Poland goes hunting for mall sites

With Warsaw's retail market nearly saturated, developers here - as in other parts of Eastern Europe - are looking beyond the city center to new shopping mall locations in provincial towns.

"Many investors have decided it's better to invest in a shopping center in a small town where it will have no competition than in the 15th mall in Warsaw or Prague, where its chances are hard to predict," said Agata Sekuła, the head of the retail department at the Jones Lang LaSalle property consultancy in Warsaw.

According to most experts, Warsaw has enough large-scale enclosed malls; it boasts 1.1 million square meters, or 11.8 million square feet, of modern shopping-floor space.

This year will see only one addition: the Złote Tarasy, or Golden Terraces, center, developed by ING Real Estate in the capital's heart just across from the main railway station. Its completion has been long anticipated, and its web-like glass roof already is a city landmark. Retailers are to fill 63,000 square meters, or about a third of the total space in the €400 million, or $511 million, development.

In the near future, "there won't be any new large shopping centers in Warsaw," according to this year's report by the property consultancy CB Richard Ellis. "Investors will focus on provincial cities because of higher demand and smaller saturation of the market."

Outside Warsaw, the largest projects in Poland this year include the Manufaktura center, developed by Apsys, in Łódź, Poland's second- biggest city. Some 19th-century textile factories totaling 109,000 square meters have been renovated to house shops, hotels and business facilities.

Also, Galeria Krakowska, a 60,000- square-meter development near the central station in Kraków, has been built by ECE-Projektmanagement.

The Richard Ellis report said smaller cities, with 400,000 inhabitants or fewer, were of particular interest to developers. For example, the U.S. company Polimeni has completed projects in Gniezno and Ostrowiec Swiętokrzyski, which each have about 70,000 residents. Polimeni also is investing in a shopping center in Słupsk in sparsely populated northern Poland.

But political factors like strong sentiment against foreign investors and a willingness to protect local businesses could slow development.

"Many communities feel they have enough of large-scale investment, and they don't want to have more not to hurt the Main Street shopkeepers," said Joseph Karp, president of Apollo Rida in Warsaw, which manages more than 30 centers in Poland. "There is a desire on the part of developers to build more, but cities will keep it at a slower pace."

Similar trends have emerged in other new Central European members of the European Union. The 55,000- square-meter Centrum Chodov opened in Prague late last year, but two other projects - Inter Ikea and Centrum Cerny Most - are planned for Brno and Ostrava in the eastern part of the Czech Republic.

Overall, shopping center growth in Poland, a country of 38 million people, continues to be strong. It is one of six European countries where shopping center space scheduled to open between January 2006 and December 2007 exceeds a million square meters, according to a report in March by the Cushman & Wakefield real estate agency. That will represent about a 26 percent increase in the current 4.3 million square meters of retail space.

Poland's economy has accelerated, with this year's growth projected at 5 percent on top of last year's 3.2 percent. And retail sales are on the rise - up 9.4 percent in the first quarter from a year earlier - so demand for new locations from international and domestic chains remains strong.

Today there are 111 square meters of shopping center space for every 1,000 inhabitants in Poland, but the European Union average is far larger - 171 square meters.

"It's a very young market which has undergone a rapid expansion over the last years," said Piotr Kaszynski, head of the retail department at the Warsaw branch of Cushman & Wakefield. "The main driving factors are consumers' growing purchasing power and a large interest from retailers."

But some caution that increasing competition and rising consumer sophistication mean developers need to be careful. "Times when one could make profit on a hastily built, badly managed development are gone," Kaszynski said. "Now clients want a convenient location, parking space, good mix of tenants and entertainment component."
Source: By Beata Pasek, International Herald Tribune