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Leaders from the international retail real estate market descended upon the Palais de Festivals in Cannes last month. Polish developers, though cautious, were more upbeat than most
Thousands of market experts, developers, investors and journalists gathered in the French city of Cannes in November to participate in the 14th annual MAPIC international market for retail real estate, arguably one of the most important events on the industry's calendar. The leading players in the Polish retail property market were also there, presenting their investment plans for the upcoming years and offering their perspectives on some of the most recent retail developments and trends. Much of the focus at this year's MAPIC was on the global economic crisis. Indeed, the question of how the crisis would affect the real estate industry dominated the event, but developers doing business in Central and Eastern Europe seemed to be much less concerned about the market's future than their Western counterparts. While at the fair, Lokale Immobiliacontacted a number of major retail companies from the Polish market. All conceded that the economic downturn would bring some changes to the market, but remained upbeat about their operations in the country and their bulging pipelines seemed to be a clear sign of that optimism. Uncertain future Most participants at MAPIC 2008 admitted that the turmoil in the international financial markets would have strong ramifications for the retail property sector and marked the beginning of a shift for retail developers. "We are now on a bridge between the past and the future, but no one really knows what this future is going to look like," said Yann Guen, vice president of the board at Mayland Real Estate. "What is certainly changing is that developers are becoming less idealistic and more realistic in what they are doing," he added. That realism stems in part from developers' growing difficulties in securing funds for their new projects. "Developers now have more and more problems obtaining bank loans since lending institutions now require down payments of up to 30 percent. As a result, developers are increasingly looking for alternative ways of securing financing, turning, for instance, to mezzanine funds," Piotr Kaszyński, a partner at Cushman & Wakefield Polska, said. Katarzyna Jabłońska from the company's retail department added that there could be delays in the delivery of some of the retail projects already announced in Poland, especially those whose completions were scheduled for 2010 and later. According to Ron Epstein, executive vice president at Polimeni International, a correction in developers' plans would actually be healthy for the market and mark a return to a situation in which project development is closely related to actual demand for retail space. "Developers will now be building shopping centers when cities need them and not when [the developers] have money to go on a spending spree, which was sometimes the case in recent years," he said. Market resilience In Poland, and in its secondary and tertiary cities in particular, demand for modern office space should continue over the next couple of years, which should in turn stimulate demand for new retail investments, according to developers and market experts. The plethora of new Polish retail projects that was showcased at MAPIC this year seemed a good indicator of future growth. During the fair, London Cambridge Properties and Ficon Consulting & Real Estate, for example, officially announced the signing of a framework agreement for the development of 25 shopping centers in Poland within the next 10 years. The first to be developed will be located in the Western city of Gorzów Wielkopolski and is scheduled for completion in 2010. All the leading players in the Polish retail market had projects to display that were either planned or under construction. Among these were: Caelum Development, presenting its Galeria Lumina in Jastrzębie Zdrój; TK Development, touting its multi-use Stocznia project in Gdańsk; and Globe Trade Centre, promoting its Galeria Jurajska in Częstochowa. Mayland Real Estate, for its part, revealed some details of its investment plans for the next few years, including new large retail projects in Warsaw and Wrocław. According to a recent report by King Sturge, retail markets in Europe's emerging economies, unlike those in the big economies of the UK, Germany, France, Spain and Italy, are expected to remain fairly resilient in 2009. "Emerging economies such as the CzechRepublic, Poland, Romania, Slovenia and Slovakia will see positive economic growth. Consumer spending growth and the need for modernization will help support the retail property market in these countries," it said. "I am confident about the future," said Mayland's Guen, adding that the Polish retail market still had a lot of potential and remained attractive for developers with new visions. "In the retail real estate market, saturation is a forbidden word. It is not a time to panic but [rather] to try to imagine the future and be creative," he said. Crisis strategies Although the global financial crisis has not yet kept domestic or international retail players from announcing new projects in Poland, many of the developers present at MAPIC conceded they were taking the new circumstances into consideration while working on future plans. "We are focusing on tenants leasing large retail spaces and offering relatively low prices rather than those who establish luxury boutiques. This, in my opinion, is the right strategy for more difficult times," said Marta Gołębiowska, a leasing expert at Helical Poland. The company will open two new shopping centers in 2010, SośnicaPark (near Gliwice) and TurawaPark (near Opole), which will provide 67,000 and 41,000 sqm of retail space respectively. Sybilgroup, for its part, has already begun construction on the second phase of its MaximusInternationalFashionWholesaleCenter in Nadarzyn, which will consist of four new buildings comprising 92,000 sqm of retail space during 2008 and 2009. According to the company, Maximus will attract tenants who are likely to be doing well in the near future. "We are viewing this project as a gateway to Eastern Europe for small manufacturers who can offer good quality and inexpensive products," said Amir Bushansky, vice president for global marketing at Sybilgroup. "Those [manufacturers] will survive the current financial crisis, especially since we predict that [outdoor] bazaars will cease to exist in Central and Eastern Europe over the next few years following the region's modernization and their clients will start visiting shopping centers instead," he added. Source: Warsaw Business Journal (www.wbj.pl)
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