Paul Kusmierz, CEO of Master Management Group. Image MMG

Convenience schemes in Poland mean good yields

The Polish real estate segment is changing. What we are seeing, apart from traditional real estate investments in office and retail, is there has been growth in new formats, including mixed-use projects with multifunctional concepts, and a growing potential for small-convenience schemes and retail parks.

By Paul Kusmierz

Looking at shopping habits, the customer experience is more important than ever and it will definitely impact a retailer’s strategy. Online and offline will be a new driver for transforming old and creating new shopping destinations. Taking the above into account, traditional malls are still dominant but future growth will be driven by expansion plans of retailers with strategies suited to smaller purchasing power in small and medium sized towns. Shoppers in these cities are hungry for a modern retail experience, as many of these smaller towns exist.

This is why Master Management Group is consistently pursuing a long-term strategy of adding value and active management of commercial properties, mainly outside of the largest Polish agglomerations. MMG’s shopping center portfolio accounted for 100,000 sq m and we develop four retail plots covering more than 100,000 sq m in total, we have tremendous potential and see many opportunities for their development. Such local convenience assets will definitely increase their share in the market and will be the most defensive parts of the retail sector in 2019 in Poland.

In 2018 we had the largest amount of retail delivered to the Polish market in the last three years. It is 500,000 sq m! What’s important, 40% of the retail space that is yet to be completed consists of small-convenience schemes and retail parks. Going forward, such retail schemes will continue to open in cities with 30,000-100,000 inhabitants. Recently conducted research confirms that even though the strongest development activity may be observed in Poland’s regional cities, retail parks in smaller cities and towns with a population of less than 100,000 are developing strongly throughout Poland.  Undoubtedly, reduced competition, low saturation, and a high purchasing potential are the main drivers of investments in these locations.

We believe that new schemes will also be developed, as further phases of existing projects and a trend in retailing outside of shopping centers give a multitude of opportunities for tenants and investors. For instance, our last acquisition in Poland in 2017 was a portfolio of 11 retail schemes and plots. The deciding factors for the acquisitions were low interest rates, high yields with minimal risks in retail real estate and adequate liquidity. Today, MMG Centers are convenient locations with an interesting tenant mix and potential for expansion.

Retail chains want to increase their presence in a wide variety of projects.  Rather than increasing their presence in traditional malls or regular shops, we have observed a trend for adding non-office functions, including retail to office schemes. In the near future, we are convinced to see meaningful volumes of retail space delivered through mixed-use schemes combining different commercial functions with social, co-working, and public spaces.

The trend is both supported by retailers’ business model, increasingly expanding into new office buildings and great desire for modern facilities introducing an attractive office space with dozens of facilities like health and beauty stores, basic services, and fitness clubs. For example, MMG’s latest mixed-use investment is Hi Piotrkowska 155, a mixed-use complex of three commercial buildings being developed in the heart of Łódź: the complex will consist of two office and retail buildings and the Hampton by Hilton hotel. It will offer 34,000 sq m of commercial space. We will complete Hi Piotrkowska in March 2020, so I expect 2019 will be a busy year.

Sign up for our ACROSS Newsletter. Subscribe to ACROSS Magazine.

Opinion MORE

What are Weekends Made for?

Since the liberalization of opening hours – determined by the “Salva Italia2” decree passed in 2011, during Mario Monti’s legislature – retailers in Italy have been free to open on Sundays and festive days, according to their own commercial strategies.

The Role of the Local Community in Enhancing Retail

In order to survive, shopping centers are beginning to adapt retail, housing cultural, educational, and leisure facilities all under one roof. Since 80% of those visiting malls are Millennials or Gen Z, leisure is a hot topic within retail development.

Specialist Retail Products: the Investors’ Darling

Real estate investors both in and out of Germany rely on specialist retailers and specialist retail parks: They offer constant pulling power, stable revenues, and solid customer footfall – all of which require clearly positioned product and sector concepts, which signal to investors that their investment is both solid and sustainable.

The European Outlet Market is under pressure for innovation

Outlet Centers are still a niche market in the international retail real estate business and an asset class of its own. Today, there are more than 200 outlet centers spread over Europe but there are significant differences regarding the degree of saturation and maturity levels.

What 2019 will hold in store for the retail real estate industry

People say that predictions are hard, especially when they have to be made about the future. Be that as it may, ACROSS asked leading industry-players what to expect from the coming twelve months.

Taking the Plunge: From Shopping Mall to Entertainment Center

For years, malls in the United Arab Emirates have been surpassing each other with endlessly new, breathtaking attractions: With features such as ice rinks in the middle of the desert, aquariums, and roller coasters or an entire VR world, shopping has long since become an experience in this region.