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News Release

Warsaw

​Existing or newly-developed shopping centres? Which centre to choose?

Author: Anna Wysocka, Head of Retail Agency at JLL


​Shopping centres differ in terms of location, size, age, positioning and attractiveness. Nevertheless, the main factor that distinguishes a particular shopping centre is the tenant mix. The time for large projects developed without prior thorough research or another schemes in locations with already high retail density has long since gone. Today, prime shopping centres with an established market position or retail projects in less dense locations are the most sought-after.

Consumers value their time and are willing to do shopping in a conveniently tailored project with a brand portfolio that meets their shopping needs. The centre's strength is defined by factors such as the number of popular brands, its market positioning adjusted to the preferences and expectations of target groups as well as its uniqueness and retail and entertainment proposition. 

Old or new?

Due to growing competition and large supply of newly-developed shopping centres, tenants must often answer a difficult question regarding the selection of a new location for their store. They must decide - is it better to lease space in an existing centre with a proven track record or occupy space in a newly-developed scheme?

The situation becomes even more complicated if it happens to be a new brand entering the Polish market, a brand entering a new city or a retailer considering expansion in this particular agglomeration. Some brands enter shopping centres with an established position (Superdry in Złote Tarasy) while other select new, promising locations (Forever21 in Galeria Północna). Owners of shopping centres like to attract new brands as this generates interest among consumers. It is good when an owner obtains a completely new brand or a brand launching its first store in a given city. Sometimes it happens that tenants re-locate their stores from high-streets into well- established shopping centres, for example, Rafał Starski, an optician's in Galeria Malta.

We look over the turnover

A tenant wishing to precisely estimate future turnover might wish to analyze the efficiency of an established shopping centre by focusing on its results and position. In the case of newly-developed projects, it is prudent to analyze market density, the developer's history and focus on other objects that would be in direct competition. It is worth underlining that newly-developed centres will require more time in order to achieve full potential on markets with a high density such as Poznań, Wrocław and Zgorzelec.

In the case of existing shopping centres a tenant can, in cooperation with the landlord, analyze the centre's turnover, responsibility and results. Furthermore, they should be able to estimate their future turnover by analyzing the number and value of transactions. Analyses of receipts is a common practice in stores and restaurants as they allow tenants to monitor competition and assess approximate results of a given unit.

The landlord might share with the interested tenant the average turnover from a given sector and thorough consumer research on the popularity of a particular shopping centre. A future tenant of an existing centre might also analyze the centre's footfall – also in selected areas (such as the number of tenants entering through the particular entrance).

Research – not only periodically

When it comes to newly-developed shopping centres, it is of crucial importance to conduct thorough research into the centre's impact, competition as well as purchasing power. There are markets that lack new shopping centres (shopping centre density in Warsaw – 447 sq m per 1,000 inhabitants, while in its Białołęka district it totals only 202 sq m per 1,000 residents) as well as markets which are well-served by retail schemes (Poznań – 607 sq m per 1,000 inhabitants). Nowadays, the retail market in Poland remains highly competitive and each decision to develop a new project is a more significant risk. Pre-letting, that is to say, verifying initial interest among tenants, is becoming standard market practice among developers planning the construction of a new scheme. If the tenants look sympathetically on a new project and indicate their interest, the owner will have the green light to commence development works.

Owners of shopping centres developed in very competitive markets are in a more difficult situation. The key element here is time. It is important both during the commercialization and "start-up" process that the shopping centre develops the scheme's brand with the use of marketing promotions.

With existing shopping centres, marketing operations undergo regular evaluation from tenants in a similar vein to the quality of the centre and cost management. On markets with fierce competition there is no place for mismatched operations – innovations, constant enhancements and dialogue with the centre's clients are 'must-have' elements of a marketing strategy.

A well-thought- out strategy

Recommercialization processes in shopping centres will become more common due to the growing maturity of the market. According to JLL, more and more shopping centres operate for longer than 10 years. This means that they will need particularly active management as well as changes in their tenant portfolio to maintain their attractiveness and obtain new clients. In such cases, investors usually select one of the following scenarios: maintain the project unchanged, conduct active recommercialization or launch either an extension or remodeling/redevelopment of the shopping centre. Benefits from extension include an extensive retail proposition, higher footfall, improvement of competitiveness and greater impact/catchment area. Extensions, remodeling and redevelopments are complicated processes conducted in operating shopping centres.

Issues related to extension/remodernization, recommercialization and remodelling are faced mainly by owners of older shopping centres, which often include shopping malls developed in excellent locations with loyal clients and huge potential. Examples of excellent recommercialization strategies are Dom Handlowy Klif in Warsaw and Galeria Malta in Poznań.

Galeria Malta is an object with an established position on the retail map of Poznań which is able to change in accordance with client expectations. Furthermore, it is the most popular shopping centre for the residents of Poznań. Most clients of Galeria Malta are willing to take a 30 - minute drive in order to do their shopping in their favorite location. The centre is excellently managed and has a growing number of loyal clients. This is a unique situation on the Poznań market as there is an abundance of shopping centres and new projects continue to be developed. In recent years, Galeria Malta has managed to effectively create a portfolio of premium brands including Lacoste, Tommy Hilfiger, Marc O'Polo, Massimo Dutti, Henry Lloyd and GANT, the brand's first store in Poznań. The landlords conduct negotiations with more premium brands ,and tenants from this sector are always willing to join a portfolio of stores that are thriving in the centre.

An important choice

Retailers continue to develop dynamically but tenants are increasingly selective when it comes to the standard and location of both existing and newly-developed shopping centres. As a result, they carefully consider leasing more units. In the next two years we might expect a significant increase in the supply of new retail space as a number of large-scale projects enter markets in major Polish cities. This is an important time and it will confirm the leading market positions of the strongest and best managed shopping centres. Carefully thought-out commercialization and recommercialization strategies, regular analyses of consumer preferences, extensive entertainment offer for the whole family and, above all, fulfillment of clients' expectations are elements that are crucial in order to maintain good market position and become successful.

Author: Anna Wysocka, Head of Retail Agency at JLL