expected to grow by around 14-15 percent
per annum by 2015. The two-digit growths
will also have an impact on the county’s
economy as in 2015 e-commerce share in
the GDP is expected to reach 4.1 percent
compared with 2.7 percent in 2009.
With this dynamic growth of online sales,
Amazon’s Director of EMEA Ops/ CS Real
Estate, Raimund Paeztmann, explained
how consumption is changing. “Now suddenly you have something. Everything is
changing, you need new technologies.
Start with the customer, customer experience drives productivity.”
Some retailers are still only in the
early stages of learning how to successfully link online with retail. A big effect of
e-commerce is that the distance between
manufacturer and retailer is much shorter,
pointed out Raimund Paetzmann.
Michael Kramarz added: “The store is
the message of the future of the brand,
and we are finding that the number of
mono brand stores are increasing. These
brands need good environments, good
centre management and good urban surroundings. E-commerce rarely yet earns
money for most retailers – the future is
multi channel.”
But to achieve this companies need
more skilled personnel and profession-
als. “Technical innovation needs a driver,”
Paetzmann said.
Most urgently as the traditional retail
model changes, leasing models need to
adapt as where the decision to purchase
is made is no longer always where the sale
actually takes place. But with some large
retailers reporting that their online business as strongest in the catchment where
they have stores, bricks and mortar stores
are fundamental to their business.
Many tenants will require less space as
they integrate on and off-line sales, but
rather than seeing this as a negative, as
the industry was doing just a year ago,
market experts see this as an opportunity to widen the opportunities and offer
a more diverse range of leisure or other
activities.
“The Polish commercial real estate market is already mature, however, it still holds
potential for building new or developing
already existing retail projects and remains
attractive for a number of developers, investors and tenants,” commented Mikael
Andersson, Managing Director of Inter
IKEA Centre Group Poland. “As the competition grows strong and the battle for the
client is fierce, investors need to focus on
building an interesting portfolio of tenants.
What is more, the increasing e-commerce
market coverage enforces the investors to
create more attractive and engaging shopping areas in traditional objects.”
As the result of this, there is now
a widespread trend to refurbish the already existing buildings, increase the
shop floor area, change shopping centre
It’s true that there’s space for new shopping
centres in many Polish cities. However, when
we take a closer look at the local markets, we
will see that in some cities there are in fact
too many shopping centres which strongly
compete for tenants and consumers. When
making the decision to build yet another
shopping mall, investors should remain
reasonable and profoundly analyse local
markets. They should also remember that
consumers’ habits change constantly and in
a few years e-commerce will be much better
represented than today.
profiles by replacing the tenants or widening noncommercial functions of such
development.
However, according to CBRE, the comparison between consumer behaviour
in various countries regarding buying in
shopping malls and online varies considerably. “It turns out that the most traditional
European nations are Hungarians, Belgians
and Spaniards, who are most willing to buy
in shops,” explained Magdalena Fratczak,
Director, Retail Department at CBRE Poland. “On the other hand, consumers from
Denmark, UK, Ireland, Norway and Turkey
are most willing to use their smart phones
to buy online in Europe.”
Fratczak concluded: “Compared to other
European nations, people from Germanspeaking countries – Germany, Austria and
Switzerland – as well as Romania are more
eager to take advantage of catalogue
shopping. Poles more and more often decide to buy electronic devices and home
appliances online, but when it comes to
fashion – the majority of Polish consumers turn out to be traditional - they choose
shops, where they can touch and try on
the product they are interested in.”
CEE’s top investors, developers
and professionals recognised at
the Investment Awards for 2014
Winston Norman
E
uropaProperty would like to thank all
those who attended the 4th annual
CEE Investment and Green Building
Awards, held in Warsaw’s Intercontinental
Hotel. The awards ceremony was fantastic,
and was witnessed by a select group of
senior European and Central European real
estate professionals; affirming the event’s
status as a true landmark event for the
investment sector. Companies and individuals recognised at the awards included:
investors, developers, bankers, agencies
and many others from throughout the CEE
region.
Deutsche Asset & Wealth Management
was a multiple award winner at the 4th
annual CEE Investment & Green Building
Awards held in Warsaw on Thursday 30th
October 2014. Apsys, Echo Investment,
Mayland Real Estate, Amazon, Panattoni
Europe and JLL also walked away with
some of the big company prizes.
Deutsche Asset & Wealth Management,
one of world’s biggest institutional real
estate funds, with a strong investment
footprint in Europe and Poland, was the
big winner of the event, collecting three
awards on the night for Office Investor, Investment Deal and Overall Investor of the
Year. Other Investment winners included
GLL, Deka Immobilien, Tristan Capital Partner, Europa Capital, PointPark Properties,
Griffin Real Estate, and Atrium European
Real Estate.
Bogoljub Karic founder and CEO of
BK Group received this year’s Lifetime
Achievement award. The award is in recognition of his outstanding services to
the Eastern European real estate sector
and his company’s extensive international
achievements. Born in 1954 in the former
Yugoslavia, Karic grew his business into
a multi-billion dollar corporation, now
known as the BK Group, which operates
in the following industry sectors: manufacturing, civil engineering, construction,
international wholesale, export & import,
telecommunications, electronic media,
banking, finance, and media. He also
founded the first private university in Serbia and Russia, the BK Foundation helping
children and he founded the first association of industrialists entrepreneurs as well
as establishing the first private bank and
insurance company in Russia-CIS.
Amazon’s Director of EMEA Operations
and Real Estate Raimund Paetzmann was
named this year’s Industry Professional
of the Year. Amazon, the online giant, has
made quite an impact in the CEE region
opening three new fulfillment centres
in Poland, with another on its way in the
Czech Republic.
Panattoni Europe was named Industrial
Developer of the Year and won the award
for CEE Investment Development of the
Year for developing two of the Amazon facilities. Robert Dobrzycki, Managing Partner Panattoni Europe, made no secret of his
delight, commenting: “It is a huge honour
and privilege – to win two awards at such
a prestigious event. Each one is special and
Regional
Industrial Developer of the Year – Panattoni Europe
exceptional. Both of them are a testament
to the great determination and professionalism of the best team I have ever worked
with – Panattoni Europe.”
Echo Investment picked up three
awards. The real estate developer received
Office Developer of the Year, Office Project of the Year and a special commendation for their new office development
in Warsaw Q22, which recently received
a BREEAM Design Phase Certificate with
the rating ‘Excellent’.
New for this year’s awards ceremony, accentuating the strength and interest in the
region’s investment sector, were the Investment Brokerage and Investment Broker
Awards. JLL’s Troy Javaher won the Investment Broker of the Year and CBRE walked
away with the Investment Brokerage Firm
of the Year award. JLL also collected Professional Service Provider of the Year.
Mayland Real Estate collected a brace
of awards for its Riviera Shopping Centre
in Poland, including Overall Project of the
Year. Apsys, a retail developer and property
manager, picked up three awards including Overall Company, Property Manager
and Retail Developer of the Year. The City
of Warsaw, Unibail Rodamco, Bluehouse,
S+B Gruppe, Pekao Bank, Dentons, First
Title, Kurylowicz & Associates and Gleeds
were also among the award winners.
On behalf of our sponsors, judges and
attendees, we offer our congratulations to
all the winners. Foundations are already in
place for next year’s event, which promises
to be even bigger.
The fifth annual CEE Investment & Green
Building Awards will be held on October
29th, 2015.
Professional of the Year – Raimund Paetzmann – Amazon EU
Lifetime Achievement Award – Bogoljub Karic – BK Group
Overall Investor of the Year – Deutsche Asset & Wealth Management
Retail Guide 2014 33 Poland
Retail
Mayland’s Serenada project in Krakow
Poland’s retail development
sector spreads its wings
Alex Webber
With the capital’s retail sector maxing
out, both attention and eyes have
turned to Poland’s regions, and in
particular, locations falling outside
the major agglomerations. Buoyed
by solid financial figures, the steady
increase in purchasing power and
growing consumer confidence, the
warm glow in which Poland’s retail
players bask has been reflected by
what can be judged overall as a rather
positive year. However, to simply view
it as a continuation of 2013 would
risk ignoring the subtle shifts that the
market has made.
If
anything, 2014 has been marked by
a latent move away from the larger
agglomerations to the smaller cities; this, explains CBRE’s Katarzyna Kocon,
was always going to happen: “Currently
there’s a total stock of around 10 million
sqm GLA in Poland, of which 1.5 million
sqm is found in the Warsaw area.” If not saturated, the major cities were certainly approaching over-supply. Developers needed
to look elsewhere.
So this year has, instead, seen developers flirting with less populated areas.
“The most rapid changes we’re seeing,
are occurring in towns with a population
of less than 100,000,” said Kocon. Of the
two shopping centres and eight miscellaneous schemes launched this year,
six of these have opened in just such
places, among them the 35,000 sqm Galeria Siedlce and the 27,000 sqm Galeria
Bursztynowa in Ostroleka. The numbers
are revealing: the modern retail stock in
Poland’s eight agglomerations did not
change in H1, while 69 percent of new
retail space was delivered to what would
be termed small to medium-sized cities of
under 100,000 people. Cities of 200,000400,000 people accounted for the remaining 31 percent.
Credit for much of that 31 percent
should be addressed to a Lublin postcode.
Opened in March, the city’s Atrium Felicity development touts 75,000 sqm of GLA
spread across 120 units, and a catchment
area that’s been estimated at 470,000. That
Felicity – Lublin’s largest shopping centre –
is already 90 percent leased has illustrated
the growing pull of Poland’s eastern territories. “Retail developments in Poland are
quite scattered, definitely when compared
to countries like the Czech Republic where
developers are quite focused on certain
conurbations. This means that in Poland
all regions are viewed as ‘good’, though
we’re definitely seeing more things happening in the east which has traditionally
been seen as a ‘poorer’ area,” said Kocon.
In terms of the supply of modern retail
stock, the east of the country has seen
the strongest surge in growth: 27 percent. “Along with the growth in purchasing power and improvements to the road
Please contact:
Key Account Manager
Joanna Czerwińska
mobile: (+48) 783 917 507
e-mail: joanna.czerwinska@pkp.pl
Poland
Retail
The 98,000 sqm Posnania is slated to open in the autumn of 2016
structure in the East, developers and retail
chains are keen to expand in this area of
Poland. This interest has been markedly
bolstered by the influx of shoppers from
across the eastern border, and additionally
reinforced by a local border traffic agreement with the Kaliningrad region,” said
Anna Bartoszewicz-Wnuk of JLL.
Even so, it must be remembered that
the retail stock in this part of Poland remains significantly lower than in other
part of the country, and the gap between
supply and demand is forecast to widen
yet further. One key reason for this is the
lack of warehouse space. Currently, Poland
has 7.5 million sqm to its name, with all
but 8 percent located in the Warsaw, Upper Silesia, Poznan, Central and Wroclaw
regions. If retail stock in the east is to grow,
it is imperative that warehouse facilities
do so as well.
As things stand, 891,000 sqm of retail
space is under construction, of which
228,000 sqm will be completed by the time
2014 signs off. And while 298,000 sqm will
be added to cities of less than 100,000 it
would be incorrect to say that development has all but dried up in Poland’s big
cities. The 98,000 sqm Posnania, for instance, is slated to open in the autumn of
2016. Developed by Apsys, the €300 million commercial centre will have 300 units,
parking for 3,300 vehicles and create over
3,000 jobs when open.
According to Fabrice Bansay of Apsys,
the decision to build in Poznan was founded on pillars of logic: “Poznan is the fifth
largest Polish city and one of the leaders in
terms of purchasing power. The catchment
area of the centre covers nearly one mil-
lion residents of the Wielkopolska region,
while Poznan itself is a city with European
ambition and the potential to fill the space
between Warsaw and Berlin. Therefore, the
choice was always obvious for us.” Even at
this nascent stage, the success of the project already appears assured with agreements and reservations for the lease of
units standing at over 80 percent. Among
these tenants, giants such as Carrefour and
Leroy Merlin have already confirmed their
presence.
Further south, in Krakow, Mayland’s Serenada project will also enter the market
in autumn 2016 with 170 units occupying 42,000 sqm of GLA. The development,
again with a catchment area of one million
potential customers, will include Poland’s
largest aqua park, as well as an 18,000 sqm
Crocus hypermarket and a 12,000 sqm Obi.
According to Mayland’s Anna Skrocka, the
centre should be considered a solid bet:
“An analysis of Poland’s commercial market space clearly indicates that of the six
major conurbations Krakow is the least
saturated when it comes to retail space.
Already, we’ve established a core of large
tenants while the retail park where Serenada is located has a proven footfall of eight
million annual visitors,” she said.
But the construction of Posnania and
Serenada isn’t indicative of the wider
picture. Of the trends that are emerging,
expansions, remodelings and refurbishments are becoming more and more noticeable. “There aren’t many opportunities
to develop in the major cities, but if shopping centres want to maintain quality
then they need to expand and refurbish,”
said Kocon.
Patrycja Dzikowska of DTZ agreed:
“Growing competition in the modern retailing sector has forced the owners of
a large number of shopping centres, particularly those that have operated in the
market for ten years or longer, to undertake challenging tasks in order to fortify
their assets and prevent the drain of customers and the loss of market share. Year
by year this tendency has escalated, resulting in a reshuffle in the market.”
Over 142,000 sqm of stock being added
directly relates to older schemes that already exist. Examples of this are rife right
across the country: Torun’s Atrium Copernicus, Wroclaw’s Magnolia Park, Jelenia
Gora’s Galeria Sudecka, and Galeria Pomorska in Bydgoszcz. Of the 13 projects
under construction, nine happen to be
extensions. And there are other trends to
watch for, namely the construction of strip
malls, convenience centres and retail parks
of approximately 10,000 sqm. Once more,
these are tending to crop up in the smaller
cities and follow proven and established
concepts such as Stop.Shop by Immonfinanz, HopStop by Katharis Development
and Dekada by Dekada Realty.
In terms of development, only the
emergence of the Outlet Centre appears
to have flagged somewhat. A 12,000 sqm
one is slated to open in Lublin in Q4, while
Bialystok is scheduled to gain a 13,000 sqm
Outlet Centre in spring 2015, bringing the
total number of such centres in Poland to
12. This slowdown has not cast a shadow
on the general mood: as the year rolls to its
conclusion, developers are happy, and it is
expected that 500-600,000 sqm of GLA will
be added each year till 2017.
Poland
Retail
Warsaw’s Central Railway Station
PKP developing successful
joint venture partnerships
Thanks to the strategy implemented
by Polskie Koleje Państwowe S.A. (PKP)
modern, thoroughly refurbished railway
station buildings are increasingly
perceived by prospective tenants as
attractive spaces for their retail outlets.
P
KP owns 272 railway station buildings with commercial potential (including 86 which have been or are
being modernised, excluding railway stations of strategic importance), which it
wishes to utilise to the fullest extent. The
level of commercial premises rental has
been steadily growing, currently amounting to 56 percent (as regards active railway
station buildings) – in total this is almost
90,000 sqm of commercial premises.
Jaroslaw Bator, Member of the Board
at PKP S.A, commented: “The issue of ef-
ficient commercialisation is the most important for passengers because the process enhances comfort of using railway
stations. It leads to creating facilities that
have other functions than handling travellers – they become attractive meeting
places or venues for organising cultural
events. On the other hand, PKP S.A., being their owner, gains access to resources
necessary to maintain and upgrade its assets. We are putting much work in having
our railway station buildings fully commercialised before their opening, which
is the usual practice with, e.g., shopping
malls. Each of our investments is preceded by consultations with the city authorities and external companies. We also
welcome cooperation with private investors when we implement development
projects.”
One of PKP’s main priorites and expertise is providing passengers with a diverse
retail and service offer. “When it comes to
the largest railway station buildings of strategic importance, more and more often we
launch venues of prominent brands, such
as KFC, McDonald’s, Starbucks, Empik,
Rossmann or Biedronka,” Jaroslaw Bator,
commented. “One of our priorities is to
provide a diverse retail and service offer to
passengers. This is why in each of our stations you can see considerably more drugstores, pharmacies, book shops or even
clothes shops in addition to the usual kiosks and dining venues. We want our offer
to be tailored as much as possible to the
needs of people using our railway station
buildings.”
Warsaw’s Central station has the largest
GLA (7,300 sqm). There are currently 90
Poland
commercial premises in the modernised
section of the building. The new space
will be created under the project name:
“Increasing the aesthetic value of the Main
Hall, of the non-refurbished part of the
North Gallery, and of the West Gallery of
the Warszawa Centralna station.” The undertaking is to create 455 sqm of modern
retail space in the Main Hall of the railway
station building as well as 974 sqm in the
underground part of the North Gallery
and the West Gallery. The planned date of
opening the gallery is Q3 2015. The refurbished space will be more spacious and
equipped with all utilities.
The second largest railway station building in terms of lease space is the Krakow
Glowny station – a new building, opened
this February. The space of around 4,200
sqm hosts almost 40 tenants, including
Biedronka, SuperPharm, Matras and ToysBox, but also local brands, such as e.g.
Awitex bakery. The building boasts a commercialisation rate of 90 percent.
Retail
The station building of Wroclaw Glowny
has also seen progressing commercialisation. Even in early 2014, leased space
amounted to nearly 40 percent, while today it is almost 62 percent. In April, a new
STARBUCKS coffee shop was opened along
with a KFC restaurant. In Q1 2014, PKP S.A.
signed lease contracts with EMPIK and Dr.
Zdrowie chain of pharmacies. In August,
the company was able to conclude a contract with another chain tenant – McDonald’s. The new restaurant will be created
inside the historical interior of the station
building. The total lease area is over 1,000
sqm. Construction and interior design work
is currently in progress and the restaurant
is to open towards the end of the year. The
station should then boast a commercialisation rate of at least 80 percent. The mezzanines will be restricted for events only –
the project will be entirely managed by the
city authorities of Wroclaw.
Jaroslaw Bator, Member of the Board at PKP S.A
Multi receives construction permit
for Forum Radunia in Gdansk
Multi Corporation has received building permission for Forum Radunia, a new
urban shopping centre complex offering
62,000 sqm of gross leasable area (GLA).
The project will be built in downtown
Gdansk on one of the most strategically located sites in the TriCity area. The project’s
grand opening is planned for late 2016.
Forum Radunia has been designed to revitalize the six-hectare historic area of the
former Hay and Crayfish markets, bordered
by 3 Maja, Armii Krajowej, Waly Jagiellonskie and Hucisko streets. The site is located
in the very centre of the city, adjacent to
the main railway station, the Old Town and
key municipal buildings. The full potential
of the location has not yet been exploited,
mainly due to the fact that railway lines run
through the land. One of the most important elements of the project is therefore to
house and cover the railway tracks inside
the complex. Within the 62,000 sqm GLA
of Forum Radunia will be enough space
for some 200 stores, a 9-screen Multikino
cinema, Pure Jatomi fitness club, restaurants and cafes, and a multilevel parking
for 1,100 vehicles. Tenants already in-
clude well known Polish and international
brands. A vital part of Forum Radunia will
be the Gdansk Heritage Centre, which will
serve as a welcome point-receiving guests
arriving in the city. The Heritage Centre is
to house the city’s main tourist information
point, a scale model of the City of Gdansk,
a multimedia room, an exhibition hall,
a cafe, and offices. “We will create a lively,
modern, friendly and open urban space,
buzzing with life. Its exceptional location
at the end of the Royal Route, with excellent public transport links and easy access
to the ring road, will ensure Forum Radunia becomes a new landmark for Gdansk,
attracting both residents and tourists. Potential tenants are expressing a high level
of interest in this project. Visitors to Forum
Radunia will have access to a wide range of
popular fashion and sports brands, health,
beauty and home furnishings stores, and
also well-known restaurants and cafes.
Local retailers will also be present at the
shopping centre, reviving the former marketplace tradition of this historic location,”
said Tomasz Matusiak, Managing Director
of Multi Poland.
Marta Augustyn – Associate Director,
Retail Agency, JLL
Retail chains in Poland are believed to be in
good condition and the country remains an
attractive market for further expansion. The
last three months have become busy for both
new market entrants and those already present on the market. Brands already present
on the market are actively, albeit selectively,
expanding. All potential locations are still
carefully examined. Unsurprisingly, prime assets located in the main metropolitan areas
attract most retailer demand. Landlords of
centres which are perceived as secondary by
market stakeholders, or those located in very
competitive markets, are facing downward
pressures on rents and high expectations
from tenants with regard to fit-out contributions.
Retail Guide 2014 39 Project management, financing and production of innovative
cross-sector projects for start-ups and companies already established
in Poland and abroad.
We are looking for investors and partners worldwide.
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Poland
Warsaw
Galeria Wilanów
Warsaw’s retail market
set to witness
spectacular changes
Winston Norman
Warsaw is the largest retail market in
Poland with over 1.1 million sqm of
shopping centre stock: 13 percent of
the supply countrywide. However,
despite this, the market still has one
of the lowest provisions of shopping
centre space per 1,000 inhabitants
among the eight major Polish
agglomerations, and is still awaiting
the construction of new large scale
shopping centres.
A
ccording to JLL, considering its
scale and consumers’ disposable
income, Warsaw offers an insufficient number of retail projects. It also has
Poland’s highest spending power (€9,706
per capita per annum i.e. 165 percent of the
national average in the Warsaw agglomeration, and €10,478 in Warsaw alone).
“A combination of such factors, coupled
with a constant inflow of new citizens and
dynamic development of the residential
market, is generating demand for new retail
projects of various scales and formats, especially in Bialoleka, Wilanow, but also in Wawer, Ursynow and Wola,” commented JLL.
The current development activity in the
Warsaw agglomeration can best be described as moderate. Only one shopping
centre - Galeria Legionowo (10,500 sqm
of GLA), is under construction in the wider
metropolitan area of Warsaw, and a further
two are being extended i.e. Wola Park (by
17,600 sqm of GLA) and Factory Ursus (by
6,000 sqm of GLA).
“The first half of the year was a rather
calm period on the retail market in the
Warsaw agglomeration,” commented Anna
Wysocka, Head of Retail Agency, JLL Poland.
“This will, however, change with a wide selection of new retail projects planned, including, Galeria Polnocna, Galeria Wilanow,
Ferio Wawer and Fabryka Wolomin.”
JLL also note that spectacular changes
are soon to take place in the wider city
centre. “The extension and redevelopment of CEDET on the corner of Krucza
Street, Bracka Street and Jerozolimskie
Avenue has began. What is more, building permits have been obtained for Centrum Marszalkowska on Marszalkowska,
Hala Koszyki on Koszykowa and ArtNorblin on Zelazna. Ethos on Three Crosses
Poland
Warsaw
Galeria Kabaty, speculated new development for Warsaw
Marek Noetzel – Partner, Head of Retail Dept,
Cushman & Wakefield
Poland’s modern retail supply will total
495,000 sqm in 2014, a fall of 24 percent on
2013’s record figure. It must be noted, however, that last year was a record one. Warsaw
remains the city with the lowest shopping
centre space provision for 1,000 inhabitants.
The situation might change, given the number of new large-scale projects that are currently at a various planning stage. Secondary
schemes in more difficult markets with clear
oversupply record rising vacancy levels. In
those locations tenants are putting pressure
on landlords, seeking financial contributions and rental levels adjusted to generated
turnover.
Square will also be revamped,” Wysocka
added.
Warsaw’s existing shopping centres
continue to perform well, especially leading regional schemes, such as Zlote Tarasy,
Arkadia and Galeria Mokotow, which are
characterised by a lack of vacancies, and
a waiting list of retailers. These shopping
centres often serve as expansion bridgeheads for brands entering Poland. In H1
some chains were taking bigger units than
before or developing new retail concepts
(e.g. Zara’s remodelling in Wola Park, and
H&M’s pop-up store in Factory Annopol).
Others have been expanding their portfolios by introducing new brands – fashion chain Kiabi from the Auchan Group
is set to open its first stores in Warsaw
shortly. In addition, neighbouring iSpot
and Hour Passion stores in Wars Sawa Junior on Marszalkowska have recently been
opened.
Warsaw is undoubtedly the most expensive retail location in Poland, but remains
one of the cheapest in Europe. Due to recent re-lettings in prime retail assets in the
capital city, prime rents for a 100 sqm unit
for a fashion and accessories sector tenant
increased by 5 percent to €105 per sqm
a month. JLL anticipates prime rents to remain stable in the short to mid-term.
Since the completion of Zlote Tarasy, in
February 2007, the retail market stock in
Warsaw has grown significantly by 17 percent, bringing the total stock level to over
1.4 million sqm last year, which translates
into a density of 430 sqm of retail area
per 1,000 inhabitants. The low saturation
of the Warsaw market when compared to
other agglomerations creates numerous
retail opportunities.
There is currently one project under
construction – Royal Wilanow, which will
soon bring nearly 7,000 sqm of retail space
to the market in a mixed-use scheme. The
future pipeline is polarised towards small,
convenience or mixed-use projects from
one side, and large- scale schemes on
the other. The first group includes Hop
Stop in the Falenica district (7,000 sqm),
Ghelamco’s Vogla Park in the Wilanow district (11,000 sqm) and Ferio Wawer (12,000
sqm). Larger pipeline schemes to be completed in 2015/2016 are: Fabryka Wolomin
(31,000 sqm) as well as Galeria Wilanow
and Galeria Bialoleka offering 60,000 sqm
of retail space each.
A few other market trends can be observed, designating the direction of
changes, these are, the further extensions
and phases of well-performing schemes
in order to retain clients by ensuring they
are provided with a wider choice. And
the owners of older schemes are increasingly deciding to enlarge their projects by
adding further phases in order to refresh
them.
The most current examples of the pipeline extensions and phases include Centrum Janki, Wola Park, and Promenada. An
increasing number of planned mixed-use
(office and retail) schemes in good locations is noticeable, with Smyk and Centrum Marszalkowska (former Sezam store)
being the most prominent examples. This
is forecast to give a substantial boost to the
development of high-street retail.
Retail Guide 2014 43 Poland
Warsaw
Tatiana Spencer – Partner, Aspenn
Plac Unii, Warsaw’s last major retail development
An increasing number of developers
have decided to redevelop old, historical
sites into opportunistic retail/mixed-use
projects. This movement has been initiated
by BBI Development (Koneser) and Griffin
Group (Hala Koszyki).
Nearly 78 percent of Warsaw’s shopping centres are more than 10 years old. As
a consequence modernisations and extensions of existing retail assets remains one
of the key trends.
The high-street retail market in Warsaw
is still awaiting infrastructural changes
that are yet to come – the completion of
the second metro line’s central junction is
scheduled for the end of 2014 and is likely
to give a considerable boost to the high
street retail sector.
Nowy Swiat and Three Crosses Square
retain the position of Warsaw’s best retail locations. However, new international
retailers coming to the Polish market still
prefer to locate their stores in prime shopping centres rather than on high-streets.
The city centre, being a natural location
for high-street retailers, has also encouraged developers to build shopping centres in central areas. In 2007 ING RED fund
brought the Zlote Tarasy shopping centre
to Warsaw’s city centre retail market, which
created serious competition for the shopping streets. This, however, is the only regular shopping centre located in the heart of
Warsaw and has developed a synergy with
the other retail formats since its opening.
Along with the development of the retail market, Warsaw’s shopping streets are
forecasted to continue their evolution. It
is expected that new retail streets will be
formed, with Swietokrzyska being one of
them. As the second metro line is scheduled to be completed by the end of 2014,
Swietokrzyska is also about to undergo
a major refurbishment, as a consequence
of which it may retrieve its pedestrian character and attract both new tenants and
new shoppers.
Another location that may soon evolve
into a shopping area is the far end of
Marszalkowska, stretching from Zbawiciela Square to Unii Lubelskiej Square, an area
which does not yet resemble a high-street.
Other projects that are still in the planning phase, however, moving towards
reality include the redevelopment of two
department stores that historically were
the first of a kind in Warsaw – Sezam and
Smyk. Smyk, formerly known as CEDET will
offer retail units on -1, 0 and 1 floors and
can already be called successful due to
its established location as a retail destination. Sezam on the other hand, currently
referred to as Centrum Marszalkowska, is
planned to be demolished and rebuilt as
a mixed-use scheme with a comparably
well settled location for retail tenants.
Every year CBRE notes around 30 new
retailers enter the Polish market, the majority of which are choosing Warsaw as
their point of entry. Depending on the
brand’s strategy, there are those which
locate their stores in shopping centres
whilst others choose only high-street locations.
Having the right location for a shopping centre development is important. The question
is how can it be different from the competition? If you look what is inside, all centres
present similar offers. So, what else will attract customers, apart from special offers or
sales? These days modern shopping centres
must be comfortable and easy to shop in.
While designing a shopping centre we need
to remember about areas which are not for
rent but definitely will keep the customer
shopping for longer. These are kids’ corners
including toilets and changing rooms, medical help, pop up stores or resting areas with
a free to use wifi and ipad/smart equipment.
Some customers will appreciate a personal
shopping advisor or home delivery. A car
wash is a must as well. What else can we expect? Only time will show.
Adrian J. Heymans – President and CEO,
ECC Holdings Poland
Over the past decade, Pruszkow and its surroundings, have been dramatically growing,
however, until today it has been deprived
of modern retail facilities. October 2016 will
finally bring an end to this fact with the new
opening of Nowa Stacja Pruszkow. A modern
shopping centre offering quality, variety, fun
and entertainment to the local community.
F
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Poland
Investment
Poznan City Center
Retail investment
will be hot in 2015
Winston Norman
Poland’s retail real estate market
continues to attract strong investment
interest and, after a slight dip in recent
quarters, retail investment is set to
return and be the new story for 2015.
J
ames Chapman, Partner, Head of CE
Capital Markets at Cushman & Wakefield, commented: “Investors have
woken-up to the exceptional consumer
spending growth forecasts for the region,
and prices for quality schemes are increasing including those in regional cities. This is
causing sellers to consider bringing strong
centres to the market and so we expect to
see significant activity during the next 12
months.”
Moreover, Poland has moved away from
being a niche market and continues to mature into one of the core investment locations in Europe.
“Factors such as joining the European
Union and legislation changes, along with
the good macroeconomic conditions,
wider access to market data and advanced
broad market analyses are factors that
have helped Poland enhance its position
as a secure and stable market with strong
fundamentals,” commented Tomasz Trzoslo, Managing Director JLL Poland, Head of
Capital Markets Poland.
He continued: “Over time, Poland has
been attracting more interest and gaining
more trust from foreign investors. Now, it
is the key location for many international
players; offering both opportunities to further develop their investment portfolios,
and high liquidity. One of the key factors
enhancing Poland’s attractiveness on the
international investment map is the level
of transparency, which is now comparable
to Western Europe.”
According to DTZ, when analysing the
retail sector, it can be observed that the
majority of transactions concluded in
2014 involved schemes located in medium-sized cities (those of below 400,000
inhabitants).
Major retail transactions included: the
recently announced acquisition of Focus
Mall Bydgoszcz by Atrium European Real
Estate for €122 million from Aviva Investors, Poznan City Center purchased by
a consortium of Resolution and ECE Fund
from TriGranit, Europa Capital and PKP
in Q1, and the sale of Galeria Mazovia by
Lewandpol to CBRE Global Investors in Q2
(both for undisclosed prices).
The acquisition of Focus Mall is line with
Atrium’s strategy to become the dominant player in its core markets of Poland,
the Czech Republic and Slovakia through
the purchase of strong income producing
Poland
Investment
Multi’s Forum Radunia in Gdansk
shopping centres which complement the
company’s existing portfolio.
Focus Mall was originally developed in
2008 and is the dominant shopping centre
in Bydgoszcz. It comprises 41,000 sqm of
retail GLA across two storeys, which is currently 96.1 percent let.
Commenting on the acquisition, Rachel
Lavine, CEO of Atrium, said: “The acquisition of Focus Mall allows us to add another
dominant and modern shopping centre to
our income producing portfolio and is in
line with our strategy of acquiring established assets in the strongest economies of
the CEE region. It is highly complementary
to and further strengthens our existing
Polish portfolio and gives us another great
retail platform in one of our targeted toptier cities in Poland.”
Poznan City Center, opened in October
2013, is heralded as one of Poznan’s most
popular shopping centres and is located
next to the main railway station. The centre, totalling 58,000 sqm of retail space, is
occupied by 230 tenants such as TK Maxx,
Toys’R’Us, H&M, Saturn, Royal Collection,
Sportsdirect, Piotr & Pawel, Reserved and
many more.
CBRE acted as advisor to Resolution
Property and ECE European Prime Shopping Centre Fund on the purchase of
Poznan City Center. Mike Atwell, Senior
Director, Head of CEE Capital Markets at
CBRE, said: “This purchase confirms that
Poland is still a key target market for major European investors looking for prime
city centre schemes in major Polish cities.
Poznan City Center will become Poznan’s
landmark shopping centre and one of the
city’s most popular retailing destinations,
benefiting from its location next to the rail-
way station and having long term prestigious tenants.”
Europa Capital, on behalf of Europa Fund
III, and together with its joint-venture partners TriGranit Development Corporation
(TriGranit) and PKP (Polish State Railways),
successfully disposed of the mixed-use project to Resolution Real Estate Fund IV and
ECE Prime European Shopping Centre Fund.
The TriGranit developed shopping centre incorporates a new bus terminal and
railway station, creating a central transport
hub for the benefit of Poznan residents
and visitors alike.
TriGranit was chosen by PKP to revitalise
and renew Poznan’s main railway station
in 2007, following a competitive tender
process with several other real estate developers. In February 2012, Europa Capital
became TriGranit’s joint venture partner
for this public-private partnership project
where PKP contributed the land and the
Europa Capital/TriGranit joint venture contributed the necessary financial capital and
expertise.
Robert Martin, Principal at Europa Capital, said: “Poznan City Center is an excellent
example of how Europa Capital works for
its investors in combination with highly
experienced local partners to deliver exceptional assets, and then crystallises the
value created through sale to the institutional market.”
Arpad Torok, CEO of TriGrant Development Corporation, added: “We have
achieved an outstanding return for not
only our shareholders, but also for all our
joint venture partners. We developed the
main train station of Poznan in record time,
and construction of the shopping centre
was completed in 18 months.”
According to Cushman & Wakefield, the
acquisition of Galeria Mazovia indicates
growing investment activities in the retail
sector in medium-sized cities. The property
is a prime product being a well-established
and dominant shopping centre in one of
the most affluent cities in Poland.
The CBRE European Shopping Centre
Fund (ESCF), managed by CBRE Global Investors, acquired Galeria Mazovia at a yield
of 7.9 percent. The vendor was a private
investor. The 28,485 sqm shopping centre
located within Plock, was built in 2010.
The scheme represents the sixth shopping centre for the fund and a first transaction in Central Eastern Europe for ESCF
(taking the total ESCF asset under management to over €500 million).
Florencio Beccar, Fund Manager, ESCF,
CBRE Global Investors said: “Our acquisition of Mazovia means we have acquired
a core, low risk and well occupied centre
at an attractive yield. It is a great fit for
the fund’s portfolio – not only does it assist with our diversification requirements,
it means we have also obtained exposure
to Poland, one of the strongest markets in
terms of GDP growth expectations in Europe.”
He continued: “We are confident that
this scheme will perform well for our investors – the asset has a solid track record and
it combines a high income return with opportunities for rental growth as a result of
strong tenant performance.”
Martin Sabelko, Head of CBRE Global
Investors CEE added: “Poland has proved
to be a very resilient market during the recent economic downturn as it never went
into recession. It continues to have sound
economic fundamentals and prospects for
GDP growth making this acquisition a solid
asset for ESCF to have in their portfolio.”
He continued: “We are also very well
placed as a business to manage Mazovia. With more than €1 billion invested in
shopping centres and having them under
management in CEE since 2002, we have
an excellent track record of active asset
management. ESCF will also be able to leverage off the strong relationships we have
built with retailers in Poland over the years.
All these factors make this a solid first entry
for ESCF into the Polish market.”
The retail sector is expected to see
considerable activity in H2 2014 across
the country. Yields for prime retail assets
remained stable compared to values recorded at the end of 2013, with their level
at 5.75 percent and 6 percent.
Hungar y
Overview
WestEnd City Center
Turning point in retail market
Gary J. Morrell
Hungary was the first country in the
CEE region where modern shopping
centres were developed. However,
development activity has been severely
cut back in recent years as consumer
spending power and retail sales
have remained low, as a result of the
economic downturn and eurozone
crisis.
B
ut retail sales have now started to
improve with GDP growth of 2.5
percent expected for the year and
this improvement is likely to continue into
next year. January-August retail grew 5.2
percent year-on-year. However, when retail development will resume remains to
be seen with no official announcement of
new projects.
With no significant development since
the completion of the Allee shopping
centre in Buda by ING Real Estate in 2007,
shopping centre owners have been undertaking asset management of their
centres, including refurbishments and upgrading the tenant mix. This is in response
to rising demand from retailers looking to
either enter Hungary or expand their presence in response to improving economic
indicators. On the demand side the lack
of 500-1,000 sqm space in the best-performing shopping centres has put upward
pressure on rents. Developers in partnership with local authorities have also been
improving and developing the infrastructure of major high streets in the centre of
Budapest.
The last delivery was the 20,000 sqm expansion and refurbishment by ECE of the
Arkad shopping centre in Budapest, bringing the size of the development to 68,000
sqm, and making it the largest retail centre
in Hungary. In terms of CEE shopping centre stock, Budapest is now behind Prague,
Bucharest and Warsaw.
With economic concerns causing uncertainty among developers, investors
and lenders pipeline projects have still not
gone ahead. With no projects under construction the next shopping centre deliveries will not be until at least 2017, given
the development period. The next scheduled delivery is the 44,000 sqm Etele City
Center by Futureal. The planned scheme
is located next to the Budapest One business park adjacent to the terminus of the
recently completed Metro 4 line, located
on the western edge of Budapest. The development project is planned to become
a business and leisure hub that will include
Erika Pal – Head of Retail, JLL Hungary
There are positive signs with regard to retail
spending but no new development that
would refresh the retail market. If the construction of centres start in 2015 these will
not deliver until 2017-2018. The retail market
is still challenging because of this lack of new
development. Retailers want to locate to the
best shopping centres and it is not easy to
find the right 500-1,000 sqm units. Hungary is
still behind Poland and the Czech Republic as
a preferred retail destination when previously
it was the leading CEE destination.
retail and service elements. Work on the
retail component is due to start in the second half of 2015.
Hungar y
Overview
Arena Plaza in Budapest
The other Budapest pipeline project is
the 37,000 sqm Mundo shopping centre in
the Zuglo district of Pest by the Polish developer, Echo Investment. The two projects
have already received exemptions from
the restrictions on retail centre development introduced by the government.
Given the lack of new development,
shopping centre stock in Budapest remains stagnant at a little over 770,500
sqm in 25 assets, according to JLL. Shopping centre density stands at 443 sqm per
1,000 inhabitants. Strip mall and outlet
centres account for a further 196,000 sqm
in the capital agglomeration. The current
shopping centre stock outside the capital
stands at 540,000 sqm in 33 centres.
Against the background of limited development and increasing competition in
the capital’s shopping centre market, Budapest shopping centre owners have been
carrying out renovations in an attempt to
improve and modernise the design and
tenant mixes of retail schemes.
“Due to stiff competition among shopping centre owners and the increasing importance of e-commerce, redesigning and
refurbishments will gain in importance in
the future,” said JLL.
In general Hungary is the subject of increasing interest from both mass-market
brands and luxury retailers after a period
when Hungary was shunned by retailers
looking to expand. The best performing
centres: the 47,000 sqm Allee, the 66,000
sqm Arena Plaza and the 45,000 sqm WestEnd have waiting lists for tenants and
therefore are able to command the highest rents, according to CBRE. Outside these
centres a second tier of shopping centres
is also recording improved retail performance.
In response to demand, TriGranit have
undertaken an extensive upgrade of its
flagship WestEnd City Centre that opened
in 1999. With regard to tenant mix there are
now fewer small retail units and a greater
presence of large international brands.
Both the H&M and the Inditex Group
have expanded their units in Arena Plaza,
which opened in 2007, and is now owned
by Lanebridge Investment Management.
H&M have extended its clothing and home
furnishings outlet to two floors, and Zara
has now has a 2,500 sqm store. Over 30 of
the 200 brands in the centre are moving or
reconfiguring their existing stock.
Refurbishments are also being undertaken in the central high streets, such as,
the renovation of Vaci utca, which was
completed in April. This has connected the
southern and northern parts of the street
and an effort has made to improve the retail attractiveness of the southern part.
In the central retail area Zara Home is set
to open its first 900 sqm Hungarian store
on Fashion Street in central Budapest, the
prime retail area has been developed by
Immobilia. Fashion Street offers around
8,000 sqm of retail space and restaurants
on Deak ter and Becsi utca and is directly
linked to Budapest’s traditional high street,
Váci utca.
“This is another great milestone for the
high-street shopping area of Budapest and
for Fashion Street to secure such a prestigious and globally recognisable brand.
Entries such as these only reinforce the
market recovery and Zara Home will be an
excellent addition to the already popular
Fashion Street,” commented Viktoria Szabo, Head of Retail at Cushman & Wakefield
Budapest, who sourced the site for Zara
Home.
Viktoria Szabo – Head of Retail,
Cushman & Wakefield Hungary
There has been an improvement in the leasing market and an expansion mood on the
part of retailers with an improving economy.
The best performing centres are Arena Plaza,
WestEnd and Árkád in Pest and Mammutt,
MOM and Allee on the Buda side of the city.
With regard to the quality of shopping centres the tenant mix is on a similar level to that
in Western Europe with the leading centres
improving their tenant mixes and others undergoing refurbishment.
Prime Budapest shopping centre rents
vary between €50-80 sqm per month,
according to JLL. However, rents are significantly higher in some high performing
centres. Prime high-street rents for a 50150 sqm unit on Vaci utca are put at €80100 per sqm per month.
Retail per capita sales are 30 percent
higher in Budapest than the average for
regional cities, according to CBRE. Following the capital, Gyor, Szekesfehervar and
Szeged in the west and south of Hungary
have the highest retail sales growth.
Retail Guide 2014 51 Czech Rep.
Overview
Recently opened Brno Retail Park
Limited retail supply
despite high demand
Gary J. Morrell
The Czech Republic remains the second
most sought after retail market in CEE
after Poland. The outlook for the Czech
economy is relatively strong as growth
in spending power is estimated to be
close to 3 percent for 2014 year-on-year.
With GDP growth of around 3 percent
predicted for 2014, the Czech Republic
is successfully recovering from the
economic downturn. However, with
the exception of Prague and Brno, large
retail development is scarce for 2014
and 2015.
J
LL figures confirm that retail supply
is limited as the company estimates
that around 125,000 sqm of space will
be delivered this year, although this represents a 35 percent increase on 2013. “The
number of cities and locations with low
saturation and good purchasing power,
where it still makes sense to build a new
shopping centre is shrinking. Although
there are still a few locations in Prague
such as Smichov and Bubny, and in Brno,”
said Sylvie Samadi, Head of Retail at JLL in
the Czech Republic.
Total shopping centre stock in the Czech
Republic stands at 800,000 sqm in Prague
and almost 1,500,000 sqm in the regions.
Only 16,000 sqm is under construction in
Prague and 69,000 sqm in the regions, according to CBRE.
The biggest project delivered this year
is the 35,000 sqm CTP Retail Park Brno by
the Czech developer CTP. This is the first
first large-scale retail project by the prolific
Czech-based industrial and office developer. The park is located on a 26 hectare
site close to the intersection of the D1 and
D2 motorways. A recent letting has already
been concluded with the home furnishing
retailer, XXX Lutz. “Our future plans include
furniture, food, DIY and many other specialised stores, which will fit perfectly into
the overall concept of the retail park,” said
Ramon Vos, Managing Director of CTP on
the development.
Sylvie Samadi – Head of Retail,
JLL Czech Republic
Retail in Prague still provides opportunities
for growth as the retail density is not that
high in comparison to some other regions.
Taking into consideration the growing purchasing power in Prague and central Bohemia, we can expect a healthy appetite from
developers. There are still some development areas in the Czech capital where there
is potential for shopping centre development.
Czech Rep.
Overview
Na Prikope Street in Prague
The other major projects under construction are the 14,800 sqm Galerie
Frydek-Mistek by TK Development and the
8,500 sqm Quadrio in central Prague. The
€120 million Quadrio, by the Czech developer CPI, will be the only new Prague retail
development in 2015. The project is located in Prague 1 and the mixed-use development is due to open at the end of October
next year. The centre will consist of 16,000
sqm of offices, apartments and parking
in addition to retail in six inter-connected
buildings. CPI is a major developer in the
Czech Republic and already owns and operates a chain of shopping centres and retail parks in the country.
Otherwise there is no new shopping
centre development planned for next year
in the city. However, a number of the existing shopping centres are going through
renovations or planning extensions.
In terms of regional cities, the only new
major shopping centre development is the
20,000 sqm Aupark Hradec Kralove in East
Bohemia, which is due to open in 2016.
The developer of the project, HB Reavis,
has been granted a construction permit
and construction is set to commence before the end of the year.
Prague city centre is attracting a number
of retail developers reflecting the inter-
est in space being shown by retailers as
a number of refurbishment projects are
underway. This includes the Cross located
between Na Prikope and Vaclavske namesti. The strongest retail demand is being registered in Prague high streets where
additional developments around the main
streets of Parizska and Na Prikope are adding to the retail stock to accommodate the
higher demand.
“Current healthy demand is seen as focused on Prague, its high street and the
best performing shopping centres with
a proven track record, while the steady
inflow of new brands has enabled leading shopping centres in Prague to refresh
and upgrade their tenant mixes and secure new retailers,” commented Sylvie
Samadi.
Across the Czech Republic the level of
demand depends of the specific region.
The oversupply in some regional cities
could take two years to be absorbed, therefore demand in these regions remains very
low. “The most saturated cities in the Czech
Republic are Liberec and Olomouc, with
over 1,200 sqm per 1,000 inhabitants. On
the other had Usti and Labem and Hradec
Kralove with less than 500 sqm per 1,000
inhabitants, are the least saturated regional cities,” said CBRE.
However, demand for different retail
formats remains weak. The poor demand
is put down to the downsizing of many
concepts due to the growing e-commerce
market and a very limited number of new
market entries. Retail demand in outlet
centres is relatively weak as the number of
retailers operating outlet stores is still limited. The general strategy of retailers is to
only open one to two outlet stores in the
Czech Republic.
JLL put prime shopping centre rents
in Prague at €95 per sqm per month and
prime high-street rents in Prague at €180.
Demand combined with an undersupply
of suitable space is driving up rents.
With regard to the quality of stock, retailers are increasingly considering such
issues as controlled energy consumption,
environmental concerns and the development of ‘green’ shopping centres. Investment into higher standards of fit-out and
amenities is becoming a must in order to
satisfy the demands of tenants.
JLL does not expect any dramatic
growth in retail demand next year. The
majority of retailers that are active on the
Czech market are consolidating their networks by filling in the gaps or relocating,
based on performance.
Retail Guide 2014 53 Slovak ia
Overview
Bory Mall, recently opened in Bratislava
Positive economic indicators
attracting retailers
Gary J. Morrell
Although Slovakia is a small market the
country is attracting established CEE
developers such as Penta Investment
and Multi Development with projects
in Bratislava and its regional cities.
E
conomic indicators and spending
power for Slovakia are positive and
vacancy rates remain low for established retail schemes across the country.
The existing schemes are continuing to be
a target for retailers looking to enter the
Slovak market or expand their networks,
but due to low vacancy there are waiting
lists for the best performing centres and
for prime high street locations in Bratislava.
In the investment market J&T Real Estate acquired the Eurovea shopping centre
in Bratislava and investors are said to be
looking at the Slovak market as CEE retail
is increasingly popular with investment
destination.
“Confidence indicators in the first half
of 2014 showed that Slovakia’s economic
performance is significantly improving.
Consumer spending hit its highest levels in
six years, business sentiment is now above
its long-term average and Slovak exports
were supported by increased imports from
Germany. These positive developments
are reflected in improved GDP growth results as GDP is forecast be almost 3 percent,” said JLL.
These positive indicators are seen as improving activity on the demand side. “The
occupier market is witnessing several new
international retailers evaluating opportunities with a view to starting expansion
in the last quarter of next year. Consumer
spending is rebounding from the previous subdued environment, strengthened
by a healthier labour market and low inflation. The looser fiscal policy is also expected to benefit the market boosting
consumer spending in the second half
of the year and in 2015,” said Cushman &
Wakefield (C&W).
The major 2014 shopping centre delivery is the 54,000 sqm Bory Mall shopping
centre by the CEE developer and investment group, Penta Investments. The company aims to create a “new city district”
in the western outskirts of Bratislava. The
project was designed by the Italian architect, Massimilano Fuksas. A second phase
of the €300 million development will consist of office, service and residential space.
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Slovak ia
Overview
The project was financed by a consortium
of UniCredit, VUB, CSOB and Hypo-Bank.
However, Bratislava is still not regarded
as offering significant shopping centre
development potential as there is currently 528,000 sqm of retail space serving
a population of about 550,000 inhabitants,
according to some analysts.
“To date there are new retailers targeting the Slovak market and most probably
the trend will continue next year. Therefore, the new developments have the
critical mass to deal with retailers, but of
course there are limits. The Slovak market
is not big and new retailers are in general
considering the capital and then the main
regional cities for expansion,” commented
Christina Dumitrache, Head of Retail at
C&W Slovakia.
The other major projects under construction are in the regions. These are the
29,000 sqm City Arena Trnava and the
23,500 sqm Forum Poprad, both regional
schemes aspiring to dominate their respective cities. The projects are scheduled
to open by September 2015 and are said to
be around 70 percent prelet.
The €50 million Forum Poprad by the
prolific CEE retail developer Multi Development is set to deliver 100 stores, and
construction started in the spring after
several delays in the preparation process.
“Development in the current economic
situation is not easy, but when a new
scheme is a good project, occupiers are
interested and our persistence in this case
has paid off,” said Katarina Chadimova,
Leasing Manager at Multi Development
on the project. “Together with people who
demonstrated a great deal of patience and
tolerance over recent years, we are now
City Arena
looking forward to the opening of a new
project in a unique locality that will be
a place for meetings, shopping and entertainment.”
The other pipeline regional project is
the €76 million City Arena Trnava by the
retail and entertainment developer, Euro
Max in conjunction with the City of Trnava.
The development will deliver 110 stores in
a 23,000 sqm shopping centre and 4,700
sqm of street retail adjacent to a new football stadium with a capacity for 19,000
people for the professional football team,
Spartak Trnava. According to research by
the developers, the retail centre could attract 150,000 visitors who live within a 20
minute driving time.
The biggest investment deal for Central
Europe in the third quarter was the acquisition of the Eurovea shopping and office
centre in Bratislava by the Slovak developer and investor, J&T Real Estate from
Ballymore Properties, which completed
the centre in 2010. J&T are not planning
any further construction at the complex
located on the bank of the Danube, although a re-configuration of the tenant
offer could be considered. C&W expect
yields to remain constant at 6.75 percent
for retail compared to 7-7.25 for office and
8.50-8.75 for industrial. This is the first retail
acquisition in Slovakia since the purchase
of Aupark Zilina in 2013.
Further retail deals are said to be in the
pipeline with investors increasingly attracted to CEE retail with its strong economy, attractive yields and rents predicted
for Slovakia in 2015. “Investors recognise
the intrinsic value of well-located shopping centres and in the context of the
Cental European economy, this has one
Christina Dumitrache – Head of Retail,
C&W Slovakia
The products delivered, or set to be delivered,
to the market are following the latest trends
in innovative shopping centres, trying to
bring all sectors into the tenant mix including
an area dedicated for entertainment. The new
retailers who enter the market are mostly targeting the existing shopping centres due to
the fact that they can check the performance
of an existing centre rather than a new shopping centre. Of course, there are certain cases
when new retailers move to a shopping centre as their first stop.
of the highest consumer growth projections in Europe. This is combined with the
lower cost of capital and the value upside
potential is driving initial yields down to
historically low levels,” commented James
Chapman, Head of CE Capital Markets at
C&W on the potential of the retail investment market.
Developers are said to be planning new
retail projects in both Bratislava and Presov. However, none have been officially announced.
Romania
Overview
AFI Palace Cotroceni
Increased retail
delivery predicted
Gary J. Morrell
The Romanian retail market is again
moving forward, although in the
short-term delivery is limited. JLL
anticipate that 2015 supply will increase
to 190,000 sqm, reflecting growing
demand in Bucharest and regional
cities, where there is limited stock.
Total modern retail stock in Romania is
estimated at 2.5 million sqm, 35 percent
of this, or 890,000 sqm, is located in
Bucharest.
P
rior to the recession, which severely affected income and spending
power, Romania was a major retail
destination, with its several large cities
and limited modern retail provision. However, Romania is now recording positive
economic indicators and GDP growth is
expected to be as high as 3.5 percent for
2014.
Shopping centre development for 2014
has been relatively limited and focused on
Bucharest and undersupplied secondary
cities like Brasov and Timisoara, according
to JLL. In 2014 only 62,000 sqm will be delivered, the lowest level since 2005.
In the longer term, CBRE estimate that
over 350,000 sqm of modern retail supply
is expected to be delivered by the end of
2016, to a market that consists of around
2.8 million sqm of modern shopping centre space.
Two of the largest pipeline projects are
ParkLake and Mega Mall, both are located
in eastern Bucharest and construction has
already commenced on the projects. The
70,000 sqm ParkLake by Sonae Sierra and
Caelum Development is expected to be
delivered in 2016. Mega Mall by the Austrian developer Real4you group is expected
to deliver 75,000 sqm of space in the second quarter of 2015. With regard to existing stock the Anchor Grup has announced
that it intends to refurbish Plaza Romania
and Bucuresti Mall.
The leading retail and office developer
in Romania is AFI Europe. The company has
achieved a foot-fall increase to 55,000 visitors per day in the first quarter at its 80,000
sqm AFI Palace Cotroceni in Bucharest, according to the company. Adjacent to AFI
Palace Cotroceni AFI is developing the five
phase, 65,000 sqm AFI Park office complex.
In December AFI Europe will hand over the
fully leased AFI Park 3. The company plans
to complete AFI Park 4 and 5 by December
2015.
“In addition to managing AFI Palace
Cotroceni, the largest and most dominant
shopping mall in Bucharest, we have introduced such new brands as Mohito (LPP),
Desigual and others. We also have completed the first operational year at AFI Ploiesti,
with the opening of the Cinema City complex and Zapa entertainment centre,” said
David Hay, CEO of AFI Europe Romania.
Romania
Overview
Promenada Mall
David Hay – CEO,
AFI Europe Romania
AFI Europe has signed a major financing
agreement for €220 million with a consortium of banks comprising Deutsche
Pfanbriefbank, Erste Group Bank and Raiffeisen Bank for the refinancing of AFI Palace Cotroceni. “We appreciate the consortium’s trust in AFI Europe and in AFI Palace
Cotroceni, for granting such a significant
loan of €220 million. As the successful result shows, achieving financing in large
sums is possible in Romania, if it is for
a good project and an experienced developer,” commented David Hay.
The company is persuing a regional retail development strategy by developing
the AFI Palace B.Noi retail centre in Bucharest and outside the capital, AFI Palace Arad. The latest retail delivery was the
33,000 sqm, €50 million AFI Palace Ploiesti.
The centre was financed by Raiffeisen Bank
International.
In general, analysts see enough retail demand to meet supply. However, in the top
shopping centres demand is higher than
supply and this is starting to force up rents
for the first time since 2008, according to
JLL. Prime rents for shopping centres stand
at €60-70 per sqm per month. The highest
rents are achieved in the highest performing shopping centres in Bucharest.
Suitable sites on high streets remain
limited. “With regard to high street locations, with only a few exceptions such as
Sibiu, there are no quality options for international retailers in Romanian cities.
Ownership is fragmented and sometimes
even problematic, the infrastructure is not
suitable for retail (such as a lack of parking spaces) and retail spaces need more
investment. This is why there are few inter-
national retailers which have a significant
presence on the high streets. The Bucharest old town could change this situation
as H&M and Adidas have already opened
units here, but this will be a slow process,”
said Andrei Vacaru, Head of Research &
Consultancy at JLL Romania.
A further sign of growing confidence in
the Romania retail market is the conclusion
of what is described as the “largest single
asset transaction in Bucharest”. NEPI has
purchased the 38,000 Promenada shopping centre from Raiffeisen Evolution. The
retail centre was opened in late 2013 and
is located in the Floreasca business district
of the city. NEPI are prolific investors and
developers in Romania and it has also acquired a 70 percent share in the GLA Mega
Mall development, as well as investing in
several value-add retail assets.
Gijs Klomp, Managing Director of JLL
Romania, who advised Raiffeisen Evolution on the deal, commented that despite
the large ticket size of the centre several
international investors expressed a strong
interest in the asset. With strong economic
growth and a clear yield premium on Poland and the Czech Republic a prime shopping centre yield of 8 percent is attractive
to investors.
On the demand side, the tough financial
conditions from retailers such as requests
for fit-out contributions, pure turnover
rents and early termination options in addition to financing conditions are regarded
as the main obstacles to new development.
“Encouraged by strong economic
growth and the rise in consumption, retailers are likely to reconsider their cautious
We see consumer confidence improving in
Romania, which started during 2014 and this
will continue during 2015. Spending power
is on the rise. Retail space per 1,000 inhabitants is much lower than that in Poland, Hungary and the Czech Republic. In addition,
Bucharest, which has a population of close to
3 million, currently has only two major shopping centres and one of them is AFI Palace
Cotroceni.
Gijs Klomp – Managing Director,
JLL Romania
There are limited retail development opportunities left in Romania. In undersupplied
secondary cities like Brasov or Timisoara
there are already developers which have projects under construction. Given the significantly higher spending power, Bucharest can
still support some additional development
in selected locations. Currently both developers and retailers are much more cautious
when considering new projects and they
are looking at the fundamentals much more
carefully.
expansion plans in Romania. Given the lack
of new projects, those who consider opening new units are mainly looking at existing shopping centres with a proven, good
performance. The gap between demand
for prime and secondary stock continues
to be significant,” concluded Gijs Klomp.
April 23rd 2015, Radisson Blu Hotel, Bucharest, Romania
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Bulgaria
Overview
Retail sentiment is improving in Bulgaria, especially in its capital Sofia
Bulgaria’s retail market
sustains upward trend
Elie Issa
Bulgaria’s retail market has rebounded
this year, lifted by rising consumer
demand, improving retail sales, higher
FDI and strengthening macroeconomic
dynamics. Furthermore, the inflow
of foreign direct investment (FDI) to
Bulgaria rose 4 percent year-on-year to
€1.22 billion in January-August 2014,
preliminary central bank data showed.
The eight-month FDI figure accounted
for 3 percent of 2014 GDP projection.
A
ccording to the preliminary seasonally adjusted data from Bulgaria’s National Statistical Institute,
turnover in retail trade increased by 0.4
percent in August compared to the previous month. The combination of these factors clearly highlight the rising trend of
new retail space delivery in Bulgaria, and
especially in the capital, Sofia.
Retail space for rent in shopping centers in Bulgaria is expected to increase by
19 percent in 2014, from the 735,000 sqm
at the end of 2013, according to industry
estimates. The recent opening of Mega
Mall Sofia lured thousands of visitors on
its opening day. Austria’s Real4You group
is the investor in the project, built in the
Lyulin residential district, on the western
outskirts of Bulgaria’s capital. ECE Bulgaria
will manage the facility and lease out commercial space to retailers.
Mega Mall features over 100 shops, restaurants and cafes spread over 24,000 sqm.
Visitors will be able to shop in high-end
outlets like Benetton, DM, Deichmann, Reserved, Cropp, Sport Vision, Grouppofiori
Techmart and Hippoland, among others.
The new mall will also have many new re-
Bulgaria
tailers, which are entering Bulgaria for the
first time. New retailers include Austria’s
Billa hypermarkets and consumer electronics retailer Techmart. Due to its location visitors can easily reach Mega Mall by
the Sofia underground railway or by other
means of public transport and it is also easily accessible by car.
Another commercial deal, indicative of
Bulgaria’s recovering retail market, also
took place recently. City Center Sofia has
acquired been by Revetas Capital Advisors LLP and will be renamed Park Center.
The plans of the new owner are to add the
mall to the retail chain Park Centers, which
currently includes 12 shopping centers in
Central and Eastern Europe, with a total
area of 124,000 sqm. Radu Boitan, senior investment director
of Revetas Capital Advisors, said the company plans to entirely renovate the mall
and update its tenants mix. The acquisition
of City Center Sofia is one of several the
company is planning in Bulgaria, he added.
Another retail development to be inaugurated in November this year is the Sofia
Ring Mall. Together with IKEA, the mall will
be the largest in the country with a total
lettable area of 100,000 sqm. Given its key
location and easy access it will become the
paramount shopping center of Western
Bulgaria, according to industry experts.
The Sofia Ring Mall is part of a much
larger project dubbed the Sofia Ring Development. The latter also includes a large
business area with office buildings, sports
facilities, a hotel and a park with a lake. The
TZUM Shopping Center
investment will be over €50 million. The
final stage of the entire project will also
include the building of a residential area
including 500 apartments and houses with
a total investment of more than €70 million.
Roughly 5,000 people will live and work
in the Sofia Ring Development after its
completion. The multi-use complex will
boast all modern requirements for energy
efficiency, and green areas will occupy
about 30 percent of the total area of the
project.
The Sofia Ring Development will have
a total cost of more than €300 million. The
investment comes from the Greek companies Fourlis Group, which manages IKEA’s
franchising in Bulgaria, and the Danaos
Group, which is specialized in the shipping
industry. It will be the largest mixed-use
project in Bulgaria, spread over an area of
400,000 sqm near the southern arc of the
ring road between Simeonovo and Bistrica.
Investment into commercial property
in Bulgaria increased by 60 percent yearon-year to €98.7 million in the first nine
months, according to data from real estate advisers Forton. Michaela Lashova,
managing partner at Forton, explained
that capital inflow has been growing during the period under review, pointing to
the quickening market recovery. “We hope
to see deals in large assets in the coming
months,” Lashova said, adding the number
of deals concluded in the period JanuarySeptember has doubled compared to the
corresponding period of 2013.
Overview
Forton’s July forecast of €130 million investmented in commercial property in Bulgaria for 2014 could be exceeded, she noted. Land plots and office spaces have been
among the market segments showing the
biggest growth dynamics, but retail and
hotels have also been attracting increased
investor interest, according to Forton.
Another factor boosting private consumption and, consequently, retail turnover in Bulgaria is the fact that remittances
from the Bulgarian diaspora are also growing. Remittances reached circa €2 billion in
2013, according to the World Bank.
But the most interesting trend is that despite the expanding network of shopping
centers in Sofia, demand and occupancy
remain on the rise. During the first half of
2014, the well-established shopping projects in Sofia maintained high occupancy
levels exceeding 97 percent, according to
Colliers International. The newly opened
schemes also maintained occupancy at
above 85 percent. For the same period, the
retail space absorbed in Sofia only exceeded 4,500 sqm, Colliers noted.
In the first half of the year, major international brands expanded into the Bulgarian retail market. The list includes Alcott,
Springfield, Cortefiel and Womens’ Secret,
among others. According to a recent Colliers Retail Sentiment Survey, retailers are
positive about the Bulgarian economy
growth and retail sales dynamics. Nearly
81 percent of the surveyed companies reportedly plan to open new stores in 2014.
Bulgaria is also among the world’s most
preferred outsourcing destinations and
the only European country in the top 10
list of most attractive countries for such activities, according to A.T. Kearney. Bulgaria
is in ninth position among 51 countries in
the world and up eight positions on the list
since 2011, when the previous survey was
done.
According to Stefan Bumov, Chairman
of the Bulgarian Outsourcing Association,
quoted by Mediapool.bg, this was an important recognition of the efforts of Bulgaria’s outsourcing industry, and its contribution to the economy. In 2013 the turnover
of Bulgaria’s outsourcing sector reached
circa €0.8 billion and has increased by 60
percent in the past four years. The sector
currently hires 20,000 people, and in the
next few years their number is expected
to increase four times. The index takes into
account 39 criteria in three categories – financial attractiveness, business environment and human resources.
Retail Guide 2014 63 Croatia
Overview
Ilica Place by Agroker
Economic recovery
needed to boost
retail in Croatia
Gary J. Morrell
Croatia has attracted
a significant amount of retail
development in recent years, and
a number of projects are at various
stages in the planning process.
However, after recent deliveries in
Zagreb the feeling is that the capital
of a small country going through
an economic crisis is approaching
shopping centre saturation. Overall,
the Croatian market is described as
challenging with limited development
activity across the different sectors.
In
general Croatia is not expected
to benefit from EU accession
until there is an improvement in
the economy. However, there are develop-
ment possibilities on the Adriatic coast, in
the larger regional cities that attract a significant influx of tourists and several retail,
leisure and residential projects that are at
the planning stage.
Although GDP growth is expected to
move into positive next year, after a period
of negative growth, concerns remain over
unemployment that stands at 21 percent.
“After a decreasing, and later stagnating trend, influenced by high unemployment and lower purchasing power, retail
trade recorded a 1.3 percent year-on-year
growth in April. This demonstrates an improvement in the market which is expected to continue throughout 2014,” said JLL.
With regard to supply the most significant recent delivery is the first 30,000 sqm
phase of the Supernova shopping centre
in the Buzin district of Zagreb. Tenants at
the complex include Interspar, C&A, Deichman and Muller. This is the 7th Supernova
centre opened in Croatia by the Grazbased Supernova Holding.
The largest ongoing development in Zagreb is Ilica Place, a 50,000 sqm shopping
centre by the Croatian developer Agrokor.
The complex is located in the centre of
Zagreb, which is naturally a major retail
destination. According to CBRE, the centre should benefit from its prime location
and the estimated 220,000 people passing
through the area on a daily basis.
In the retail warehouse sector IKEA has
delivered the first 38,000 sqm Croatia IKEA
store in Rugavica, east of Zagreb, but development of a shopping centre and retail
park has been postponed at the complex.
According to IKEA, 2,500 customers entered the store in under two hours at the
opening of the complex, where €100 million has been invested. According to Igor
Stefanac, PR Manager for IKEA in the SEE
region, the company is considering further outlets in Croatia. “In the long-term it
is possible to potentially see stores in Split
and Rijeka, beside the planned stores in
Belgrade and Novi Sad in Serbia.”
Retail sales that hit a low in 2013 have
had a downward influence on shopping
Croatia
Overview
Jens Moller Madsen – Senior Partner,
MOMA Consulting
Croatia has to rise out of recession and start
attracting inward investment. People are unhappy with the current government because
nothing positive has been happening. From
an investment perspective there is red tape
everywhere. However, this would not prevent
investors coming in if they could see a big
enough return on their investment. Investors
need to look at the different sectors, for example a few years ago developers wanted to
open outlet centres everywhere, but this was
obviously too much. In general building owners need to manage their buildings in a way
that directly services their clients.
centre and high-street rents, according to
JLL. “Due to the economic conditions, falling disposable incomes as well as market
saturation, prime retail rents have fallen
since 2007. Currently, rents in prime shopping centres in Zagreb range between
€20-22 sqm per month, while prime high
street rents range between €60-85 sqm
per month.”
Outside Zagreb there are ongoing developments in secondary cities on the Adriatic
coast. In Split, development of the 50,000
sqm Mall of Split is still progressing two
years after the foundation stone was laid,
and there is now a scheduled completion
date of April 2015. According to the German developers, Tulipan Grupa, 250,000
inhabitants live within 10 minutes of the
development, an annual 1.4 million tourists
use the airport and an annual 4.1 million
passengers pass through the ferry port.
The complex will contain around 200 stores
and has been awarded LEED accreditation.
The centre will be managed by ECE. Tulipan
Grupa operates in Croatia, Serbia and Bosnia and aims to bring expertise from Germany to developments in the area.
According to Patrick Francolic, Managing Director of Spiller Farmer Croatia, there
Mall of Split
is a lot of interest in the project from retailers. “In general there is a lot of interest in
the Adriatic coast from the retailer side,
and we are focusing on Istria where we
see a lot of potential, high spending power
and a long summer season,” he said.
Another development with a high leisure component on the Adriatic coast is the
40,000 sqm GLA Riviera Centar in Opatija
by the developer BOP Immodevelopment
in conjunction with the investor, M.O.F
Immobilien. According to CBRE, exclusive
letting agents on the development, the
complex will deliver 29,000 sqm of retail,
5,000 sqm of leisure, 7,000 sqm of hotels
and 2,000 sqm of medical service space.
The retail space will be anchored by a hypermarket, sports and fashion outlets. The
complex is located 15 km from Rijeka, the
third largest city in Croatia, and the complex is due to be completed in 2016-2017.
Aside from the economic downturn another concern from a development perspective is that Croatia has a reputation
for bureaucracy and unpredictability that
can make development expensive and
time consuming. Zlatko Greguric, Principle Banker for Property & Tourism at EBRD
Croatia argues that bureaucracy and red
tape is deterring foreign developers and
investors.
“We already have the structures in place
to create a development and investment
market but companies come up against
bureaucracy and red tape. However the
structure is not being properly implemented in the key areas of urban planning and
permitting. It comes down to the human
and local administration level, which are
not implementing and delivering these
changes,” he commented.
The economic downturn has hit spending power across the retail market, affecting demand. Developers and investors
are in many cases waiting for signs of an
economic recovery before going ahead
with projects. “The market will take time
to stabilise and the problem is that buying
power is still not picking up, so it will take
time until the market performs as it did in
2008-2009. As soon as the economy picks
up we will feel its affects in the real estate
sector,” concluded Patrick Francolic.
Patrick Francolic – Managing Director,
Spiller Farmer Croatia
There is a lot of interest from retailers on the
coast in Istria and coastal cities such as Pula,
Split and Dubrovnik. The problematic areas
are in eastern Croatia and Slavonia. Here we
have seen a lot of downward pressure on
spending power, and so consumption is
relatively low. In Zagreb it really depends on
the micro-location, there are a lot of existing
shopping centres and we see fluctuation in
the different centres as retailers change from
one centre to another.
Retail Guide 2014 65 Serbia
Overview
Usce shopping centre in new Belgrade
Lack of retail product
to meet demand from retailers
Gary J. Morrell
There have been no new shopping
centre completions in Belgrade since
the delivery of Stadion Vozdovac in
2013 and today’s major development
trend is for the construction of retail
parks around the Serbian capital and
in secondary cities.
A
lthough vacancy rates in prime
Belgrade retail assets remain below 5 percent, due to a combination of strong retail demand and the lack of
new supply, the protracted planning process, legal issues, the difficulty of sourcing
finance and economic concerns are issues
that are deterring developers.
This unpredictability in the development
process and possible corruption can make
development expensive and time consuming. As a result there are several shopping
centre developments in Belgrade at the
planning stage with no scheduled construction schedule.
“The demand for retail is there but the
problem is with the development process,
and the costs incurred. There are three existing shopping centres and the city could
cope with six or seven provided they were
built over a sensible time period. The thing
that is preventing development is the planning situation. The fundamentals would
work in terms of supply and demand levels
but there is no supply and the issue that is
preventing developers is the uncertainty.
There are too many issues at play in buying
a site, and getting the permissions,” com-
mented Andrew Peirson, Managing Director of JLL Serbia.
On a positive note proposed EU membership should benefit Serbia from a trade
and economic perspective. In addition the
government is attempting to rationalise
the planning and legal processes as EU accession talks have started and the Serbian
government is undertaking measures to
change the business and legal environment in order to comply with EU norms.
Analysts argue that the development
process needs to be simplified in addition
to the establishment of a more reliable judicial process. EU accession could lead to
an improvement of the judicial and legal
system in Serbia, which would improve the
development and investment climate in
the long term. Although from an international perspective Serbia still lacks much of
Serbia
Overview
Andrew Peirson – Managing Director,
JLL Serbia
Belgrade Waterfront project
the institutional and judicial transparency
which is crucial to providing an exit strategy that attracts investors and developers.
Despite economic concerns GDP growth
is expected to be around two percent for
2015 despite the worst flooding in over
a century that has considerably lowered
growth for the year. Another problem is
that unemployment now stands at around
20 percent.
With the delivery of the 30,000 sqm Stadion Vozdovac by Eurobau Connect there
are now essentially four modern shopping
centres in Belgrade. In addition to Stadion
the existing stock consists of the 46,000
sqm Usce centre by MPC Properties, the
30,000 sqm Delta City development by
Delta Real Estate and the 22,000 sqm Mercator Center. The three developments are
all located in New Belgrade.
Belgrade sits in last place in Europe with
regard to shopping centre space per 1,000
inhabitants, according to JLL. “The prime
shopping centre stock remains at 128,000
sqm, indicating the need for new development. As the existing modern shopping
centres do not provide sufficient space to
satisfy rising demand from international
brands, many retailers have become more
interested in signing for premises in expanding retail parks,” said JLL.
CBRE put Belgrade modern retail stock
at around 230,000 sqm serving almost two
million people. “Due to the limited offer,
Belgrade rarely sees any vacant space in
the prime shopping centres,” said CBRE.
In a major development for Belgrade,
the Belgrade Waterfront project is planned
to “change face of Belgrade”. The Abu
Dhabi-based developer, Eagle Hills and
the Serbian prime minister Aleksandor
Vicic have unveiled plans for the €3 billion Belgrade Waterfront (or Belgrade on
Water) urban development project along
the bank of the River Sava in Old Belgrade.
The Serbian Prime Minister described the
scheme as creating a business and tourism
hub for the Western Balkans. According to
the development plans, the urban redevelopment project will include offices, luxury
apartments, hotels and the biggest shopping centre in the SEE region.
The project is seen as activating the potential of the Belgrade waterfront and creating an urban centre. Development is due
to begin in February 2015 and the scheme
forms part of a wider trade cooperation between the Serbian and UAE governments.
In general finance is being provided from
the Dubai side and Serbia is providing the
land.
The primary Belgrade high street zone,
Knez Mihajlova, and the surrounding
streets are attracting international brands.
The zone has the heaviest footfall in the
city and retailers include Zara, Mango,
Nike, Hugo Boss, Max Mara, and Carpisa.
On the demand side the Serbian market
is considered to be attractive by international brands which are looking for suitable
locations for their outlets. JLL put rents in
prime Belgrade shopping centres at €60 per
sqm per month compared to prime high
street retail rents of €80 per sqm per month.
The limited stock of modern shopping
centres in conjunction with high demand
has led to a growth in retail parks across Serbia. In 2014 two retail parks were delivered,
We are witnessing almost no development in
Belgrade whether that is retail, office, industrial or residential development. The result is
a waiting list of retail tenants for the capital’s
shopping centres. There are a number of
reasons for this. Firstly, development financing is a clear issue, with banks struggling to
provide the sufficient level of debt needed
for construction to commence. Secondly, the
entire planning and tax system is still far from
smooth with the government still unable to
rectify issues surrounding land conversion
and land development fees.
namely the 9,800 sqm Capitol Park in Sabac
and the 10,000 sqm Vivo Shopping Park in
Jagodina. The biggest ongoing project in
Belgrade is the 15,000 sqm Retail Park Zemun by the Israeli IBC. In addition Aviv Arlon is planning an 11,000 sqm retail park.
On the demand side Jonathan Hallett,
Head of CEE Retail at Cushman & Wakefield, sees a lack of depth in tenant demand. “A lot of the retailers are franchises
and therefore they rely on local economic
conditions and it can be difficult to provide
guarantees for prelease agreements with
developers. Therefore it can be difficult for
developers to meet prelease requirements
from banks,” he commented.
There are a number of shopping centres
at various stages in the planning stage in
Belgrade, although the schedules are uncertain reflecting the unpredictable development process in Serbia. These include
the 40,000 sqm Visnjicka, the 30,000 sqm
Ada Mall by GTC, the 34,000 sqm Napred
Bloc 41 and the 65,000 sqm Delta Planet by
Delta Real Estate. Miodrag Gazibara, Leasing and Sales Director at Delta Real Estate,
comments that they have the preleases
needed to go ahead with their project but
freehold and land-use issues with the Belgrade authorities are holding up development.
Retail Guide 2014 67 Russia
Quotes
Florian Schneider – Moscow Office Managing Partner, Dentons
The Ukrainian crisis, subsequent sanctions against Russia and economic instability have caused many companies to postpone or cancel their investment
projects, resulting in a slowdown in business activity in the investment market.
Investments have been reduced by nearly 50 percent in 2014 in comparison
with last year. At the same time key players on the Russian real estate market
continue to show interest in real estate investment opportunities, particularly
those involving high quality properties and development projects. This year
investors preferred indirect investments and mainly focused on real estate located in Moscow. The largest volume of investments goes to the hotel sector,
using the opportunity of limited supply of quality lodging facilities, and to the
retail sector, as most retailers have not cancelled their ambitious expansion
plans. Considering Russia’s huge potential for real estate development, high
returns on investments and provided the economic and political challenges are
not long term, the investment level will rise in 2015.
Julia Sokolova – Retail Center Leasing Director, Knight Frank
The commercial sector of the Russian real estate market, as well the national
economics in general, are influenced by the current geopolitical tension and
sectoral sanctions. Many developers have to reassess their business plans and
now focus mostly on the sites with favorable locations. Shopping centres under construction are struggling for tenants. For now some foreign and national
operators have stopped or limited their activity in the Russian market. However,
there are some new ones approaching the market – since the beginning of
2014 about 20 foreign brands have come to Russia. Up to the present time
transport interchange hubs remain the additional drivers for retail market
growth. In terms of further governmental support these facilities will enable
retail objects to profit as a part of their structure.
Maxim Karbasnikoff – Partner, Head of Retail, Cushman & Wakefield
Russia continues to dominate the European retail market, contending for the
largest European shopping center market title. From the beginning of 2014, 28
new shopping centers with a total GLA of 964,721 sqm were delivered, with 2.6
million sqm of shopping center space is scheduled to be delivered in Russia in
2014 and 2015. Major developments are concentrated in Moscow including
what will be Europe’s largest shopping center, Avia Park (235,000 sqm) in Moscow and Columbus shopping center. However, this year is the year of economic
instability, low GDP growth, decreasing consumer demand and the weakening
rouble. Occupiers are increasingly under pressure and have significantly slowed
down their development plans. Therefore we foresee growing vacancy and decreasing rents in the coming 12-18 months.
Maxim Novitskii – CEO, Altera Invest
A significant decline in the volume of investment is taking place on the Russian commercial real estate market. Rates for the first half of 2014 are 60 percent
lower than for the same period in 2013. Investment capital and potential exist,
but because of the unclear political situation and expectations of a new wave of
the crisis in Russia, investors are delaying decisions, and waiting for clarification.
If the average transaction used to take months, now it takes about a year. But
no one is leaving the market, all participants are planning to continue to work,
and to invest. Investors watching the market, are waiting for good projects and
the right moment for investment. Once the situation is stabilized, investment
capital will be implemented. We have witnessed a decrease in the volume of
interest from Western investors. Most likely, their part will be replaced with Middle and Far Eastern money, actively looking at the Russian market.
Russia
Quotes
Stanislav Bibik – Executive Director, Head of Capital Markets, Colliers International
Russia
One of the key value drivers for the retail segment is the vast shortage of
quality shopping centres in Moscow and other large Russian cities. There is
about 352 sqm of quality retail space available for 1,000 people in Moscow,
which is only half of what is available in other Eastern European capitals such as
Warsaw and Budapest. The vast shortage of quality retail space has helped to
maintain vacancy rates below 3 percent in Moscow for the past 10 months. The
Russian retail segment has continued to attract investors despite the negative
external factors, which have caused some short-term slowdown in the overall
investment activities. We believe that as soon as external factors will fade away
we will observe major investment inflow into the Russian retail segment.
Mikhail Rogozhin – Managing Director of Retail Department, CBRE, Russia
The Russian retail property market is under pressure from the weakening
demand against the background of high new delivery of retail space (0.6 million sqm in Moscow; 2 million sqm – in Russia). Additional negative sentiments
are brought by sharp rouble depreciation, which is especially uncomfortable
for the competitiveness of international players. As a result, newly delivered
schemes experience difficulties with the formation of their desired pool of tenants and are forced to offer 10-15 percent discounts compared to the effective
rental rates in the established shopping destinations. New entrants remain very
active: 29 international retail chains arrived in Moscow in 2014, attracted by
high purchasing power and better achievable commercial terms. However, it
is not enough to generate enough demand: the vacancy rate in Moscow is
expected to increase from 2.6 percent in 2013 to 5-6 percent by the end of
2014. We expect that sentiment will start improving in the late Q1 – Q2 2015,
especially if sanctions against Russia will have been removed.
Vladimir Ivanov – Managing Partner, Spectrum
In light of the current travails on the world economy, leading Russian real
estate players are changing their development strategies by choosing quality as the cornerstone of their development projects. These trends also show
that the Russian commercial real estate market has reached a certain degree
of maturity and is ready to offer a product corresponding to the highest global
standards with a better return on investment to Russian and foreign investors.
According to expert estimations, in 2014 the amount of foreign investment in
the Russian real estate market will come to nearly $3 billion, while the average
real estate investment return will come to 28-35 percent. These figures form
sound grounding and forecast that a period of decreased activity shall bring
forth projects with new investment quality, which are appealing to even the
most conservative market players.
Tom Mundy – Head of Research, JLL Russia & CIS
The Russian retail market faces significant headwinds due primarily to
a combination of slowing wage growth, rising inflation and a weakening rouble. Whilst we believe that these issues will weigh on demand in the shortterm, we remain confident that Russian retail remains fundamentally attractive
to investors due to both the size of the consumer market and the lack of quality
shopping centre stock. Moreover, taking a longer term view we believe that the
current market pressures will provide an impetus for Russian retailers to source
stock from local manufacturers, which will support more stable growth in the
future, with less of a reliance on imported goods. Furthermore, with traditional,
western lines of finance increasingly difficult to access, we believe that developers and owners will benefit from access to new sources of capital, such as
from Asia and sovereign wealth funds.
Retail Guide 2014 69 Russia
Overview
Kuntsevo Plaza, one of the latest retail offerings in Moscow
Moscow leads by volume
of shopping centres
but vacancies on the rise
Winston Norman
Russia has the highest European
shopping centre pipeline for 20142015. Newly completed retail projects
in the Moscow region could deliver up
to 1 million sqm of new space by the
end of 2014. However, due to wider
geopolitical issues, a slowdown in retail
demand is causing increased vacancy
across the city and its region.
A
ccording to the latest research from
CBRE, a key feature on the Moscow
retail market is a further decrease
in consumer activity. From the middle of
Q2 2014, the average footfall in Moscow’s
shopping malls began to show a negative
trend. This has particularly affected largescale shopping centres.
“In the next couple of quarters retailers
will suffer from the impact of the ongoing
slowdown of business activity and sharp
devaluation of the rouble, which occurred
in Q3 2014,” commented Michael Rogozhin,
Managing Director of the Retail Department at CBRE in Russia. “This problem will
mostly affect players focused on imports.
Thus, newly constructed retail schemes will
experience an even greater slowdown of
demand from tenants. Already established
and popular shopping malls may also face
Russia
Overview
The average vacancy rate of Moscow’s modern shopping malls in Q3 2014 was 3.8 percent
increasing challenges, as profitability of
tenants may go down. The average vacancy rates for the year may exceed 5 percent
and the competition between shopping
centers will become more acute.”
According to Colliers International, in
the first half of 2014 the volume of quality space on the retail real estate market of
the Moscow region increased by 307,780
sqm and reached a total of 4,519,800 sqm.
By the end of the year Moscow and its
surrounding suburbs could see another
750,000 sqm of new space. Even if only
half of the space announced is opened on
time, 2014 will be a record year for volume
of new retail space over the past 10 years.
A total of seven shopping centres
opened in Moscow during the first half
of 2014, including Vegas Crocus City (GLA
– 111,400 sqm), GoodZone (56,000 sqm),
Vesna (56,000 sqm), Reutov Park (41,000
sqm), Moskvorechye (16,500 sqm) and others. Meanwhile, Russia’s regions saw the
opening of eight new retail properties, including Torgovy Park (55,000 sqm) in Tver,
Kaleidoscope (42,000 sqm) in Novosibirsk,
the 4th phase of Greenwich (40,000 sqm)
in Yekaterinburg and Emerald City (33,000
sqm) in Tomsk, among others.
In this way, Russia continues to dominate the European retail market, contending for the largest European shopping
centre market title. From the beginning of
2014, 28 new shopping centers with a total
GLA of 964,721 sqm were delivered, with
2.6 million sqm of shopping center space is
scheduled to be delivered in Russia in 2014
and 2015.
“Major developments are concentrated
in Moscow including what will be Europe’s
largest shopping center, Avia Park (235,000
sqm) in Moscow,” commented Maxim Karbasnikoff, Partner, Head of Retail, Cushman
& Wakefield. “However, this year is the year
of economic instability, low GDP growth,
decreasing consumer demand and the
weakening rouble. Occupiers are increasingly under pressure and have significantly
slowed down their development plans.
Therefore we foresee growing vacancy
and decreasing rents in the coming 12-18
months.”
The decline in consumer activity has led
to a shift in demand towards community
and neighbourhood format shopping centres. At the same time there is a demand
from new international chains. During Q3
2014, 11 new international brands opened
their first stores in Moscow, which is the
highest number this year. All in all, 29 new
international chains entered the Moscow
market in the first nine months of the year
and 10 more new brands could enter the
market by the end of this year.
This activity is taking place in an environment where players that are already present in the market are slowing down their
business due to apprehension of negative
influence of current geopolitical problems
on customers demand. For example, the
German sports clothing and shoe chains
Adidas and Reebok plan to open 80 new
stores in 2015 instead of the previously
planned 150. American retailer Columbia
also expects a possible reduction of exports to Russia. Moreover, American fast
food chain Wendy’s announced plans to
leave the Russian market by the end of the
year. The main reason is the high level of
competition. As a result of the worsened
business indicators, the South Korean
electronics chain Samsung has decided to
close more than 20 percent of its existing
stores in Russia.
“Although some foreign and national
operators have stopped or limited their
activity in the Russia, there are some new
ones approaching the market,” commented Julia Sokolova, Retail Center Leasing
Director, Knight Frank.
CBRE’s Mikhail Rogozhin continued:
“New entrants remain very active. Retail
chains are attracted by high purchasing
power and better achievable commercial
terms. However, it is not enough to generate enough demand: the vacancy rate
in Moscow is expected to increase from
2.6 percent in 2013 to 5-6 percent by the
end of 2014. We expect that sentiment will
start improving in the late Q1 – Q2 2015,
especially if sanctions against Russia will
have been removed.”
With most retailers apparently not cancelling their ambitious expansion plans,
companies like IKEA Shopping Centres
Russia (IKEA SCR) has announced details of
its brand new food court concept and mall
extension plans, which are set to attract
a raft of retailers and western restaurant
operators to its MEGA branded malls.
Plans released for the MEGA Teply Stan
and MEGA Khimki shopping centres, both
located in Moscow, and for MEGA AdygeaKuban located in southern Russia, demon-
Russia
Overview
The total stock of modern retail space in Moscow reached 4,456,000 sqm or 367 sqm per 1,000 inhabitants
strate the ambitious changes being undertaken at 12 of IKEA SCR’s 14 malls.
The company plans to invest more than
GBP300 million in the extension of the
two Moscow MEGA malls and the regional
MEGA Adygea-Kuban.
IKEA SCR believes the commercial upgrade programme will ensure it maintains
its market leading position, and continues
to attract international retailers seeking
a “safe entry platform” into Russia. Armin
Michaely, IKEA Shopping Centres Russia’s
General Director commented: “We are creating the best possible environment for
our current and new food court tenants,
and our visitors. Food and beverage is becoming an integral part of Russian families’
visits to shopping centres, with the popularity of dining out at branded outlets, and
interest in foreign cuisine rising. A key goal
of our commercial upgrade programme is
to deliver the best choice and quality for
our customers, while making food areas
destinations for socialising and relaxing,
and an attraction in themselves,” he explained.
“We are looking to make MEGAs the
first choice dining destination within their
local communities. Taking MEGA Khimki
as an example, there are 300,000 people
living within close proximity to the shop-
ping centre – we want these people to
choose MEGA when they eat out, and that
is a key reason why we are making such
major additions to our food offering,” he
continued.
Michaely also explains that the MEGA
mall extensions are a result of the Russian
consumer’s huge appetite for all types of
retail, and particularly fashion. Last fiscal
year MEGA Shopping Centres were visited
by 261 million people, a year on year increase of 3 percent, while over the last five
years footfall has increased by 30 percent.
In the first half of 2014 the average
lease rates for retail space in Moscow did
not change substantially, as a number of
shopping centre owners declined to index
rates in reaction to currency exchange rate
fluctuations. The average vacancy rate for
space in quality retail centre at the end of
the first half of the year was 2.8 percent.
A total of 13 modern retail centres have
been announced for completion in Moscow in the second half of 2014, including
such malls as Avia Park (224,800 sqm), Columbus (140,000 sqm), Mozaika (68,000
sqm) and Kuntsevo Plaza (58,900 sqm),
among others. A number of major retail
projects are also planned for opening in
regional centres as well, including Nebo
(75,000 sqm) in Nizhniy Novgorod, Plan-
eta (73,000 sqm) in Novokuznetsk, Lotus
Plaza (63,000 sqm) in Petrozavodsk, Europolis (61,000 sqm) in St. Petersburg and
others.
Anna Nikandrova, Regional Director,
Head of Retail Real Estate Department at
Colliers International Russia, pointed out:
“The launch of Avia Park, the largest shopping centre in Europe, as well as Columbus
will allow Moscow to climb to fifth spot
in the ranking of Russian cities, according
to retail space per capita. If the ambitious
plans of regional developers are brought
to life, then St. Petersburg will give up its
leading spot on the retail space saturation ranking to Samara and Yekaterinburg,
where prime shopping space could reach
630 sqm per 1,000 capita by the end of the
year. This will be driven by the completion
of two major retail complexes in Samara –
Ambara and Aurora (3rd phase) – as well as
the Globus shopping centre (2nd phase)
and several other retail properties in Yekaterinburg.
According to CBRE forecasts, there is
a high probability that the majority of
these projects will be introduced in 2015.
Overall the total new delivery in 2014 in
Russia (including Moscow and St. Petersburg) will amount to 1.4-1.5 million sqm.
Retail Guide 2014 73 Uk raine
Overview
Forum Lviv
Turbulent times
for retail in Ukraine
James Hydzik
First, the good news. Ukraine’s domestic
political risk is at its lowest in a year.
The October 26th parliamentary
elections showed the overwhelming
pro-Europe choice of Ukrainian voters,
and for the first time since 1917, there
are no Communists in power.
T
he good news gives hope for the
long-term, but for Ukraine’s retail real estate market, the shortterm news is not so rosy. The economy is
wracked by what has been dubbed “a war
that was not a war, followed by a peace that
was not a peace”. Imports dropped 21 percent in the first half of 2014, though much
of that drop would include gas from Russia.
Moreover, GDP contracted by 3.5 percent in the year through Q3 2014, according to Ukraine’s State Statistics Service, and
National Bank of Ukraine governor Valeri-
ya Hontareva, and is expected to slide
by 7 percent by year-end. The hryvnya,
Ukraine’s currency, lost another 4.7 percent
in the beginning of November. Bloomberg
writes that Timothy Ash, emerging markets chief economist told the media outlet
in an email the most recent drop in hryvnya “suggests that locals are worried again.”
Less corrupt? One change that will certainly be welcome is the anti-corruption
drive underway within the government.
The move underscores a fundamental and
grass-roots demand the grew in response
to the Yanukovych government’s excesses.
Business organisations such as the European Business Association have been working with government ministries to sort out
the mess the prior government, especially
in the judiciary where the courts were used
to coerce companies. As a result, dozens
of legal proceedings have been dropped
since spring.
However, systemic issues will take much
longer to resolve. Nick Cotton, Managing
Director of DTZ in Kyiv, explains. “As yet,
there have not been any material regulatory improvements and, this should not
really have been expected given that the
new parliamentary control was only effected following the October Parliamentary
elections. However, it should be said that
the general environment is one in which
there is less immediate concern over the
risks of illegal raiding activity on assets
located outside Crimea and, certain areas
of eastern Ukraine in light of the new government’s drive to ensure observance of
the rule of law and create a more business
friendly environment.”
International aid is being directly tied
to cleaning up corruption. International
Monetary Fund financing agreements
expressly demand it in relation to the disbursement of tranches, and Canadian aid
Uk raine
Overview
Nick Cotton – Managing Director,
DTZ Ukraine
At present, the retail sector outside Kyiv is not something that can be seen as a unified whole
is tied to oversight in order to ensure that
the money is actually spent in the manner
expected.
“The culture is slowly changing, but the
excesses of the past few years are thankfully behind us,” said Gerald Bowers, General Director of the British Business Club of
Ukraine.
As a result, there is a feeling of hope for
Ukraine’s overall future. DTZ notes that the,
“expectations of the international business
community in Ukraine on the longer-term
development of the country largely remain positive.”
In the mean time, the prospect of a more
orderly business environment will not pay
dividends in the near future, and the recent past is an indicator of a cold winter
for some. Even nominally good news, such
as the commissioning of 60 percent of
the planed deliveries scheduled for 2014
is double-edged. The deliveries, coupled
with the general downturn in the economy, raised vacancies to over 23 percent in
June 2014.
The Kyiv retail market is generally
plagued with less than certain delivery
dates and is still quite small for a city of
3 million people. Normally, a spate of deliveries in such an environment produces
a spike in vacancies that subsides as companies take advantage of the new availabilities. Also, economic downturns such as
2008/2009 knocked as much as 30 percent
off of rents. However, the combination of
the new space, the economic downturn
and the negative short-term sentiment
shown in the most recent drop in hryvnya may keep the retail market at higher
vacancy rates and lower rents (i.e., at or
below USD 100 per sqm) for an extended
period of time.
At present, the retail sector outside Kyiv
is not something that can be seen as a unified whole. The western city of Lviv, on the
Polish border, might see deliveries in 2015
of the Leopolis and Forum Lviv centres,
with 50,630 and 36,000 sqm respectively,
coming on line. Western Ukraine could
also see more demand too, as companies
already exposed to Ukraine explore an
area perceived to be less likely to feel the
east’s destruction. DTZ points to home
wares dealer JYSK as it opened new stores
in Lutsk and Vinnytsya as well as the northeastern city of Kharkiv.
Kharkiv, which is Ukraine’s second largest city at approximately 1.5 million people, is an exception to the rule in eastern
Ukraine. Further south, the oblast capitals
of Donetsk and Luhansk have suffered
extensive material damage. When the latest statistics on such destruction were announced and twelve sites were known to
be damaged, Donetsk’s Sergey Prokofiev
International Airport was still in one piece,
though retail operations (and flights) there
had ended months before. Since then –
during a ceasefire – the airport and other
sites have been demolished. The extent of
the damage to sites under construction is
currently unknown.
It should be said that the general environment is one in which there is less immediate concern over the risks of illegal raiding
activity on assets located outside Crimea
and, certain areas of eastern Ukraine in light
of the new government’s drive to ensure observance of the rule of law and create a more
business friendly environment. Furthermore,
expectations of the international business
community in Ukraine on the longer-term
development of the country largely remain
positive.
When will it open, and where? Rebuilding Donbas, as the Luhansk and Donetsk
region is known, has been complicated
there by recent voting for a new government. The groups currently in control of
the area do have some understanding of
what will be needed – plans for a central
bank are under way in Donetsk – getting
to the point that any company would be
able to find external financing for a project
there is a long way away.
Meanwhile, plans are being created in
Kyiv and points-west. Nick Cotton at DTZ
says that, “As yet, only a small number of
foreign retailers are considering entering Ukraine, these typically heralding
from Turkey. Local franchise holders who
control the majority of the market are,
however, revising their brand portfolios
in light of changing spending power and
social structure and this is seeing the entry of new fashion brands albeit, typically
through local franchise holders. Food hypermarkets remain the most active retail
sector for pure foreign-owned expansion
with Auchan and Billa very much leading
the foreign directly owned field against
some very strong and sophisticated local
operators.”
Retail Guide 2014 75 The Inaugural
ITALIA
GRI 2014
MILAN 24-25 NOVEMBER
Rosa Grand Milano
Italy’s most senior real estate investment meeting
ROBERTO ZOIA
Director of Asset Mgmt
& Development
IGD
MAURO MONTAGNER
CEO
ALLIANZ REAL ESTATE
PIERRE RAYNAL
Managing Director
RICHEMONT
PAULO SARMENTO
Principal
MEYER BERGMAN
JERRY BOSCHI
Development Director
ECE
PROJEKTMANAGEMENT
ROBERTO LIMETTI
MD & Head of Italy
PRADERA
ANDREA OMETTO
Asset Manager
SONAE SIERRA
NICOLA ZENI
CEO
ANGULAR
MATHIEU CASSINIS
Head of Italy, CIO
STAM EUROPE
JOSEPH P. DE LEO
Snr Partner, Investment
Committee Member
BENSON ELLIOT
JOE NELLIS
Managing Director
GE CAPITAL REAL ESTATE
HUNT DOERING
Principal
BAUPOST GROUP
...and many more
All material throughout is subject to change without notice.
A SELEC T I ON OF T HE D I S CUS S I O N S O N THE PRO GR AM M E
INVESTIRE NEL RETAIL – Dove sono le opportunità migliori?
RETAIL INVESTMENTS – Where are the most attractive opportunities?
REGIONI – Cosa e dove, oltre a Milano e Roma?
REGIONS – Is there more to Italy than Milan & Rome?
SVILUPPARE NEL RETAIL – È morto il modello di business tradizionale?
RETAIL DEVELOPMENTS – Is the traditional business model dead?
INVESTIMENTI OPPORTUNISTICI – Stessa storia della Spagna o una storia diversa qui?
OPPORTUNISTIC INVESTMENTS – Same deal as Spain or different story here?
ASSET REPRICING – Valutazione, stabilizzazione e rally?
ASSET RE-PRICING – Price evaluation, stabilisation and rally?
CREDITO – Le banche ritroveranno il portafoglio o qualcun altro staccherà gli assegni?
LENDING – Will the banks find their wallets, or will alternative lenders pick up the check?
... and many more
With translation | Con traduzione
CONTACT US
Fulvia D’Ippolito, Project Director for Italy
+44 207 121 5072 | Fulvia.DIppolito@globalrealestate.org
www.globalrealestate.org/Italia2014
GRI meetings provide a forum for the world’s leading real estate players to develop valuable relationships,
find new business par tners, and strengthen their global networks.
SHORT
MEDIUM

Retail investment on the up

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