Author: Anna Merta, Leasing Director Retail, Globalworth Poland

If retail buildings are to be competitive, they have to match what they offer to the new circumstances, behaviors and expectations of their customers. The pandemic has only hastened certain processes that first began long before.  The key to success is to specialise, which is what Globalworth has been concentrating on for its mixed-use centres with large retail and service.

Regardless of the situation with Covid-19, the retail market in Poland is changing rapidly. This is because of our style of life, the growing wealth of society, as well as with changes in consumer habits and more broadly how people spend their free time and do their shopping. Undoubtedly, the pandemic has made its mark, however over the last few years, a few key events have taken place that also had an effect.

Market saturation

Around 6-7 years ago, it could already be seen that the market was becoming saturated. Despite there being numerous shopping centres in regional towns and cities, still more were being built. The rise in investment was not however matched with a rise in the number of local residents or of tourists. This was particularly clear in cities like Wrocław and Poznań.

Sunday trade ban

The event that had one of the most significant effects on the branch was the imposition firstly of a limitation on Sunday trading that was later to practically become an outright ban.  For many centres, this required them to completely reassess their business models and some of them were totally transformed. Above all, leisure and recreation areas were added or were enlarged as such sections were not covered by the restrictions – shopping centres were not only to be places to do your shopping but somewhere to meet up and spend your free time. The properties with retail sections owned by Globalworth have high footfall throughout the week due to their central locations in regional cities and towns, their tenant mix, their range of services and their fully leased office sections. These centres were not severely affected by the restrictions.

E-commerce

E-commerce has a huge effect on retail trade and the pandemic has only accelerated its development. It is projected to continue to grow at a double-digit pace for the next few years. Already annual revenues from online trade-in Poland is around EUR 15 bln. Despite this, the online and offline sales channels complement each other. Despite e-commerce taking a larger share of the market, it cannot replace traditional shopping nor the emotions that accompany it, the so-called shopping experience. It is the experience that is becoming more important to us and not the possession of something.

Fewer brands

In Poland, we have seen over the last few years a complete reshuffling of both the fashion and grocery retail markets. Every year, fewer brands appear interested in expansion and at the same time every year, a not-insignificant number decide to limit their activities in Poland or close up altogether. For many of them the market turns out to be too competitive or too fragmented and the brand saturation is too high to be able to compete with other firms, especially with home-grown companies.

Smaller formats

The Polish market has been evolving to meet our shopping habits. This can clearly be seen in one of the most mundane parts of our lives, which is when we do our daily shopping for groceries. We’ve moved from hypermarkets to local supermarkets and small convenience stores within the buildings in which we live. This can also be seen elsewhere: Polish people ever more often avoid large format stores and prefer to go to cosier department stores that are easily accessible in the centre of town or to retail parks nearby their estates. What is most important to us is the time, the quality and the convenience of our shopping.

Mixed-use

This is something that both developers and investors have seen and they are frequently deciding that their projects should be mixed-use combining retail and services with offices and sometimes even a residential section. From a business point of view, it allows the building’s owner to diversify their revenues, while at the same time creating an attractive project that is open seven days a week. Because of this Globalworth’s properties coped better with the pandemic, since they are buildings that are visited every day and not just at the weekend.

COVID-19

The coronavirus outbreak and the resulting closure of the economy proved many of the assumptions that had been made to be right. The consequence was considerably lower footfall for retail centres with fewer brands looking to expand, this, in turn, had a major effect on negotiations between landlords and tenants.  But there are also chains that are looking for an opportunity in this situation to acquire attractive locations.

The key is to specialise

Our response to the rapid changes and challenges described is to specialise. This was our basic conclusion when we examined the situation on the market and what our centres (Hala Koszyki in Warsaw, Renoma in Wrocław and Supersam in Katowice) had to offer. For this we conducted very detailed studies, looking at the local markets, our competition, the profile of our customers and their needs. We attempted to adapt what our centres offer to other neighbouring retailers while at the same time ensuring they met the needs of their customer base as revealed by the study.

Long gone are the times when you could use the same tenant mix for different centres. The tenant selection should result from a detailed market analysis that takes into account many factors such as the location, the property’s potential and its context.

Hala Koszyki in Warsaw

These days customers are looking for places that have character, their own specific character and climate, a well-defined identity and a unique range of goods and services. These are some of the reasons for the huge success of Hala Koszyków in Warsaw. Being the first food hall in Poland, it has become the benchmark and inspiration for many other centres of its type in the country. It specialises in food and restaurants based on local and original concepts. It offers food from around the world in a wide range of different price brackets from street food to premium restaurants and it creates a testbed in Warsaw for different tastes and culinary experiences. When taking on Hala Koszyki, we tried to give it the most diverse character and match what it offers to a wide cross-section of society. We decided to be inclusive and as a result, both students from the nearby University of Technology and families with children will find something there for themselves and so will businessmen and women from the nearby office blocks and hotels, local residents and tourists. Hala Koszyki is after all, according to both the press and guide books, the place to be for anyone coming to visit Warsaw for business or pleasure. It is also a centre for vibrant nightlife, a popular place to meet up in the evening throughout the week and a venue for cultural events. We are continually working on this development and trying to improve it.

Supersam in Katowice

Supersam in Katowice is another example of us, specialising in one of our centres. Knowing that there are a lot of retail centres in the Katowice urban area, we decided to make it into a place to do your daily shopping for a wide range of customers for whom value for money is one of the most important criteria. That’s why popular brands such as Aldi can be found in the centre, as well as Dealz, Hebe, Kik, Rossmann, Pepco and Action. Supersam’s big advantage is also its accessible location in the very centre of the city, which makes it not only a convenient place to shop for residents of Katowice’s city centre but also for people from the entire Katowice urban area.

Renoma in Wrocław

The historic building of the Wertheim department store, which goes back almost 100 years, is today a popular place for people to do their shopping. Nonetheless, during the events of the last few years, we took the strategic decision to transform it, which is now being realised.  Work began at the beginning of last year to adapt the centre to the new circumstances of the market and to ensure that Renoma becomes unique and attractive over the long term.  We definitely do not want to compete with the larger shopping centres. We decided to take a different route by enlarging the office section, choosing a unique range of brands and building up a modern diverse range of food and restaurants. We decided against a traditional food court in favor of original concept restaurants that opened out onto the street and redeveloped pl. Czysty square and opened up pl. Kościuszki. Confining retail and services to the ground floor and the basement level are intended to create a unique tenant mix. For the service section, we are concentrating on those brands that already have a long history with Renoma and are not present anywhere else in the region. Stores that meet daily shopping needs, service points and a medical centre will complete what the centre has to offer. As a result of these changes, Renoma will even better suit its surroundings and be part of the popular trend of renovating shopping streets. It is very important for both new and existing retail centres to be integrated into their cities. Covid-19 has clearly shown that only such formats stand a chance to operate continuously while maintaining relatively high footfall levels over difficult periods.

Locality

In all the examples mentioned, the most important features that we emphasise are our buildings’ localities, their uniqueness and our respect for their traditions and the architecture. We do not try to imitate any other projects with our properties, instead, we use the full potential of their locations and adapt to the needs of local communities and the customers from within the centre itself, for each of these centres has a well-developed office section. This is expressed not only in what is offered but also in the architecture. Hala Koszyki and Renoma are both historic buildings that have been superbly renovated to designs by JEMS, a highly prestigious architectural studio in Warsaw and by Zbigniew Maćków a renowned architect from Wrocław.

Supersam is another building that uses original parts from the former market hall and was designed by the most renowned Silesian architect, Tomasz Konior.

Bold decisions

In light of the changes described, most owners of retail buildings will have to deal with the challenge of what to do for their projects to remain attractive, to pull in customers and to follow the latest trends. I can say that from Globalworth’s point of view, we are in a good position where we are ahead of the current retail trends, having taken some bold decisions well in advance. As a result, today we are already at an advanced stage and we are adapting our properties to the demands of new times. The events surrounding Covid-19 and retail trade conventions have shown that these were the right decisions and that we are heading in a good direction by becoming a pioneer of transforming buildings that have a retail component.

The article appeared in Real Estate Magazine 3/2021.

Polish version: realestatemagazine.pl