October 2018 2 Socio-economic significance of development of modern retail space in Poland „The report includes information in a form of a summary and is to be used only for informational purposes. The content of the report shall not be treated as a detailed analysis and shall not be used as the basis for any decision process. Neither EYGM Limited, nor any other member of the global Ernst & Young organization can be held liable for any damages resulting from actions or restrains from taking decisions or actions based on the content of the report.”
EY Real Estate 3 TABLE OF CONTENTS
05 | Introduction
05 | Definitions
05 | Clauses and caveats
06 | Statistics
22 | Polish retail brands - export of Polish retail
28 | Developers of retail space
32 | Corporate Social Responsibility (CSR)
40 | Development of cities
50 | Increase of real estate values
52 | Impact on the labor market and taxes
58 | What is the future ahead of us? Challenges and opportunities
68 | 15 years with PRCH
71 | Members supporting PRCH
4 Socio-economic significance of development of modern retail space in Poland Introduction The report has been prepared by Ernst & Young spółka z ograniczoną odpowiedzialnością Corporate Finance Sp.k. (“EY”) for Polish Council of Shopping Centres (“PRCH”).
Definitions One of the key elements supporting the development of retail sales and services is the availability of modern retail space. By the retail space is understood the space complying with requirements of both international and local retailers. The following definitions were used in this report in compliance with International Council of Shopping Centres (“ICSC”) standards: • Shopping Centre - a retail property that is planned, developed and managed as a single entity, comprising units and common areas, with a minimum gross leasable area (GLA) of 5,000 sqm, and a minimum of ten retail units. • Retail Park - a consistently designed, planned and managed scheme that comprises mainly medium- and large-scale specialist retailers. • Outlet Centre - a consistently designed, planned and managed scheme with separate store units, where manufacturers and retailers sell merchandise at discounted prices that may be surplus stock, prior-season or slow selling. Clauses and caveats • EY made every effort to gain the most reliable data. Please note, that legal, economic, political and market conditions may affect the results presented in this Report. EY does not guarantee that adopted assumptions will be valid in the future. • Report is based on the information from sources that EY found reliable. EY does not verify and does not take responsibility for gained information. • Report constitutes a summary of changes of market conditions. Shopping centers described in this Report are only examples illustrating described market changes.
EY Real Estate 5 01
Statistics STATISTICS
Main macroeconomic indicators
55 201 AVERAGE GROSS PLN per Capita SALARY IN THE 2017 ENTERPRISE SECTOR PKB
4 822 PLN increase of 7.2% YOY July 2018 2.0% July 2018 RETAIL SALES INFLATION increase 7.1% YOY (in current prices) July 2018
increase of 4.6% YOY RETAIL SALES GDP 2017 800 bn PLN 2017 increase of 6% YOY (in current prices) 5.9% July 2018
REGISTERED 4.7% @ 2017 UNEMPLOYMENT RATE SHARE OF ONLINE SALES IN RETAIL SALES Source: EY based on data from Central Statistical Office
EY Real Estate 7 Development of the retail market in Poland
Traditional retail streets First generation of Department stores retail centers In the middle of 90’s there was visible development of hypermarkets such as Late 80’s, beginning of economic Hit, Tesco, Carrefour, Auchan, Géant, transformation. Focus of retail supply Real. They were usually located in small along traditional retail streets and in shopping malls among a few to a dozen department stores. Lack of modern or so number of smaller stores or service. retail centers and international retail This type of commercial developments are chains that were popular in western counted as the first generation of retail countries at that time. centers in Poland. King Cross Praga is an example of this development. At the same time projects such as Panorama or Promenada, both in Warsaw, were examples of modern shopping centres have been developed.
1990 II half of 90’s
Firts foreign supermarket Second generation of chains retail centers
Beginning of the 90’s brought With the time passing retail buildings to Poland first international became less dependent on big supermarket chains such as Billa, supermarkets and more focused on the Netto, Rema 1000 or Globi. services and smaller stores. Restaurants and store chains started taking more share in the leasable area of retail centers. This was the second generation of retail centers.
8 Socio-economic significance of development of modern retail space in Poland Fourth generation of retail centers
Next years were progressive evolution of shopping centers. Participation of non-retail services, such as restaurants increased. Historical urban development was used to develop modern retail space, the examples of such development are: Manufaktura in Łódź or Wzorcownia in Włocławek. This type of retail centers combined closed shopping malls with an open urban space and started fulfilling city- forming function. Most of the modern shopping malls are fourth generation retail centers.
2000 2005 <2018
Third generation of Future? retail centers Currently on the market we observe construction Beginning of 21st century is the next of new formats of retail centers, where retail has breakthrough in the commercial market only supplementary function. Current consumers, in Poland. It was a time of incorporating especially younger generation treats shopping malls as new functions for visitors that improved a place of meetings and entertainment. Hala Koszyki an experience of shopping. New or Hala Gwardii are examples of this new format. shopping malls started becoming filled Revitalisation of historic places is another noticeable with cinemas, fitness clubs and game trend on market. Hala Koszyki or Koneser are rooms. Grocery market stopped playing examples of this process. In big cities development of a central role and main destination of large, complex projects such as Posnania, Wroclavia clients. To the best examples of this or Forum Gdańsk is also observed. On smaller markets generation belong: Sabyda Best Mall or the expansion of specialistic stores and small retail Galeria Mokotów. parks is observed.
EY Real Estate 9 SUPPLY AND ITS STRUCTURE
At the end of the first half of 2018 The compound annual growth rate there was 11.9 M sqm of total retail (CAGR) of retail space between 2012 space in Poland, including shopping and 2017 accumulated to 5%. At that malls (traditional, specialized and period of time total supply increased mixed), retail parks and outlet by 2.5 M sqm of gross leasable area. centers.
Supply of retail space (M sqm GLA)
14 11.7 11.94 12 11 11.44 9.84 10.3 10 9.2
8
6
4
2
0 2012 2013 2014 2015 2016 2017 H1 2018
Supply of retail space (M sqm GLA)
Source: PRCH Retail Reserach Forum
10 Socio-economic significance of development of modern retail space in Poland SUPPLY AND ITS STRUCTURE
Comparing the structure of the market, More dynamic changes occur in the the last 6 years showed slow but steady location structure. Small markets (cities increase of retail parks and outlet with less than 100,000 inhabitants) centers share in the retail market. share has been growing for past years due to the high saturation of retail However, traditional shopping centers space in major Polish cities. still play dominant role on the market with 88% share.
Market structure 2012 Market structure H1 2018
1% 2% 7% 10%
92% 88%
Tradi�onal shopping malls Retail parks Outlet centers
Source: PRCH Retail Reserach Forum
EY Real Estate 11 SUPPLY AND ITS STRUCTURE
Increase of supply in smallest cities Outlet centers development outside is observed mainly in the category of main agglomerations is another trend retail parks. In the last 6 years their observed in the market. share in retail market in the cities In 2012 there were outlet centers with less than 100,000 inhabitants only in the biggest markets. At the increased from 7% to 22%. end of the first half of 2018 market share outside main agglomerations amounted to approx. 26%.
Market structure 2012 Market structure H1 2018
15% 18%
16%
15%
57% 54% 11% 12%
8 biggest agglomera�ons Ci�es 200-400 thous. Ci�es 100-200 thous. Ci�es below 100 thous.
Source: PRCH Retail Reserach Forum
12 Socio-economic significance of development of modern retail space in Poland MARKET SATURATION
The level of average saturation of Poland at the end of the first half of retail space between 2012 and 2018 amounted to 311 sqm. 2017 increased from 239 sqm of GLA to 306 sqm of GLA per 1,000 The highest saturation on the market inhabitants (28% increase). This result is observed in Wrocław (948) and is slightly lower than UE average Poznań (891). Poznań market has which amounts to 315.8 sqm of GLA. also been the fastest growing market in Poland with 39% growth of total According to PRCH data, average supply in the last 6 years. market saturation of retail space in
Retail space satura�on per 1,000 inhabitants (2012-2017) sqm per 1,000 inhabitants 1 000
800
600
400
200
0 Wroclaw Warsaw Tri-city Szczecin Poznań Łódź Katowice Cracow Poland
2012 2013 2014 2015 2016 2017
Source: PRCH Retail Reserach Forum
EY Real Estate 13 MARKET SATURATION
Retail space satura�on per 1,000 inhabitants sqm per 1,000 inhabitants (2012- H1 2018)
900 800 700 600 500 400 300 200 100 0 Poland 8 agglomera�ons ci�es 200-400 thous. ci�es 100-200 thous. ci�es below 100 thous.
2012 2013 2014 2015 2016 2017 H1 2018
Source: PRCH Retail Reserach Forum
Analysis of saturation in individual Among Western European countries, segments of the market showed that the lower saturation rate is recorded there is visibly lower saturation on in Germany and Belgium with the smallest markets (cities below respectively 222 and 252 sqm of 100,000 inhabitants). These are gross leasable area of retail space. markets that are currently targeted by retail investors. In regards to more mature and demographically comparable Retail space saturation in Poland commercial markets such as United at the end of 2017 (306 sqm per Kingdom (426), France (393) and 1,000 inhabitants) was at the level Spain (311), it is reasonable to of countries such as Czech Rep. assume that our domestic market has (280), Slovakia (264) or Italy (267). a potential for development.
14 Socio-economic significance of development of modern retail space in Poland Retail space saturation in Europe 2017
Czech Republic 280.6
Finland 468.0 Netherlands 383.7 Sweden 538.9
Norway 945.6 Estonia Great Belgium 654.6 Britain 251.9 426.9 Latvia 340.4 Russia 133.8 Lithuania Denmark 400.1 333.2
Poland Ireland Germany 299.5 602.8 Luxemburg 222.6 668.0
Austria 476.2 France Romania Slovakia 393.6 Italy 264.3 267.0 165.0
Switzerland Spain 338.9 311.5 Turkey 148.7 Portugal 342.1 Slovenia 386.9 Croatia Area per 1,000 Country 347.2 inhabitants Greece Bulgaria 85.3 117.0 EU-28 315.8 Malta Cyprus 274.6 Hungary - EU 265.6 207.0 >500 Bosnia and 400-500 Hercegovina 300-400 112.1 200-300 Serbia 134.8 <200
Source eport The Socio Economic Impact of European etail eal Estate 201 , ICSC EY Real Estate 15 FOOTFALL STATISTICS
300 - 480 thous. Monthly average footfall at the shopping center of 30,000 sqm of GLA
Over 1 M clients monthly footfall at Złote Tarasy shopping center
120 - 170 M clients visit polish shopping centers every month
Source: PRCH Footfall Trends Index
16 Socio-economic significance of development of modern retail space in Poland FOOTFALL STATISTICS
PRCH Foo�all Trends Index 2012-2017
500 480 460 440 420 400 No. of visitors (thous.) visitors of No. 380 360 340 320 300
anuary ebruary arch April ay une uly August September October ovember ecember
2012 2013 2014 2015 2016 2017
Source: PRCH Footfall Trends Index Note: Indication of the average footfall at shopping centers based on numerically-different samples of shopping centers included in a given year in the PRCH database.
According to the PRCH data Footfall is about 26% higher than in the Trends Index in 2012-2017 remained remaining months of the year. relatively stable and a medium-sized shopping centre (30,000 sqm of GLA) At the other side is February - the has been visited by averagely end of post-Christmas and New Year’s 4.2-4.8 M clients a year. sales. It is a time when customers decide to save money after increased However, the seasonality of the Christmas time expense. visits level over a year is very clear. Traditionally, the month with the highest amount of visitors is December when the number of clients EY Real Estate 17 INCOMES AND EXPENSES In the period of 2012-2017, the Analysis of the structure of household household disposable income increased spendings showed that the biggest increase by almost 26%, with CAGR of around 5%. of spending was observed in leisure sector, A particularly high increase in income was expenditures on restaurants and hotels observed in the last two years. In 2017 the 63%. On the other side, spending on annual increase in the household disposable alcoholic beverages and food declined by income equalled to almost 8.5%. 3% in the analysed period of time.
However, the growth rate of household Moreover, analysis of households spendings spendings at the same period of time was showed, that in 2017 over 25% of them much lower and amounted to around 13% were distributed in shopping centres. (CAGR of 2.4%).
Household disposable income and expenditures (pln per capita) 1 700 1 598 1 600 1 475 1 500 1 386 1 400 1 340 1 299 1 270 1 300 1 176 1 200 1 132 1 079 1 091 1 100 1 045 1 062
1 000 2012 2013 2014 2015 2016 2017
Household disposable income Expenditures
Source: EY based on data from Central Statistical Office
18 Socio-economic significance of development of modern retail space in Poland TURNOVER AND SALES
In the last 6 years the cumulative The average annual increase in retail aggregate growth rate of turnover sales in 2012-2017 amounted to per square meter of leasable area 3.2%. However, in June this year, this (Turnover index) has significantly index was at much higher rate of 8.2% increased in the category of Services YOY. (CARG=18.2%) due to changes In 2017 the estimated sales volume in client’s needs and changes in in shopping centres constituted 18.1% shopping centres offers. of retail sales in Poland, while retail The second noticeable trend is share in Polish GDP currently is over a decrease of this index in the 20%. category of Food (CARG = -7.6%).
PLN per sqm of GLA PRCH Turnover Index
3 000 2 500 2 000 1 500 1 000 500 0
Total Food Leisure Services Electronics Gastronomy Special goods
Health and beauty
Fashion and accessories 2012 2013 2014 2015 2016 2017
Source: PRCH Turnover Index
EY Real Estate 19 Shopping centers are perfectly Development of new retail formats such following Poles’ changing shopping as fashion outlets or small retail parks habits and spending’s structure. is also the reaction to the changing Bigger food courts and more attractive consumers’ preferences. restaurant offer in new and redeveloped In 2012-2017 the significance of retail shopping centres, as well as leisure parks noticeably increased.Their share in zones and numbers of events address the a market structure increased by 40%. increasing share of restaurants spending (according to the Central Statistical Office the share of spending of households on restaurants and hotels increased by 60% during the years 2012-2017).
20 Socio-economic significance of development of modern retail space in Poland EY Real Estate 21 02
Polish retail brands - export of Polish retail 20 years of Polish retail Polish joint stock company MONNARI TRADE S.A. has existed since the year `2000.
The brand itself was established two years eariler, becoming the foundation for the future development of Polish fashion brands.
The chain of MONNARI brand stores is already present in Poland in all large and medium-sized cities; as at the end of Q1 2018 there were 163 stores with a total area of 33,500 sqm.
From the very beginning, the Company has been creating its own, comprehensive clothing collection, aimed mostly at women over 30. Within a few years, the Company has created a recognisable trade mark, which is the synonym of top quality, elegance and style.
In 2018, the MONNARI brand took the 109th place in the ranking of major Polish brands by “Rzeczpospolita” daily news, advancing from the 149th place taken a year before.
In the “clothing and footwear” category, MONNARI was ranked 5th. This Polish brand is a good investment For a few years, the MONNARI TRADE S.A. Capital Group has been strengthening its market position by improving all financial indicators and through a stable development of its sales network. In 2017, the Capital Group increased its revenue to the level of PLN 247.4 M, while its net profit was PLN 21.7 M. For years, the brand has had a stable position in the market and has enjoyed a considerable renown among both customers and shopping centre owners. The stable sales network, experienced team, stable customer segment, recognisable brand and dynamically developing ominchannel concept have been important factors of MONNARI’S success.
The dynamic evolution of the shopping centre market in Poland, which has continued for more than 20 years, has signifficantly impacted the development of MONNARI. All stores of the chain, apart from two, are located in shopping centres. This shows how important the development of the latter has been and how strongly it has influenced the expansion of domestic brands both in the country and abroad.
Mirosław Misztal Chairman of the Management Board, MONNARI TRADE
October, 2018 EY Real Estate 23 Since Poland joined the EU, the The largest retail player active on the Polish fashion and footwear sector, stock exchange is LPP S.A. Group which was in deep recession before (owning brands such as: Reserved, that time, has gone through major Cropp, House, Mohito, Sinsay and transformation and is currently one Tallinder), whose share value has of the fastest growing sectors of the increased by 19,285% since its IPO economy. in 2001. At the end of 2017 the company had 1,743 stores with Dynamically developing Polish retail a total of over 1 million sqm of brands are pivotal in functioning GLA in 20 countries (apart from of shopping centers and they Poland, LPP operates in Czech successfully compete for clients with Republic, Hungary, Romania, international retailers. Additionally, Bulgaria, Germany, Russia, Estonia, many of them have been conquering Lithuania, Latvia, Egypt and the UK international markets. to name a few). Kazachstan, Israel Apart from a large number of small and Slovenia are on the firm’s radar and medium size firms operating in screen. There are over 25 thousand this field, there are 22 companies employees across all of the listed on the Warsaw Stock Exchange. subsidiaries of the holding company.
The biggest Polish fashion and footwear brands in terms of number of stores
LPP 1 743
CCC 925
Redan 727
OTCF 510
Vistula Group 411
ETOS 333
Big Star 200
0 500 1000 1500 2000 Source: EY
24 Socio-economic significance of development of modern retail space in Poland Second biggest Polish fashion brand At the end of 2017 the OTCF had over with regard to profits is OTCF. The 500 stores and was operating on 27 company produce and distribute European markets. sports clothes and accessories for CCC S.A. is another Polish brand, both professional sportsmen and which successfully competes with people, who do sport for recreation. foreign retailers and is a sought In OTCF’s portfolio there are 4F, 4F after tenant for shopping centers’ Junior, Outhorn and Everhill brands. landlords. At the end of 2017 The cooperation between 4F and the company had 925 stores Polish Olympic Committee has been across 16 countries (among lasting since 2008 and the OTCF has others Germany, Austria, Sweden, been a supplier of olympic collections CEE countries) with a total of over for every Olympic Games since 2010. 500 thousand sqm of GLA. Its capital value in mid May 2018 reached In addition, the company cooperates 10.6 billion PLN and since its IPO in with olympic committees from December 2014 the share value rose Latvia, Serbia, Croatia, Greece and by 2,631%. The company employs Macedonia. nearly 12 thousand people.
EY Real Estate 25 Both retailers are equally well positioned as foreign brands such as H&M, or Inditex retail chains (i.e. Zara, Bershka, Stradivarius, Massimo Dutti), in terms of number and size of retail In addition to CCC, which is an units in Poland and they are equally unquestionable leader, there are many important as anchor tenants as their other Polish brands in the footwear foreign counterparts. sector, which complement tenant-mix in shopping centres, providing for a wide offer diversity for customers. The key players are: Ryłko, Gino Rossi, Wojas, Prima Moda, Venezia, Badura and Kazar. Apart from the above listed firms, there are many other Polish fashion brands, which are a base for tenant- mix of small and mid-size units in shopping centers. Men fashion is strongly represented by Bytom, Wólczanka, Próchnik, Lancerto, Furniture and home deco & Recman and Lavard, while Simple, equipment has also a strong Polish Pretty One, Monnari, Solar, Green representation, with Agata Meble, Point and Taranko represent woman Black Red White, Abra Meble, Meble fashion. VOX, Home & You to name a few.
Big Star, Diverse, Tatuum or Medicine are strong tenants for young fashion.
It is also very easy to find a Polish brand in electronics and household appliances sector. The majority of retailers in this category is owned Retailers, which operate in jewellery, by Polish capital. These include: accessories and leather goods, Euro AGD, Media Expert, Neonet or include: W.Kruk, Apart, Ochnik, Komputronik, which used to focus Wittchen. on computers, but now offering also household appliances.
26 Socio-economic significance of development of modern retail space in Poland EY Real Estate 27 03
Developers of retail space Since the beginning of modern retail largest share in market, amounting spaces development in Poland, the to approximately 85%. Among the largest players on the market have largest players there are: Atrium been international developers. During European Real Estate, Apsys Group, the first phase, till mid 90’, there AEW Europe, Carrefour, CBRE Global was a domination of hypermarket Investors, ECE Projectmanagement, chains that, at the same time, played NEPI Rockastle, Klepierre, Mayland a role of developers and properties’ Real Estate, Immofinanz, Ingka managers. Centres, Unibail-Rodamco-Westfield.
Among the leading companies in On the market there is also noticeable this group the German partnership high activity of Polish developers, Metro Properies (development of who take part in creating a picture Real hypermarkets - tookover by of a modern retail market in Poland. Auchan, Praktiker markets with Among the largest players there home-improvement goods, Makro is Echo Investment S.A., which, and shopping centers M1), British since 2015 is a part of Griffin Real Tesco and French Carrefour, as well Estate - Oaktree - PIMCO capital as Immochan (CEETRUS at this group. The company is the largest, moment) which developed Auchan Polish developer in commercial real hypermarkets and shopping centers estate sector listed on the Warsaw can be found. Stock Exchange. Company developed shopping centers such as: Galaxy Economic development and increase in Szczecin, Pasaż Grunwaldzki in of purchasing power, as well as Wroclaw, joining European Union strengthened Gallery Echo in Kielce, Amber Gallery the investment attractiveness of in Kalisz or Galeria Sudecka in Jelenia Poland, which resulted in increase Góra. Under construction there of demand for retail spaces among are also Libero Gallery in Katowice tenants. This in turn contributed (45,000 sqm) and Galeria Młociny in to increase of interest in Poland Warsaw (71,000 sqm). among foreign shopping centers’ developers and investors that deal not One of the biggest developers only with acquisition but also active that also operates in retail spaces management and development of sector is GTC S.A. The company was commercial facilities. Based on the established in 1994 and since 2004 is analysis of total supply of modern listed on the Warsaw Stock Exchange. retail space in Poland, they have the Its shares are included in the mWIG40
EY Real Estate 29 index. Moreover GTC S.A. shares are MCG Inwest, whose owner is the listed in Johannesburg (inward listing) main shareholder and President of and Dow Jones STOXX Eastern Europe CCC S.A. Dariusz Miłek. The company 300 Index. Apart from Poland the developed, among others: Cuprum company also operates in Budapest, Arena in Lubin (35,000 sqm), Bucharest, Belgrade, Zagreb and Korona Kielce (34 ,000 sqm), Galeria Sofia. Warmińska in Olsztyn (41,000 sqm) and Galeria Solna in Inowrocław The company has built 68 commercial (31,000 sqm). properties which offer 1,200,000 sqm of GLA. Among the GTC S.A. retail Gemini Holding is a company owned projects there are: Galeria Mokotów by Polish racer Rafał Sonik. So far, it and Galeria Północna in Warsaw, has completed three objects: Gemini Galeria Kazimierz in Cracow and Park Tarnów (42,500 sqm), Gemini Galeria Jurajska in Częstochowa. Park Bielsko- Biała (40,000 sqm) and Gemini Park Tychy (36,600 sqm). Although in agglomerations development of the biggest shopping Dekada S.A. is a company investing centers still remains a domain of mainly in strip malls and small foreign entities, Polish developers are shopping centers in smaller cities. main investors in middle- and small- In company’s portfolio there are sized cities. Among them the following 11 Dekada projects (including companies shall be mentioned: Myślenice, Skierniewice, Żyrardów, Grójec, Malbork, Ciechanów) with Rank Progress S.A. is a company total area of 45,800 sqm. Another that has been operating on the retail, 7 projects, with total area of office, residential, industrial and 54,200 sqm in under construction warehouse market for 18 years. In or in the planning stage (Nysa, Mińsk 2001-2015 the company built 13 Mazowiecki and Konin). galleries and retail parks which total space amounts to over 282 thousand sqm. The largest projects in this sector are: Galeria Twierdza in Kłodzko (30,000 sqm), Brama Pomorza in Chojnice (25,600 sqm), Galeria Tęcza in Kalisz (18,200 sqm) and Galeria Świdnicka in Świdnica (15,600 sqm).
30 Socio-economic significance of development of modern retail space in Poland EY Real Estate 31 04
Corporate Social Responsibility Unibail-Rodamco-Westfield, a leading international company operating in the real estate industry, is among the pioneers in the field of Corporate Social Responsibility. For many years, CSR has been at the centre of the Group’s activities; in 2016, the company introduced its “Better Places 2030” strategy. It is related to main challenges facing the commercial real estate sector, namely: designing and constructing new buildings, redevelopment and extension of existing buildings, everyday operational activities, cooperation with tenants in the field of environmentally friendly solutions, promoted and preferred transport means, positive impact on local communities, and involvement of all employees in the Group’s CSR activities.
Unibail-Rodamco-Westfield’s strategy concentrates around four important areas: activities aimed at lowering carbon footprint, less polluting transportation, reducing local unemployment levels and lowering the number of top-down orders.
Each of these pillars translates into global aims, with voluntary involvement of the company’s employees in activities for local communities among the particularly innovative ones. This has resulted in programs with measurable effects, such as actions promoting healthy diets for the youngest (the “Arkadia na widelcu” workshops) or helping young people find their place in the labour market and plan their career (“Pracuj z nami w Galerii Wileńskiej”).
CSR activities serve as a source of inspiration for millions of people visiting our shopping centres every year. Furthermore, they are an important element of creating market advantage, which is an important argument for investors or tenants, and thus a factor in business terms.
Grzegorz Grajkowski Head of Operations Poland Unibail-Rodamco-Westfield
October, 2018
EY Real Estate 33 The idea of CSR (Corporate Social CSR in shopping centers, apart from Responsibility) has become an building positive relations with local important element of shopping center communities, builds up companies’ management, which in different ways image. supports local communities, which in Formerly CSR activities performed turn contribute to their sustainable by shopping centers were primarily social and economic development. It focused on sponsorship campaigns, is particularly important as shopping support of local initiatives and centers have been changing their projects, such as Christmas food primary role and turn into places donations, or charity events. These not only focused on retail but they activities are still very important, but are becoming centers for social life currently many schemes put emphasis and interactions, they are places for on long-term CSR. spending spare time to relax, enjoy leisure and entertainment.
Traditional support - charity
Local community Sport activation sponsoring CSR
Associations Ecology (long-term CSR)
Art and culture
34 Socio-economic significance of development of modern retail space in Poland SIEMACHA Association could serve language, sports, which are free as an example of a long-term CSR of charge. Specialized pedagogic cooperation with a couple of shopping assistance is also available. centers in Poland. It started off in In order to help fulfilling these 2010 in Gemini Park Tarnów shopping tasks, employees of shopping center mall. It hosts the first branch of the organize special series of business Association in Europe, which allows classes, during which teenagers children and teenagers to spend their acquire skills about how to plan, spare time practicing their hobbies. prepare, budget and manage events. SIEMACHA Spots provide their Thus those who join SIEMACHA beneficiaries with space for initiative co-create events organized establishing and maintaining relations, in Gemini and also have opportunity to doing creative activities and gaining practically learn and understand the new experiences. These specialized world of retailers and business rules. places support young people, who They gain insightful knowledge about want to be a part of community and labor market and, unlike in the case of are open to gain new skills. school classes, they can understand the specifics of given profession in The Spots offer a wide variety of practice and try to manage different classes – music, dance, foreign tasks.
EY Real Estate 35 Currently SIEMACHA Association to GKS Katowice and KS Rozwój sport is present in Bonarka City Center in clubs. Cracow, Magnolia Park in Wrocław, Special attention should be brought Korona Kielce shopping mall and to CSR activities, which are focused Millennium Hall in Rzeszów. on culture and art. One of the best Shopping centers support local examples is Manufaktura scheme, sport clubs, for instance Gemini Park which among other functions, hosts Tarnów supports local speedway sport the Museum of Modern Art ms2, club - Unia Tarnów. It organizes a Museum of the Factory, Teatr Mały series of meetings within a shopping (teathre) and Experymentarium. center with clubs’ players. It also Gemini Park Tarnów in turn supports hands out tickets to the matches of Kantata Tarnowska and Panorama the club. Additionally, it also works Siedmiogrodzka. It also hosts „Gallery closely with the school nearby, within Gallery”, which is a special with the parish as well as support space dedicated to presentation of local foundations, such as Via Spei, photos and paintings. Additionally, enabling money collection actions for it runs a number of educational various purposes and places, which activities in the shopping mall, require help. Libero shopping center, including road safety exercises. which is currently under construction in Katowice, provides financial support
36 Socio-economic significance of development of modern retail space in Poland Unibail-Rodamco, one of the largest water and energy waste and smart players on the European retail market, waste disposal. All these activities who owns Arkadia, Złote Tarasy and in turn translate into substantial Galeria Mokotów in Warsaw as well cost savings, which causes the as Wroclavia in Wrocław, announced investment to pay off within two to in 2016 a complex and long-run four years after implementation of CSR program “Better Places 2030”, new solutions. Only replacement of which should cover all of the managed traditional lighting to LED lighting shopping centres. The key strategic lowers the electric energy costs by CSR goals focus on ecology and social over a half. Large shopping centers issues. for example have substantial surplus of heat energy, radiated by lighting, The primary goal of Unibail- restaurants and food court units as Rodamco is to reduce carbon dioxide well as customers themselves. This emissions by 50% and to implement surplus can be restored as there are strategy, which not only limits specialized systems, which collect energy consumption but also aims heat energy from the air and transmit at optimizing any activities related it to another medium, i.e. water. to shopping centers operations, i.e. Thanks to using its own resources, reduce carbon footprint by choosing a shopping centre does not take eco-friendly construction materials in as much external energy due to in the development phase, as well consuming its own ones. as minimize energy waste in existing buildings by applying renewable One of the examples of shopping energy sources and low-emission centers, which applied an air to water devices and supplies. Lighting will heat pump system is Stary Browar be replaced by LED lights in 100%, in Poznań. When the temperature while retailers will be required to outside is below 10 degrees Celsius, declare and sign appropriate eco- the system can generate 80% of friendly agreements. It all fits within own heat energy necessary for the global trends of implementing green scheme to operate. buildings solutions, which aims at One of the aims of Unibail-Rodamco’s minimizing environmental burden of “Better Places 2030” campaign is commercial buildings. also to encourage shopping center One of the strongest environmentally customers to use sustainable means friendly tendencies is optimization of of transport with the aim to score utilities usage, meaning minimizing 75% of the pool to follow. In order
EY Real Estate 37 to achieve this goal, the fund is conducted by retailers of Galeria increasing the number of bike racks Wileńska. Unibail-Rodamco works within its schemes. It also plans closely with local non-governmental to engage with local authorities organisations to reach people, who to optimize transport system in need support in their initial steps of shopping center surroundings and career development. introduce car-sharing platforms. Another example of a complex CSR Unibail-Rodamco will also increase the strategy are activities conducted by number of EV charging stations. the French Ceetrus Polska (earlier: Choice of the location is also crucial: Immochan), acting both as an investor shopping centers from the fund’s as well as asset manager of shopping portfolio – Arkadia, Galeria Mokotów, centers. Galeria Wileńska and Wroclavia – have all very good accessibility, so a client The company has been implementing can leave the car in a garage and use „Good neighbor” campaign since public transport or ride a bike to visit 2012, which covers five topics: the scheme. Culture and science (theatre shows, art workshops, reading together Unibail-Rodamco will also implement actions and educational meetings); across all of its portfolio „UR for Jobs” Region (events promoting local initiative , which aims to increase culture and traditions); Health skills and professional competences of and safety (events focusing on young people from underprivileged health and safety issues); Ecology neighborhoods and also to create jobs (initiatives promoting ecological especially for them, suiting their set focus attitude); Sport and leisure of talents. Recruiting for the program (events promoting active leisure time “Work at Wileńska” has just kicked with lots of fun and entertainment). off. After completion of the course, The program identifies the needs a few dozen of people, who are Praga of local community through public inhabitants, will be able to start their consultations and dialogue, which career in Galeria Wileńska shopping form the base for planning and center. executing particular projects. During the second phase of the program – job fairs – its participants will take part in job interviews
38 Socio-economic significance of development of modern retail space in Poland EY Real Estate 39 05
Development of cities
40 Socio-economic significance of development of modern retail space in Poland For centuries retail has been pivotal in considered as true landmarks of city creation and played a crucial role a particular agglomeration. Such in activating urban life around them. combination attracts both city Shopping centers have become an inhabitants as well as tourists. integral part of Polish cities and form their important element as economic Given changes in retail spending and social centers, irrespectively patterns as well as ways of spending whether they are located in centers free time, shopping centers are not or in outskirts of cities. Some of only places where people shop, but them, due to their location, unique far and foremost they have become architecture and wide offer of retail a place where people meet, have fun and services as well as cultural and enjoy their leisure time. and leisure elements inside, can be
Regeneration of post-industrial, railway and historical sites:
• Manufaktura • Forum Gdańsk • Stary Browar • Galeria Katowicka • Galeria Wzorcownia • Bonarka • Galeria Krakowska • Silesia City Center Creationof new city • Galeria Kazimierz centers, activation of neighborhoods: Creation of new public • Manufaktura spaces: • Hala Koszyki • Manufaktura • Forum Gdańsk • Galeria Wzorcownia • Galeria Słoneczna • Arkadia • Silesia City Center • Bonarka Development of urban infrastructure
EY Real Estate 41 CITY CENTERS AND SHOPPING CENTERS
Very often a shopping center creates of the city. Currently, the complex a new city centre, because given its is a vibrant city center of Łódź, location as well as multifunctional which is mainly a place for the city offer, they become the heart of the inhabitants to meet and spend city and the destination per se. One time. It provides cultural, leisure of the best examples include among and entertainment facilities such as others: Manufaktura project in Łódź Museum of Modern Art MS2, Museum or Stary Browar in Poznań. Such of the City of Łódź, Teatr Mały, as schemes guarantee sustainable well as Eksperymentarium, dance development of the city and school, climbing center, fitness club, establishing functions, which boosts multiscreen cinema Cinema City its city centre character within the with IMAX screen, wide selection of center itself, which builds up its image bars, pubs and restaurants, services as well as enhances vitality and verve along with extensive retail offer in the of the whole city. shopping center itself. The complex also offers very attractive public Development of Manufaktura complex space with well-designed landscaping envisaged regeneration and retention and street furniture. Numbers of of historical character of post- events, shows and concerts organized industrial buildings from the very within the complex attract many beginning. agglomeration inhabitants as well as Yet at the same time they were given tourists, irrespective of age, with a new functions. Architects managed view to the needs of families or groups to integrate modern technologies of friends. Additionally, there is and trends so that Manufaktura Andel’s hotel within the development. can become architecturally as well Manufaktura complex as a whole is as functionally attractive quarter a self-contained city within a city.
42 Socio-economic significance of development of modern retail space in Poland There are many other examples, developed with office and residential supporting the statement that space - Radom Office Par and Osiedle shopping, leisure and entertainment Słoneczne respectively. centers play an important role in city center creation within small and Wzorcownia is a new meeting place in medium sized cities. One of them 110 thousand inhabitabts Włocławek, is Galeria Słoneczna in Radom, Pasaż Grodzki serves the same which has a population of around purpose in 80 thousand Jelenia Góra 215 thousand people. Currently, and 40 thousand Żyrardów has its the scheme has become the city Stara Przędzalnia and Dekada. center. The surrounding area was
EY Real Estate 43 REGENERATION. HISTORICAL, POST- INDUSTRIAL AND RAILWAY STATION SITES
If it wasn’t for shopping center and Very often such areas have an mix-use schemes investors, of which unquestionable historical and retail and services are integral part, architectural significance, which with many attractively located sites of appropriately conducted regeneration historical value, of railway or post- process, is given the second life and industrial character (coal mines, regains its splendor. Investors more factories) will still be in ruins, which and more often decide to follow in turn would negatively impact city ambitious visions presented by image. architects, who try to retrieve their value and adjust such projects to the surrounding urban order.
44 Socio-economic significance of development of modern retail space in Poland This is a modern and very much new functions, becoming places needed approach to regeneration integrating local communities. projects, which must adhere to urban, historical and social environment. Attractiveness of these sites very often derives from their locations, These sites have frequently very very often close to the city center, of strong investment potential. The excellent visibility and appropriate above mentioned examples of size of the plot. Manufaktura and Stary Browar are perfect to showcase perfectly Not without significance is also the conducted complex regeneration price, which due to rehabilitation projects of historical post-industrial necessity is relatively low. This in turn sites. Thanks to investors, degraded increases investment profitability. areas of cities have a chance to Sites which are directly located at or have the second life by getting close to railway stations, naturally
EY Real Estate 45 form public space, generating Thanks to this project, delivered in increased footfall by passenger flows, 2003, Poznań gained a new landmark which naturally creates opportunity scheme, integrating a variety of to provide them with the retail and functions such as retail, services, service offer located within shopping, as well as culture, leisure and leisure and entertainment center. The entertainment. Stary Browar is also example of such developments include a starting point of Półwiejska street, Galeria Krakowska in Kraków, Avenida which is a tourist pedestrianized route in Poznań or Forum Gdańsk. leading to Poznań Market Square, which naturally gives this place Stary Browar in Poznań is in turn additional vibrations. Modern office a great example of a city creating mix- buildings as well as Andersia Hotel use scheme, developed by complex complement the quarter, enhancing regeneration of historical Hugger its mix-use character of the place. brewery dating back 19th century, Frequently one of the key advantages which used to be heavily degenerated and values of post-industrial projects site within the city center. The is their ability to integrate different architects managed to place new types of functions – combining retail, structures and buildings within the residential, hospitality, office, culture existing brick buildings and create and entertainment. Additionally, by walking passages, which integrate fitting new schemes to old historical newly built with old buildings. buildings, maintaining genius loci, Designers managed to create modern which is the spirit of the place, and and friendly public space – Art Yard, creating attractive public spaces, which is a multifunctional place. projects become new city market Thanks to the investor, the close squares, serving as meeting places. and compact complex gained open KWK Gottwald site in Katowice air space due to opening of the turned into Sielesia City Center regenerated gen. J.H. Dąbrowskiego complex provides a great example city park. of regeneration of a former coal There are approximately 200 retail, mine, bringing synergy to a variety including retail, service and foodcourt of functions. This 86,000 sqm of units within the 60,000 sqm of GLA GLA regional shopping center has complex. There are also restaurants, 310 retail units. There is Dębowe cafes, theatre, concert hall and art Tarasy residential settlement nearby gallery, 8-screen cinema as well as as well as Silesia Business Park office Blow Up Hall 50 50 Hotel. complex.
46 Socio-economic significance of development of modern retail space in Poland Apart from the formerly mentioned producing chemical materials. examples such as Manufaktura in The area is now developed with Łódź and Stary Browar in Poznań, a large Bonarka shopping center, the capital city of Warsaw also has Bonarka4Business (B4B) office a couple of such projects, such as complex. mix-use Koneser, located on the former vodka distillery site, EC Magnolia Park in Wrocław, which is Powiśle, ArtN or the shopping centre one of the largest shopping centers Stara Papiernia in Konstancin. in Poland, is located on the former meat factory site. It is not only large Similarly Kraków has many examples agglomerations, where regeneration of complex regenerations of post- projects have been or are developed. industrial sites. These include Galeria There are also many examples of such Kazimierz, developed on a former investments in small and medium-size meat factory site and a mix-use cities. Alfa Centrum, built on a former complex located on former site „Biruna” textile factory site in of manufacturing plant Bonarka, Białystok, Stara Przędzalnia complex
EY Real Estate 47 in Żyrardów, Sfera shopping in Bielsko Shipyard and port sites also belong Biała located in the Lenko - linien to this category. An example of textile manufacturing plant or Focus such complex regeneration project Mall in Zielona Góra, which used to is Dalmor site urban redevelopment, be Polska Wełna site where wool was located in Gdynia. According to the produced. plans, the area shall be developed with office, residential, office, retail This type of investments not and service functions along with only prevent „urban sprawl” and marina. Repair Shipyard Nauta is also gentrification of cities, but also going to change its function, moving improve the quality of life for the its activities to other parts of the city city inhabitants and boost the city where the main Gdynia Shipyard is image. Still, venturing into this type of located. projects located on post-indistrial sites is quite often complicated and take long time to complete.
48 Socio-economic significance of development of modern retail space in Poland Vastint, who is an investor of the on this challenge and venture into 8.5 ha Waterfront project, plans to regeneration with success. Apart develop the area on the Waszyngtona from financial benefits for the street with a mix-use complex, investor, they bring urban order and envisaging construction of a shopping lots of intangible values to the local mall, multi-screen movie theater, communities. Regeneration projects multifamily block of flats, offices as enable to maintain cultural heritage well as hotel situated directly off the and follow the rules of sustainable coast. development.
Despite many risks and hurdles connected with such projects, many developers are keen to take
EY Real Estate 49 06
Increase of real estate values
50 Socio-economic significance of development of modern retail space in Poland As the recent history shows, • 20 - 30% increase of the value of opening of modern shopping malls land designated for commercial in the biggest Polish agglomerations development located in a close (Galeria Mokotów in Warsaw, Galeria vicinity of shopping centers. Dominikańska in Wroclaw, Stary • Increase of rents by 15 – 20% Browar in Poznań) had an impact on for commercial space located in the prices of neighboring real estate: a direct neighborhood of a new • 8 – 10% increase of the value of shopping mall. residential properties located within direct neighborhood of the mall within 2 years period, the only exception are properties located next to delivery zone.
Increase of the The synergy effect area’s attractiveness - creation of service for residential zone around shopping developments - center fulfilling of resident’s Improvement of needs communication in the area due to infrastructure Changes in development and neighbouring areas adaptation of public zoning transport for increasing demand
Sources of real estate values increse
EY Real Estate 51 07
Impact on the labor market and taxes
52 Socio-economic significance of development of modern retail space in Poland IMPACT ON THE LABOR MARKET
Over Over 13 thous. of jobs 400 thous. supporting operation of shopping of employees centers
3.5 jobs per 63% of employees under 30 years old 100 sqm of leasable area
1/3 Second biggest sector in of employees have Poland in case of employment* a student status
*the trade, transport, accommodation and catering services sector according to Eurostat 2017
EY Real Estate 53 IMPACT ON LABOR MARKET
According to ICSC (International accommodation and gastronomy, Council of Shopping Centers) information and communication data, there were almost 410,000 amounted to 3.7 M workers in 2016. employees in shopping malls in Poland Taking into account, ICSC data, in 2016, which makes Poland 6th retail centers generated over 10% of biggest market in the European Union. workplaces in the sector.
Additionally, in companies directly Assuming number of retail centers related to the operation of retail and number of workers, on average centers, there were over 13,000 over 800 people work in one retail employees, according to ICSC center. The employment rate per estimates. These are security square meter of gross leasable area agencies, property managers, amounts to 0.035 employee. advertising agencies or companies Work in shopping malls is usually specialized in event’s organisation etc. a good opportunity for students According to Eurostat, Polish trade, willing to earn some extra money logistics, accommodation and dining while studying. Employers are happy services sector was the biggest one to employ students due to lower in the EU and employed 24.7% of all labor costs. Due to flexible working workers employed in this sector in the hours, young people are able to European Union. In 2017, it was 2nd combine their professional life with biggest sector in Poland in case of college and university. According to employment after industry with share the Kantar Millward Brown research, of 22.8% of all workers. commissioned by PRCH, 63% of all According to the Central Statistics employees are under 30 years old Office in Poland, sector of trade, and third of all of them have a student automotive repairs, logistics status. and warehouse management,
54 Socio-economic significance of development of modern retail space in Poland EY Real Estate 55 IMPACT ON TAXES
VAT
Excise tax PIT
TAX
Minimum tax on commercial CIT real estate
Property tax, Perpetual usufruct fee
One of the many benefits associated • VAT from sales of products with retail centers is an impact on the and services by tenants in retail tax revenue of the state. The proceeds centers. According to ICSC generated directly and indirectly by data, the state revenue from shopping centers include: VAT from this sector in Poland amounted to amounted to over PLN 19 billion in 2016 and accounted for over 15% of the entire VAT revenues.
56 Socio-economic significance of development of modern retail space in Poland • Income from personal income • Excise tax on tobacco and tax from people employed in alcohol products sold in retail shopping centers, companies centers. Additional excise operating these facilities, and revenues are generated by gas construction companies at the stations operating at some construction stage. shopping centers.
• Income from corporate income tax (CIT) in respect to owners of commercial facilities, tenants of space, service companies (facility management, technical service) and development companies.
• Property tax and perpetual usufruct fees.
• Proceeds from the new tax so-called “Minimal levy on commercial real estate”. The new tax is effective from January 1, 2018 and applies to taxpayers owning fixed assets (shopping centers, department stores and other commercial and service buildings) with an initial value exceeding PLN 10 million. The surplus of the value of a fixed asset exceeding threshold of PLN 10 million is taxed monthly at a rate of 0.035%. The tax amount is counted towards corporate income tax.
EY Real Estate 57 08
What is the future ahead of us? Challenges and opportunities
58 Socio-economic significance of development of modern retail space in Poland The world is rapidly changing right in front of our eyes. What seemed to be a distant future is already having a substantial impact on our shopping patterns. Given the changing consumer behaviour, it is the variety of a non-retail offer that is the best gauge of attractiveness of a retail scheme, not the size of the building. Former anchor tenants who no longer guarantee customer inflows to retail properties are expanding their sales models and beginning to use modern sales channels in order to adapt to the market. For leading retailers, an online store is not just an addition, but a legitimate distribution channel. Cashierless shopping and in-store robots are being deployed on the retail market with offerings becoming ever more customized. Personalisation, however, requires a multidimensional analysis of consumer behaviours and most often involves the use of data from mobile phones or payment cards. Consumers also want to access products of interest quickly, which requires modern logistics to maintain sales efficiency.
Demographics also plays a part in market changes. Online retail sales originally developed for the younger generation are evolving to appeal to older customers who are steadily rising in numbers across the society.
The retail market is expanding into ever more segments, becoming strongly intertwined with the logistics and leisure markets. Given the current pace at which changes occur, it is very difficult to foresee what the retail market will look like in a couple of years or more. For the time being, we can only identify some key directions in which the market will evolve.
Katarzyna Kotkowska, MRICS Associate Valuation and Advisory Cushman & Wakefield
October, 2018
EY Real Estate 59 Changes, which have been happening development of new technologies, on the retail market over the last but also with shift of consumer habits couple of years, are very dynamic. particularly of young generations. On the one hand there are a number of challenges, which landlords, On the other hand, such situation asset managers as well as retailers creates many opportunities for have to face and react quickly. They development of companies, which are are primarily related to the pace of able to adopt to these circumstances and take advantage of them.
CHALLENGES / RISKS
1. Market risk by developers, investors and retailers will be also unfavorable and will lower The possible global economic business profitability. slowdown (to 1.7% in 2020 in the Euro Zone) and local economic slowdown 3. Aging of population (3.5% in 2020 compared to 4.6% in 2018) will have negative impact on Poland is one of the countries the labor market, purchasing power, following global trends when it retail sales and in consequence on comes to aging of population. The business profitability of all entities percentage of people, who are getting active on the market. older, is increasing. Their share in population is expecting to reach the 2. Tax and legal risk level of 23% by 2020, 32% by 2030 Tax and legal regulations, which and 43% by 2050. Considering the have been introduced over the last malfunctioning of the public pension two years, have already exerted system in Poland, low pension levels, negative impact on the sector (for as well as different structure of needs example ban on Sunday shopping, of this age group (increased spending tax on commercial properties), and on health), there is a real risk of drop further consequences could be even of domestic demand and retail sales. more severe. It is highly possible that further legislative changes connected with running operations
60 Socio-economic significance of development of modern retail space in Poland 4. Generation change - as shortening of delivery time, are changes of shopping habits key reasons why it is not only young and ways of spending free generations, who are using this type time of shopping channel. This in turn directly impacts demand for retail Generation Y (so called Millennials space, especially in the categories who are people born between 1990 such as household appliances, and 2000) and Z (so called Post- electronics and multimedia. The millennials, who are people born after consolidation process, which has been 2000) have completely different traits observed for over a couple of year of characters and system of values (for example in the food sector) as compared with older generations. This well as optimization and restructuring in turn translates into their distinct process of many retailers, confirms needs and shopping habits. The key the fact, that e-commerce has posed ones include: challenge to traditional retail. Bearing Personalization that in mind. diminishing number of retail tenants will result in declining Many young people divert from quality of retail tenant-mix and their mass, repetitive retailers and service offer to the end-consumer. providers. What they value is standing out from the crowd, which is why they Tenants are not the only group at appreciate possibility to personalize risk connected with e-commerce. their clothes, jewelry or a meal. There Landlords may also be affected as is a risk that some retail chains will the value of their properties could not be able to adjust their offer to drop. Consolidation of the sector these needs, which eventually will or restructuring of retail chains result in substantial drop of turnover. translates into lower demand for retail space and possible decrease of rental E-commerce, retail chain levels. In case of a retailer running optimization and drop of demand for multichannel sales and pays turnover retail space rent, increase of online sales impacts Customers have been getting more negatively instore sales, which and more used to convenient way translates into the lower amount of of shopping, which is supported by rent paid to the landlord. the double-digit growth of online Lack of new technologies sales recorded over the last couple of years. Convenient and wide Shopping centers and retailers, selection of delivery spots as well who are not well equipped with
EY Real Estate 61 modern technologies and are not within catchment area. Unfortunately agile enough to follow the trends there are numerous examples of face substantial risk connected with overscaled schemes, which do not fit customers choosing their competitors. to a particular location. There is a risk Applications, tailor-made offers, use that some of them will be closed or of social media, analysis of footfall will have to change its initial primary flows, and many other tools, enable function. more efficient and effective asset Shopping centers are being management and provide solid ground repositioned to become places where for preparing a better strategy for people spend their free time. They a particular shopping center. integrate local communities. Lack Neighborhood convenience stores of meeting this parameter could posing competition to shopping result in clients’ exodus to multi-use centers schemes, accommodating activities services such as culture, leisure and Convenience means also proximity of entertainment or health. Quality of doing shopping and using services. public spaces and urban landscaping Therefore format of convenience is also very important, which defines stores, which is a small neighborhood the place as a meeting spot. center, comprising of a supermarket and basic services, is gaining on importance and posing a growing competition. This may result in situations that some of poorly positioned shopping centers could lose client base in favor of smaller retail formats. 5. Not staying agile, lack of proper market positioning
Location, local social-economic conditions and competition shall determine positioning of shopping centers. It is asset manager’s duty to adjust the offer to client needs
62 Socio-economic significance of development of modern retail space in Poland NEW POSSIBILITIES / OPPORTUNITIES
Modern technology innovations, wide 1. Positive economic outlook range of competition and changing and effects of 500+ as well as demanding consumers Program force landlords to stay agile and Provided that the Polish economy introduce improvements, which continues growing, along with the meet clients’ expectations, but also global markets, one can expect which allow them to stand out from further positive trends on the labor the rest of the pack, including other market and growth of wages. With existing shopping centers but also low inflation levels, it shall result in face challenges connected with increase of disposable income and e-commerce. purchasing power. Staying agile, anticipating trends 500+ program, which is and using opportunities, increases a governmental social benefit, exerts chances to succeed in the future: positive impact on the retail market.
All of these trends give solid grounds for good outlook for retail sales in shopping centers.
EY Real Estate 63 2. Social shopping center restaurants or chef specials - destination, creating restaurants, which offer dishes for positive, multidimensional different income groups. experiences Another interesting trend, following Shopping centers provide for space popular TV cookery shows, is where clients gather for both business dedicating some space for cookery as well as private meetings. Leisure courses. and entertainment zones in the most modern schemes makes up for 15- Dining offer is complemented by 20% of GLA. a variety of cafes, bakeries or ice cream spots, which over the recent Food court zone years have substantially gained on Major structural shifts are recorded popularity within food court zones. Chain fast Fitness, health and spa food restaurants are still present but they are gradually loosing on The role of fitness clubs within importance. They are also trying to shopping centers have increased adjust their offer to the changing substantially. Especially the fitness consumer habits and offer possibility club chain operators are significant to personalize meals, smart ordering footfall generators. Medical centers methods, wider choice of healthy or have a similar impact. gluten-free food. Wellness, spa and beauty parlors Apart from quick service restaurant have also become popular services zones, shopping centers often accompanying traditional shopping have increasing number of classic center offer spa and wellness.
64 Socio-economic significance of development of modern retail space in Poland Multiscreen cinemas important elements of positioning of modern retail scheme. Large shopping centers still welcome multiplex movie theatres. 80% of movie Additional services theatres are located in this type of objects. Apart from film shows, various Modern social shopping centers offer conferences or cultural events can be a wide and creative offer to their organized there. customers, which is attractive enough so that they don’t need to go to Kids play ground zones competitive schemes. Asset managers and landlords of One of the examples of non-standard shopping centers are fully aware services is concierge. Clients can about the importance of families and place order and shop with a hand free children in their customers’ lives. This option, so that they don’t have to carry is the reason behind development shopping themselves and bags will be and constant improvement of the delivered directly to a customer’s car. offer targeted and adjusted to whole Through concierge clients can also families. Kids play zones are enlarged book a movie or theater ticket, get and their equipment is enhanced, so a cab or have a car washed. that parents can leave their youngsters in good hands for over longer period Services of an image consultant or of time, dwell and can enjoy shopping a personal shopping advisor are plans without any hurry. getting more and more popular.
Unique tenants Entertainment service offer is broadened by Virtual Reality rooms. Among tenants, local brands and unique concepts of well-known retail All of the changes happening within chains are desirable. Anchor tenants shopping centers realm have been are also present, while their exposure implemented with the goal to provide is not as visible as in the case of clients positive experiences, which traditional older generation centers. in turn shall result in their loyalty and The offer is focused on services and a sense of belonging to the place, products that have no alternative in which they will visit on a re-occuring e-commerce business. basis.
Culture Forward-looking landlords, who are consciously shaping shopping center Cooperation of shopping centers with image towards a place where people cultural institutions is also one of the meet and spend time, where retail is elements of building of social galleries. only one of the functions, are likely to Theater performances, festivals, be on a winning position. exhibitions, concerts are currently very EY Real Estate 65 3. Use of technology and social boosts sales in brick-and-mortar store, media especially when offering click-and- collect option. Modern, interactive Bearing in mind millennials’ sales apps have to be seamlessly expectations, and even younger integrated across all the sales generations, both retailers as well as channels. landlords of shopping centers have to embrace modern technologies, if only Touch screens or virtual mirrors, they want to stay in the game. which boost client experience and support sales, are also becoming Omnichannel, which is multichannel a more and more popular feature sales, is currently a standard among present in the stores. the largest retailers. Research confirms that having online store
66 Socio-economic significance of development of modern retail space in Poland Social media are currently considered Large LDC screens are yet another to be the best marketing channel for tool supporting retail sales in modern both retailers as well as shopping shopping centers. centers. Young generations check Asset managers use them for their online reviews and recommendations marketing campaigns, to support prior to making a purchase or a visit retailers operating in particular to a particular place. scheme, or to inform about Contact with clients and appropriate promotional actions and events. marketing campaign allow to build and LCD screens are also important maintain proper client relationships elements of interior design, which and create their loyalty. boost positively image of a shopping center. LED technologies, with Collecting data about footfall well-designed graphic sets can patterns, dwell time, sale conversion create spectacular shows, positively rate, etc. are primary sources for influencing our feelings and emotions. valuable information for retailers and With e-commerce in place for good, asset managers, who want to optimize shopping centers must reinvent sales and tenant-mix. themselves. They are here to stay Beacons are now frequently used to and there is no risk that they will capture footfall data. This combined disappear, however if they want with Big data analytics allow to to compete, they must adjust to collect and analyse information about changing consumer habits and the target groups. This tool has anticipate new trends. It is crucial become a standard market practice. to constantly monitor what is happening and use modern tools and Big Data analytics is also crucial for technologies to own advantage. retailers. They can monitor shopping patterns and adjust to clients’ needs, by personalization and special dedicated offers.
EY Real Estate 67 15 years with PRCH
2010 The headquarters of the association’s office moved to Nowogrodzka street in Warsaw. Start of the PRCH Retail Awards competition and the first PRCH Retail Gala Awards. Co-organisation of ICSC European Retail Asset Management Conference in Warsaw. 2003 Organisation of the first Study Tour to Great Britain. Initiative of the PRCH establishment. Start of the PRCH Tennis League, the Shopping Center Certified Director Program, PRCH Business Forum and PRCH HR Business Forum. 150 member companies.
2009 Start of work on the PRCH Database, footfall and turnover index in shopping centers. The beginning of work on the PRCH Code of Good Practices. Establishment of the PRCH Retail Research Forum 2005 and first RRF report. Polish Council of Shopping Centers 86 member companies. association (old logo). Stephen Pragnell became first President. 2008
Anna Szmeja-Kroplewska became the First industry meetings of the business mixer type and General Director. organisation of the first educational meetings PRCH Seminars. Building a knowledge base and a catalogue of shopping centers in Poland. Change in the position of the PRCH President. Patrick Delcol becomes the 2006 new president. 51 companies are members of the association. First coordinated actions promoting Polish retail market on Mapic fair in Cannes. 2007 PRCH Meeting Point / Polish party at Co-operation with the ICSC European Conference in Mapic. organisation an international conference in Warsaw. By 2012, 42 member companies. Undertaking activities in the field of Public Affairs and lobbying for the act on creation and operation large-scale shopping facilities (WOH). 47 member companies.
68 Socio-economic significance of development of modern retail space in Poland 2018 2011 New form of ReDI fair. First Shopping Centers’ First edition of the PRCH Retail Horizons conference. Directors Forum in Poland. Start of the PRCH Academy. Online access to the full 240 member companies. professional catalogue of shopping centers. 180 member companies.
2017 Co-organisation of ICSC international conference 2012 in Warsaw. Creation of the ReDI warehouse. Presentation of the PRCH Code of Good Practices. Continuation of the Public Affairs activities. Organisation of postgraduate studies in Solvay. 240 member companies. 193 member companies.
2016 2013 Lobbing and Public Affairs activity on trade restriction on Sundays and retail sales tax. First PRCH Retail Trends conference. The pioneering Organisation of the first Safety of Retail Facilities study of the ROPO effect. Congress. Children-friendly shopping centers 200 member companies. report publication. 220 member companies.
2014 2015 First edition of the ReDI fair in the National Stadium Radosław Knap is becoming a new General Director in Warsaw. Retail streets, analysis, strategy and 215 member companies potential Report. 221 member companies.
EY Real Estate 69 70 Socio-economic significance of development of modern retail space in Poland MEMBERS SUPPORTING PRCH
Asset managers (fund management, property management, asset management, technical management, facility management) Investors Banks and financial institutions Property owners and developers General contractors
• ACTEEUM CENTRAL EUROPE SP. Z O.O. • Grupa Napollo • AEW CENTRAL EUROPE SP. Z O.O. • INGKA CENTRES • AMG DEVELOPMENT SP. Z O.O. SPÓŁKA • IMMOFINANZ SERVICES POLAND SP. Z O.O. KOMANDYTOWA • JLL • APOLLO-RIDA POLAND SP. Z O.O. • KLEPIERRE MANAGEMENT POLSKA SP. Z O.O. • APSYS POLSKA S.A. • KNIGHT FRANK SP. Z O.O. • ATRIUM POLAND REAL ESTATE MANAGEMENT • LCP PROPERTIES SP. Z O.O. SP. Z O.O. • LIEBRECHT AND WOOD POLAND SP. Z O.O. • BIELSKO BUSINESS CENTER 3 SP. Z O.O. • MASTER MANAGEMENT SP. Z O.O. • BLUE CITY SP. Z O.O. • MAYLAND REAL ESTATE SP. Z O.O. • BNP PARIBAS REAL ESTATE POLAND SP. Z O.O. • mBank Hipoteczny SA • BSC REAL ESTATE ADVISORS • METRO PROPERTIES SP. Z O.O. • CARREFOUR POLSKA SP. Z O.O. • METROPOLITAN INVESTMENT SPÓŁKA • CBRE GLOBAL INVESTORS POLAND Sp. z o.o. AKCYJNA • CBRE SP. Z O.O. • Mitiska REIM • CEETRUS (Immochan Polska Sp. z o.o. ) • Multi Poland Sp. z o.o. • Centerscape Investments Poland Sp. z o.o. • NEINVER POLSKA SP. Z O.O. • COLLIERS INTERNATIONAL POLAND SP. Z O.O. • NEPI Rockcastle • CPI POLAND SP. Z O.O. • NEWBRIDGE POLAND SP. Z O.O. • CREAM SP. Z O.O. • PKO Towarzystwo Funduszy Inwestycyjnych S.A. • Cromwell Poland SP. Z.O.O. • POLSKIE KOLEJE PAŃSTWOWE S.A. • CUSHMAN & WAKEFIELD POLSKA SP. Z O.O. • Pradera Management Poland Sp. z o.o. • DEKADA REALTY SP. Z O.O. • PricewaterhouseCoopers Sp. z o.o. • ECC REAL ESTATE SP. Z O.O. • Prime Kapital • ECE PROJEKTMANAGEMENT POLSKA SP. Z O.O. • PRÔM | PEAKSIDE ROS OUTLET MANAGEMENT • ECHO INVESTMENT S.A. • RANK PROGRESS S.A. • EPP Sp. z o.o. • SAVILLS SP. Z O.O. • Estate Fellows Sp. z o.o. S.K. • SESCOM S.A. • FORTIS CENTRUM ARDEA KS SPÓŁKA Z • SNK Investments Sp. z o.o. OGRANICZONĄ ODPOWIEDZIALNOŚCIĄ SPÓŁKA KOMANDYTOWA • TK POLSKA OPERATIONS S.A. • FORUM GLIWICE SP. Z O.O. • TREI REAL ESTATE POLAND SP. Z O.O. • Getin Noble Bank SA • TRIGRANIT DEVELOPMENT POLSKA SP. Z O.O. • Ghelamco Poland Sp. z o.o. • UNIBAIL-RODAMCO-WESTFIELD • GLOBE TRADE CENTRE S.A. • UPSIDE PROPERTY MANAGEMENT SP. Z O.O. • GREM Gemini Holding Sp. z o.o. Sp.K. • WHITE STAR REAL ESTATE SP. Z O.O. • WOMAK HOLDING S.A
EY Real Estate 71 MEMBERS SUPPORTING PRCH
Tenants (stores, brands, retail chains, franchise)
• 5àsec (EBS S.A.) • MEDIA-SATURN HOLDING • Abra S A POLSKA SP. Z O.O. • AMREST SP. Z O.O. • ORDIPOL SP. Z O.O. • APART SP. Z O.O. • P4 SP. Z O.O. • APPLE POLAND SP. Z O.O. • PAWO - MEN SP. Z O.O. SPÓŁKA KOMANDYTOWA • BC CLUB SP. Z O.O. • PBH S.A. (Quiosque) • CAMAIEU POLSKA SP. Z O.O. • PEPCO POLAND SP. Z O.O. • CASTORAMA POLSKA SP. Z O.O. • ROSSMANN SUPERMARKETY • CINEMA 3D SPÓŁKA AKCYJNA DROGERYJNE POLSKA SP. Z O.O. • CITYFIT SP. Z O.O. • SALAMANDER-POLSKA SP. Z O.O. • DEICHMANN-OBUWIE SP. Z O.O. • SIMPLE CREATIVE PRODUCTS S.A. • ETAM POLAND SP. Z O.O. • SMYK S.A. • EURO-NET SP. Z O.O. • SOLAR COMPANY S.A. • FOTOJOKER SP. Z O. O. • Subway Vermietungs- und • H & M HENNES & MAURITZ SP. Z O.O. Servicegesellschaft m.b.H • JERONIMO MARTINS DROGERIE I • TCHIBO WARSZAWA SP. Z O.O. FARMACJA SP. Z O.O. • Telakces.com Sp. z o.o. • JPG SP. Z O.O. • TELETORIUM SP. Z O.O. • KAPPAHL POLSKA SP. Z O.O. • TJX POLAND SP. Z O.O. • KAZAR Footwear Sp. z o. o. • Top Secret Sp. z o.o. • KOLPORTER SP. Z O.O. S.K. • VAN GRAAF GMBH SPÓŁKA • Leroy Merlin Polska Sp. z o.o. KOMANDYTOWA • LPP S.A. • VISION EXPRESS SP SP. Z O.O. • Marketing Investment Group S.A. • VISTULA GROUP S.A. • MAXI ZOO POLSKA SP. Z O.O. • YES BIŻUTERIA SP. Z O.O. • MCDONALD’S POLSKA SP. Z O.O. • ZIBI DETAL SP. Z O.O. • Mediaexpert (Terg S.A.) • ŻABKA POLSKA SPÓŁKA AKCYJNA
72 Socio-economic significance of development of modern retail space in Poland MEMBERS SUPPORTING PRCH
Consulting companies, producers and service providers for the shopping centers’ industry that do not operate in previous categories.
• Andrzej Lulka i Wspólnicy Kancelaria • DATAWISE SP. Z O.O. SPÓŁKA Prawna sp.k KOMANDYTOWA • ACELER SP. Z O.O. • DEKRA CERTIFICATION SP. Z O.O. • APCOA PARKING POLSKA SP. Z O.O. • DENTONS • ARCADIS SP. Z O.O. • DLA PIPER • ARCISZEWSKI MAREK “MA MANAGEMENT” • DOMAŃSKI ZAKRZEWSKI PALINKA SP. K. • ARGON LEGAL ADAM MIŁOSZ I SŁAWOMIR • DUSSMANN SERVICE POLSKA SP. Z O.O. LISIECKI SPÓŁKA KOMANDYTOWA • EMMERSON EVALUATION SP. Z O.O. • ATALIAN POLAND SP. Z O.O. • Ernst & Young sp. z o.o. • AVALON REAL ESTATE SP. Z O.O. SPÓŁKA Corporate Finance sp. k. KOMANDYTOWA • ESRI Polska Sp. z o.o. • BIENIAK SMOŁUCH WIELHORSKI WOJNAR • EURONET POLSKA SP. Z O.O. I WSPÓLNICY SPÓŁKA KOMANDYTOWA • EUROPTIMA SP. Z O.O. • BNT NEUPERT ZAMORSKA & PARTNERZY SPÓŁKA JAWNA • EVENT WORLD • BOIG THE BLUE OCEAN INVESTMENT • EVER GRUPA SP. Z O.O. GROUP SP. Z O.O. • FOCUS AGENCY SP. Z O.O. • Branch Brothers Sp.z o. o. sp. k. • GFK POLONIA SP. Z O.O. • CALLA S.C. JOLANTA GRYCZYŃSKA, • GIS EXPERT SP. Z O. O. ROBERT GRYCZYŃSKI • GRANT THORNTON FRĄCKOWIAK • CANVAS SP. Z O.O. Sp. k. SP. Z O.O. SPÓŁKA KOMANDYTOWA • CERTYNERGIA SP. Z O.O. • GRUPA ENERGIA GE SP. Z O.O. SP. K. • CHAPMAN TAYLOR INT ERNATIONAL • HAYS POLAND SP. Z O.O. SERVICES SP. Z O.O. • HEXA TELECOM SP. Z O.O. • CITY PARKING GROUP SPÓŁKA AKCYJNA • HILL INTERNATIONAL SP. Z O.O. • CIVIS POLSKA SPÓŁKA Z OGRANICZONA • HRK S.A. ODPOWIEDZIALNOŚCIĄ • IMPEL SA • CLIFFORD CHANCE, JANICKA, KRUŻEWSKI, • IMS S. A. NAMIOTKIEWICZ I WSPÓLNICY SP. K. • INEOGROUP SPÓŁKA AKCYJNA • CLIVET SPA • Inexled • Columbus Pro Sp. z o.o. • INQUIRY SP. Z O.O. • Corner for kids (Nowa Szkoła Sp. z o.o.) • INTELLIGENT TECHNOLOGIES S.A. • CRESA POLSKA SP. Z O.O. • INTERPARKING POLSKA SP. Z O.O. • Crido Sp. z o.o. • INWEMER SERWIS SP. Z O.O. • DAPR SP. Z O.O. • i-Systems sp. z o. o. sp. k.
EY Real Estate 73 MEMBERS SUPPORTING PRCH
Consulting companies, producers and service providers for the shopping centers’ industry that do not operate in previous categories.
• KANCELARIA ADWOKACKA RYCHŁOWSKI • Premier Tax Free Polska Sp. z o.o. & URBAŃSKI SP. PARTNERSKA • PROMEDIA JERZY OSIKA • KANCELARIA RADCÓW PRAWNYCH • PROPERTYVIEW SP. Z O.O. I DORADCÓW PODATKOWYCH FERRETTI BĘBENEK I PARTNERZY • PRZEDSIĘBIORSTWO WIELOBRANŻOWE IPB SP. Z O.O. • KOLORYT PLUS SP. Z O.O. • QPONY.PL SP. Z O.O. • KOTA KATARZYNA WOSIEK • RĄCZKOWSKI, KWIECIŃSKI ADWOKACI • KR GROUP SP. Z O.O. SPÓŁKA PARTNERSKA • LUG LIGHT FACTORY SP. Z O.O. • REDCOMM SP. Z O.O. • Łukasz Ochman KANCELARIA ADWOKACKA • RETAIL CONCEPT SP. Z O.O. • MAGNUSSON, TOKAJ I PARTNERZY ADWOKACI • RETAILIC SP. Z O.O. I RADCOWIE PRAWNI SPÓŁKA PARTNERSKA • Roboty i spółka (BIEŃKOWSKI KRZYSZTOF • MAKOLAB S.A. HENRYK ICOUNT) • MALLSON POLSKA SP. Z O.O. SP. K. • RUUKKI POLSKA SP. Z O.O. • Mark2 Corporation FM Poland Sp. z o.o. • SECURITAS POLSKA SPÓŁKA Z OGRANICZONĄ • MARRO SP. Z O.O. ODPOWIEDZIALNOŚCIĄ • MBE GROUP SP. Z O.O. • Selectivv Europe Sp. z.o.o. • MEDIA ON SP. Z O.O. SPÓŁKA KOMANDYTOWA • SENTE - SYSTEMY INFORMATYCZNE SP. Z O.O. • Mediadem Consulting • Solix Sp z o.o. Sp. k. ELŻBIETA DMOWSKA-MĘDRZYCKA • Sołtysiński Kawecki & Szlęzak – Kancelaria • MESH METRICS SP Z O O Radców Prawnych i Adwokatów Spółka • Microlog AS komandytowa • Millennium Goodie Sp. z o.o. • SQUIRE PATTON BOGGS ŚWIĘCICKI KRZEŚNIAK SP. K. • MK Illumination Polska Sp. z o.o. • STARNET TELECOM SPÓŁKA Z O.O. • MULTIDEKOR PROFESSIONAL SP. Z O.O. • SUPREMIS SPÓŁKA Z O.O. • MWZ Group Monika Woźniak-Zawioła • TIDE SOFTWARE SP. Z O.O. • NETIA S.A. • TOOLBOX MARKETING SPÓŁKA Z O.O. • New Amsterdam Sp. z o.o. • TOP-KEY ANDRZEJ GUZIŃSKI • OOH MEDIA POLSKA SP. Z O.O. • Trebbi Polska sp z o.o. • OVE ARUP & PARTNERS INTERNATIONAL LIMITED SP. Z O.O. ODDZIAŁ W POLSCE • TRIAS S.A. • Panasonic Marketing Europe GmbH (sp. z o.o.) • WKB WIERCIŃSKI, KWIECIŃSKI, BAEHR SPÓŁKA oddział w Polsce KOMANDYTOWA • Paweł Zadrożny - Świat Filmu SF • Wolf Theiss P. DASZKOWSKI SPÓŁKA KOMANDYTOWA • PERFECT LIGHT ILLUMINATION SP. Z O.O.
74 Socio-economic significance of development of modern retail space in Poland Polish Council of Shopping Center Polish Council of Shopping Centers was established in 2003 and is the biggest organization in Poland that gathers brands, property owners and managers and companies related to the shopping centres and high street industry.
The PRCH is a not-for-profit association which main goal is to support development of companies and professionals operating on the retail market in Poland through education, organisation of prestigious industry events (ReDI fair, PRCH Retail Awards), networking, issuing and updating professional reports.
PRCH represents retail industry in talks with Polish and European institutions, monitor and give opinion on trade and commercial properties regulations, is a partner of the International Council of Shopping Centers (ICSC) and a member of European Property Federation (EPF) in Brussels.
Polish Council of Shopping Centers 50/450 Nowogrodzka St., 00-695 Warsaw www.prch.org.pl EY Real Estate 75 EY | Assurance | Tax | Transactions | Advisory
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