RETAIL DEVELOPERS

GUIDE
Karina Kreja, Associate Director, CBRE:
After two decades of dynamic development the Polish retail market is now mature. Despite increasing competition it still offers considerable
development potential, albeit far more selective than in the past. We address the following publication to both seasoned and future retail
developers to support them in their retail investment plans. It is essential to understand that shopping center planning is a complex process that
requires in-depth knowledge of both consumer and competitive market.

Hanna Bomba-Wilhelmi, CEO, RegioPlan Consulting

Location determines a shopping centres success, but the choice of a right location is only the first step. An in-depth knowledge of the catchment
area is equally indispensable. One step leads to another and each decision determines the range of further alternatives. It is essential for a
developer to embrace this process in its full complexity in order to deliver a successful and durable scheme that will first and foremost serve the
customers well. The fact is, that the consumers determine whether the tenants or the owners of centers will be successful or not.

Dariusz Gardener, Managing Director, ADV POR:

Despite growing competition from the part of other developers, the shopping centers remain very attractive for construction sector. However
this is the market that requires deep expertise especially with regards to the specialized projects. That is why we decided to work with CBRE as
exclusive advisor and agent on our first outlet project in Lublin. The knowledge and contacts of consultants led by Magda Fratczak resulted in a
good concept that has already attracted huge tenants attention. We plan to work with CBRE in future on our next retail projects.

Dr. Nils-Christian Hakert, COO, Atrium Real Estate

Atrium Real Estate has a large portfolio of shopping centers in the CEE region, which has been constantly and successfully growing.
RegioPlan has been conducting the shopping center analyses for the whole portfolio not only in Poland, but in other CEE countries as well.
These analyses represent a great second opinion for management decisions and big support for our marketing. RegioPlan team has a great
knowledge about the Polish market, is highly customer-oriented and a pleasure to work with. A great team I can highly recommend!
4 INTRODUCTION
6 STARTING WITH THE LOCATION
8 MARKET POTENTIAL ASSESSMENT
9 FROM CATCHMENT TO TENANT MIX
11 DESIGNING THE BEST LAYOUT
12 VALUE ADD INVESTMENT
13 DEVELOPERS CHECK LIST
14 MARKET PRACTICE
KEY TERMS
KEY SHOPPING CENTRE FORMATS
INTRODUCTION
COPING WITH A MATURING MARKET Koneser Warsaw
After two decades of rapid development the Polish retail market is
now reaching maturity. The end of 2012 saw total shopping centre
stock increase to 9.5 million sq m of GLA comprised in 380 schemes
of which 38 are specialized formats, including retail parks and
factory outlets. Undeniably, times are increasingly challenging for
retail developers. With consumer demand easing in response to the
prospect of the prolonged economic slowdown and market saturation
symptoms already observed in a number of locations, shopping centre
development is losing its reputation as one of the safest real estate
investment sectors. Additionally, the level of risk attached to retail
scheme construction is being reassessed, with a number of uncertainties
emerging from the combination of reduced levels of financing,
continuously moderate retailer demand as well as quickly changing
consumer habits.

For a market that has so far developed in extremely favourable

conditions, difficult times are approaching. Clearly, the gap between
market leaders and those lagging behind is growing. With prime
shopping centres such as Manufaktura or Galeria Mokotow trading
at a yield below 6%, other shopping centre transactions are often
being completed in double digits. From an investors perspective, the Outlet Centrum Lublin
ongoing run to safety translates into decreasing prime yields while
the spread for secondary and tertiary products is widening. This mirrors
tenants demand, with the best schemes enjoying negligible vacancies
and waiting lists while an increasing number of shopping centres are
suffering from persisting high vacancies. In terms of client interest, the
best schemes in Poland record footfall levels of over 30 million visitors
per year while the majority of schemes fail to reach the 5 million visitor
threshold that in the recent PRCH Footfall Index research has been
indicated as the 2012 average.

At that same time an alternative retail concept is providing competition

for shopping centre schemes. Format-wise, the recent strip mall
expansion is the most prominent trend that also marks the growth of
small (under 5,000 sqm of GLA) convenience and neighbourhood
formats. Also, the market has seen several completions of theme-
oriented projects with household equipment centres at the lead.

This publication is aimed at supporting shopping centre developers as

well as other market players engaged in planning, commercialization, Outlet Centrum Lublin
construction and strategic elements of a shopping centre concept.
Tapping on the market expertise of CBRE and RegioPlan Consulting, it
aims at guiding them through the key elements of this complex process.
IS IT WORTH BUILDING ANOTHER RETAIL
Retail investment in Poland
GALLERY?
3000

The answer in general is yes, as market niches persist, but a developer

needs to be increasingly selective and sophisticated in order to hit 2500

the market with the right type of product. Already market saturation
is high in a number of medium-sized Polish cities such as Opole, 2000

Rzeszow or Legnica. Still, in many other locations tenant demand

remains unsatisfied, as the existing retail offer does not match their 1500

requirements. For example, approximately 1/3 of the stock is located

in 1st generation, hypermarket-anchored schemes, while the majority 1000

of expanding tenants are looking for retail gallery space, where

fashion, accessories, as well as other comparable goods are the key 500
merchandise.
0
There is also a major mismatch location-wise between tenants 2006 2007 2008 2009 2010 2011 2012

requirements and shopping centre provision, as 2/3 of currently Source: CBRE

constructed projects are to be delivered in medium and small cities,
whereas purchasing potential remains the highest in the eight key
urban centres of Poland, presented in more details in CBREs annual Poland - Key Statistics
Poland Retail Destinations report. Warsaw, Silesia and Szczecin
all record very low vacancy levels that indicate a landlords market.
For example, in Warsaw the lack of quality shopping centre space Population (000) 38 200
has already had a very positive impact on its high streets but also
pushes shopping centre rents up, whereas elsewhere they remain Unemployment Rate (%) 12
stable or have slightly declined. Although the entry threshold for the
mature markets is higher than in the case of a new location, there Monthly Average 904
are additional incentives available to any developer building in large Gross Salary (EUR)
cities, such as considerably lower market risks and higher returns.
Modern Shopping 9.5
Moreover, the current market environment clearly promotes several Centre stock (million sq m)
formats that were previously overlooked. Small or large strip malls that
were often neglected in the past are now rapidly expanding in both Average vacancy rate (%) 2.9
city centre and out-of-town locations. Retail parks, also with minimum
common space required, are recording an increasing pipeline. Prime rents 75-95
Furthermore, a number of hybrid schemes, such as Szczecin Outlet -Warsaw
Park with a Helios cinema leisure addition, are emerging to fit best in (EUR/sq m/month)
their local context. At the other end of the shopping centre spectrum,
a new generation of inner-city galleries that combine a retail function Prime rents 30-45
with a transport hub are on the increase, with two flagship projects in -Poland
Katowice and Poznan now at the advanced stages of construction. (EUR/sq m/month)

The retail developers list is continuously being extended with many Source: GUS, CBRE, 2013
new players, often being established companies from the residential
sector or experienced main contractors, who are now trying their
Retail formats evolution in Poland
chances in the retail sector. But the times of the build and they will
in 000 sq m of GLA
come approach are now over, as both tenants and investors are
increasingly selective. The market is ever stronger in discriminating 12000

between prime and non-prime schemes. Even experienced developers 10000

have seen their centres suffering, when built without sufficient market 8000
intelligence. It is essential for a shopping centres long-term success 6000
that a thorough and comprehensive assessment of its potential is
4000
undertaken.
2000

0
1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013*

I Generation II Generation III Generation

Source: CBRE
STARTING WITH THE
LOCATION
LOCATION, LOCATION, LOCATION
Location determines success! There is a suitable location for every use
and it is a precondition for any successful business. While seashore
rocks represent a stable and weatherproof location for a lighthouse, the
optimal location for a shopping centre is characterized by high ranking
accessibility, visibility and parking spaces. Even though these aspects
are relatively easy to measure, a great number of shopping centre
developments suffer compromises when the location is considered.
Seemingly irrelevant and justified by economizing on the often limited
resources, these compromises are sometimes fatal, particularly once a
competitor comes into play, who has respected all of the success factors.
In other words, too many compromises relating to the location make a
shopping centre vulnerable to better located competition.
Types of Catchment Areas
CATCHMENT AREA DELIMITATION

Sufficient knowledge about the catchment area is the basis for every 5 km
successful investment decision when it comes to shopping centre
development. The catchment area defines the market capacity of a 3 km
retail project and provides crucial information on demographics and
purchasing power.

There are, in general, three different ways of delineating a catchment

area, with varying validity regarding the actual market potential for
a project. The simplest method is to draw circles around the location.
That however, ignores topography, and is hardly suitable for a detailed
location analysis. A very common approach is the concept of drive-time
zones, which can be realised with most GIS tools available on the market.
Drive-time zones are based on the actual road network and are more
suitable for the assessment of a location, as they represent a realistic
picture regarding accessibility.

A drawback of this method is the disregard of one very important factor

10 minutes
which influences the catchment area: the competition. The drive-time
zone does not stop at a competing shopping centre in the vicinity,
whereas a potential customer most probably does. In the eyes of a
customer, competitors represent intervening opportunities, which many
are not willing to ignore in order to visit another centre, located at further
distance. This fact, in reality, limits the actual catchment area. Taking
this into consideration, the Huff model, based on the delimitation of
catchment areas, represents an approach which takes account of the
latter circumstances, thus preventing an overestimation of the market size.

catchment

Source: RegioPlan Consulting

 Huff Model Based Catchment Area
for Stadion Narodowy
City area Warsaw
Primary catchment
Secondary catchment
Drive - time zone
Existing shopping centre
Projected shopping centre

Catchment vs. Drive-Time Zone

Number of Inhabitants

1 600
As shown on the map above, a 20 minute drive-time zone of a 1 400
fictional small scale project at Stadion Narodowy covers large parts of 1 200
the city of Warsaw. Yet, its actual catchment area is much smaller as
1 000
several large scale competitors limit the potential reach of the fictional
800
shopping centre, especially in respect of areas east of the Vistula
River. Consequently, the actual catchment area comprises of about 600
600,000 inhabitants, while the 20 minute drive-time zone includes a 400
population of about 1.5 million people. To conclude, drive-time zones 200
are an important tool for estimations, but cannot replace the catchment 0
area method. Even though delimiting a real catchment area can be

primary catchment

secondary catchment
10 minutes zone

20 minutes zone

total catchment
total drive time zones
cumbersome and time-consuming, it represents the model which gets the
closest to reality.

QUANTIFICATION OF THE RELEVANT

MARKET POTENTIAL Source: RegioPlan Consulting

Once the catchment area is drawn, we proceed to the estimation of the

total market potential. This value represents the total amount of money
being spent by private households on retail trade. To get an even better Purchasing Power
idea of the potential, one can break down this number into different per Inhabitant in , in 2012
retail sectors, and even further into different product groups. The basis
for calculating the market potential are the number of households, the 9 000
average consumer expenditure per household, retail sector and the local 8 000
level of wealth, represented by the purchasing power index. As shown 7 000
in the accompanying chart, the purchasing power varies considerably
6 000
between the different regions of Poland, even between the largest cities.
5 000
For plausible results a reliable data provider is essential. Experience has 4 000
shown that official data provided by national statistics often deviates 3 000
from the real picture for various reasons. This especially concerns official
2 000
consumer spending data as the official statistics fail to grasp factors such
as the black market or direct money transfers, which however have a 1 000
significant impact on the total disposable income of inhabitants. 0
Szczecin
Poznan
Lodz
Warszawa

Krakow

Wroclaw
Poland Average

Source: RegioData Research

MARKET POTENTIAL
ASSESSMENT
COMPETITION ANALYSIS
Example scoring model for the location
The retail market in many Polish cities is rapidly becoming saturated.
Each existing centre has its particular strengths and market position. 100
Development projects, on the other hand, are numerous and often
80
difficult to predict, particularly relating to the likelihood of the realisation,
the quality of the concept and its success. In considering the variety, 60
it is essential to know who the real competitors are; how they stand in
comparison to each other; and how they relate to the planned shopping 40
centre project. To answer that question, RegioPlan Consulting applies
20
a simple and effective two-dimensional diagram, based on two scoring
models. One model assesses the quality of location for each existing 0
centre and all known projects, while the other assesses the quality of the

project P1

project P2
analysed project X

center 2

maximum total points

concept. Only a combination of both factors determines the impact of a
relevant competitor. An example is illustrated in the diagram below.

Environment Access Individual

Access Public Plot

Source: RegioPlan Consulting

Example scoring model for the concept

100

80

60

40

20
Source: RegioPlan Consulting
0
Assuming X to be the analysed project, the assessment shows a relatively

project P1

project P2
analysed project X

center 2

maximum total points

good location and a superior concept as compared to all other centres
in the market or in the pipeline. The competitive projects P1 and P2 as
well as the centre 1 seem to be weaker, either concerning the location
or the concept. Consequently, they do not represent a severe threat at
the moment. But what about the existing centre 2? It obviously has the Branch Mix Anchors

best location in town, but currently a rather outdated and unattractive Other Tenants Layout and Interior

concept. From a strategic point of view, this centre could be refurbished Source: RegioPlan Consulting
in the future.and cou
ld thus become a potential major threat. Productivity in /sqm, min/max/average
DIMENSIONING OF THE PROJECT
Once the catchment area and the competitive situation are determined,
9 000
the next step is a simulation of the purchasing power flows. These flows
are represented by achievable market shares, which lead to the turnover 7 500
expectation for each retail sector. Finally, the turnover potential can be
6 000
transformed into a GLA potential by applying the average productivity
in EUR/sq m by retail sector or even by tenant. In other words, this 4 500
provides the answer to the question: Which GLA can be realised per 3 000
retail sector to achieve at least an average productivity per sq m? The
result generated reflects both the optimal total size and the optimal 1 500
merchandise mix. 0
drugstore/perfumery

sports

electronics
clothing
food

Source: RegioPlan Consulting

FROM CATCHMENT TO
TENANT MIX
DEFINING RETAIL FORMAT
Retail formats in Poland
Merchandise mix, defined on the basis of purchasing power in
an effective catchment area, is a starting point for a retail format
definition. Initially, potential brand and tenant mix is defined
and is then confronted with the market. Also, the overall market 9%
1%
potential defines the maximum supportable floor space size of a
planned scheme, a key indicator that should always be taken into 38%
consideration. Obviously, not all potential in the catchment needs to
be tapped into by a new scheme, but all proposed concepts should 29%
fit into the existing demand. At this stage it is necessary to step
back again and have a another close look at all of the existing and
potential competition.
23%
In-depth knowledge of the existing and planned competition
is essential. Brands presence, as well as footfall and turnover
performance, gathered from the operating shopping centres all Ist generation shopping centres
support an informed decision-making process, however this data is 2nd generation shopping centres
often impossible to collect without the professional help of a market
advisor such as CBRE, that is able to combine first-hand information 3rd generation shopping centres
coming from leasing, management and capital markets business
Outlets
lines. Also, the qualitative observations of a seasoned advisor have a
great value at this stage of the decision-making process, as often it is Retail parks and theme-oriented
possible to determine the most and the least successful components Source: CBRE
of the competing projects even without quantitative data. Confidence
coming from experience is valuable and often intuitive ideas prove
crucial, particularly when supported with a thorough analysis.
Warsaw retail market composition

BUILDING A NARRATIVE
A shopping centre, unless it is a neighbourhood scheme, needs to
differentiate clearly from its immediate competitors. In an ever more 16%
21%
competitive retail environment shopping centres are increasingly
required to build their own identity based on location and brand. 2%
Therefore a consistent, strong narrative is needed in order to appeal 8%
to both tenants and customers. It is impossible to target everyone and 13%
clear choices need to be made. For example, a retail gallery could
be budget and family lifestyle oriented, target top market slice, or
combine some characteristics, but can never be all at once. Lack of a
clear shopping centre brand results in client confusion, which is always 40%
a drawback.

Key shopping centre profiles that currently dominate the Polish retail Ist generation shopping centres
landscape are: 1st generation hypermarket-anchored with a service 2nd generation shopping centres
gallery, 2nd generation scheme anchored with a hypermarket and 3rd generation shopping centres
mid-market fashion gallery, as well as 3rd generation retail gallery DYI/retail warehousing
with a sizeable leisure component. However, the spectrum of Outlets
available formats is much wider and many other concepts, including Retail parks
hybrids, or specialized and theme-oriented schemes, are feasible
Source: CBRE
if catchment and competition analysis indicate numerous available
market niches.
TENANT MIX SOLUTIONS Key Anchores

Once the market analysis has been completed and a shopping

centres best potential profile identified, a preliminary tenant mix
Category Operator
concept can be sketched. To create an initial tenant mix CBRE
takes into the account tenants favourable conditions, that is a Tesco, Carrefour,
consideration of rental levels including optimum leasing space and Hypermarket Real, e.Leclerc,
location preferences, not only with regards to the key layout elements, Auchan
such as entrances, but also in relation to other retailers.
Piotr i Pawe, Alma,
Two key tenant groups in a tenant mix include: Supermarket PoloMarket, Stokrotka,
Anchor(s) are typically the largest and key stores in a scheme, Biedronka
and main internal traffic generators. The presence of anchors OBI, Praktiker,
is one of the main defining characteristics of every shopping DYI Leroy Merlin
centre. Anchors are typically the first to be invited to a project,
Saturn,
often on very favourable conditions. Typical anchors in
Electronics Euro RTV AGD,
Polish schemes are hypermarkets and large fashion tenants. Media Expert
There are no department stores as shopping centre tenants
Inditex Group,
in Poland, but it is common that hypermarkets double in Fashion LPP Group,
their role and offer a wide variety of other than FMCG or C&A, H&M
complementary merchandise. Anchors usually occupy from
Source: RRF, CBRE
20% to 40% of a centres GLA, and, depending on the size of
a scheme, can take up to 12,000 sq m.
Tenants presence per category
In-line tenants, including all other than (primary and
secondary) anchor tenants present in the scheme, which
usually lease retail space for market level rents, and are
2%
offered typical units. However, the rental differences even 3%3%
3%
2%
2%
2%

3%
between in-line tenants remain considerable. For example, 3%
3%
5%
5%
often similarly sized tenants coming from different market 33%
33%
5%
5%
segments can pay considerably different rental levels as their
6%
profit margins and sales profiles vary. 6%

6%
6%

Other key tenant groupings that have a vital importance to both 9%

9% 12%
12%

tenant mix and a scheme layout are based on their merchandise and 11%
11%

service offer, including key categories such as grocery, fashion, home,

restaurants and food court, complementary services, and leisure. Fashion Services
Shoes and leather Food
Health & Beauty Other
From the financial perspective, preliminary tenant mix is an essential Accessories & Jewellery Home Accessories
element in the project foundation process, as it gives the first insight Food specialty Children & Maternity
Multimedia Electronics
into its future financial performance, with an initial assessment of
achievable rental levels as well as cash flow estimations. Therefore, Source: RRF, CBRE
preliminary tenant mix closes the analysis stage and serves as the key
reference when the decision on a projects financing is made.

Other Anchores
Other Anchores

Examples of
Category
tenants
CinemaCity
Cinema Mulitkino,
Helios, Imax
Independent
Bowling
tenants
Children Fantasy Park,
playgrounds Kidsplay,
Kinder Planet
McDonalds,
Foodcourt KFC,
Burger King,
NorthFish
Pure,
Fitness Gymnasion,
Fitness Academy
Source: CBRE
DESIGNING THE BEST Top 10 tenants in Polish shopping centres

LAYOUT Tenant Category In % of

Schemes

Inmedio Multimedia 81
FROM TENANT MIX TO LAYOUT
CCC Shoes 73
A preliminary layout can be put in place once the first tenant mix has
been completed, after all key occupiers have been identified and their Triumph Fashion 61
size, as well as their position in the scheme, has been initially assigned. Inmedio
However, both tenant mix and layout creation are fine-tuning processes Apart Accessories 59
that are closely interlinked and typically are considered together through
a number of layout versions. Depending on the projects complexity, Deichmann Shoes 52
the tenant mix (re)drafting process takes from several to dozens of
Vision Express Health & Beauty 52
re-iterations between leasing and design teams. The most successful
project achieves a relative balance in customer traffic levels across a 5Sec Services 50
scheme, be-tween entrances, anchors and tenants clusters (such as a
food court or boutique fashion cluster), providing equally good retail Orsay Fashion 49
conditions for every unit in the scheme.
Reserved Fashion 48
The preliminary layout includes all key features of a given location, such
as access points to the site, a building location on a given plot, various Euro RTV AGD Electronics 47
entry points to the site and buildings, delivery zones, car parking,
Source: RRF, CBRE
as well as other key determinants such as shopping mall (horizontal Source: RRF, CBRE
and vertical) traffic. At this stage a specialised software package,
for example based on Space Syntax theory, can be used to simulate
traffic flows, but more often the expertise of both leasing agents and Examples of layout solutions
the management team is employed in order to anticipate levels of
customers activity in various parts of a centre. Fashion
Shoes
The anchor and other key tenants views are important in the layout Grocery
fine-tuning process, whereas the majority of in-line tenants, who join the Home Appliances
project later, have considerably less say with regards to their position
Media
and unit shape. Preferably, they are grouped in clusters to create the
equivalent of an anchor in terms of a traffic flow. However, such key Children
features as unit size and proportion, visibility, frontage and signage, as Restaurants & Bars
well as lighting and air-conditioning, must be provided in accordance Accessories
with market standards.
Health & Beauty
Services
Other
Foodcourt
Preliminary layout Final layout

VALUE ADD
INVESTMENT
REFURBISHMENT OPPORTUNITIES AND Retail stock growth
in million sq m of GLA
PITFALLS
Refurbishment and revitalization of shopping centres will be gaining in 3,0

importance in the next few years. Not only does this apply to shopping
centres of the first generation, but also to hypermarkets, which have
2,0
been growing rapidly in number between 1996 and 2005. Since 2005,
however, the expansion of this format has experienced a substantial
slowdown, which is a consequence of the high hypermarket density and 1,0

changing consumer needs. Well-patronized hypermarkets with great

accessibility, surrounded by undeveloped plots (representing space
0,0
for expansion) are now coming to the attention of many real estate

-1997

1998-2002

2003-2007

2008-2012

2013-2017
developers.

At present, the leasable area of shopping centres, retail parks and Hypermarket
hypermarkets opened until 2002 amounts to about 4.1 million sq m. Retail Park
Even though some of these investments have already been revitalized, Shopping Center
the Polish retail real estate market offers tremendous opportunities Source: RegioPlan Consulting
for successful refurbishments. Possibilities for extension need to be
examined at each site in advance, and should form the part of a
comprehensive assessment of the property and location. Compromises
in layout, tenant mix, or architectural design represent risk factors and
need to be avoided by all means.
Current retail stock by age
Despite the high value-add potential of refurbishments, such in million sq m of GLA
investments are very complex and often involve greater risks than new
developments. Developers of green field projects can be largely flexible Under Construction
in designing access roads, ensuring visibility and sufficient advertising (2013 - )
area, as well as in determining the centre layout and position of anchor
tenants. Refurbishments on the other hand considerably narrow these
New additions
elements of flexibility. (2008 - 2012)

Architects may also face structural limitations, whereas the leasing and
marketing teams might in some cases have a tough time dealing with Maturing schemes
(2003 - 2007)
the established negative image of a given retail destination. Moreover,
non-cancellable, long-term lease agreements may seem favorable
from an economic and legal perspective, but for the restructuring of the Mature stock
tenant mix such agreements can become problematic. (1998 - 2002)

To diminish these risks, it is necessary to carry out a careful due

Old performers
diligence analysis and to address relevant experts for each particular
(1993 - 1997)
area. As a location analysis expert, RegioPlan Consulting believes
retail centres should undergo a thorough check of their location, their
0 1 2 3 4
competitive strengths, and their ability to generate sufficient turnover. Source: CBRE

At the very initial phase, investors considering a refurbishment should

answer the following yes/no questions. The more questions that are
answered with yes, the lower the number of compromises that may
have to be made and consequently the risk of failure is reduced.
DEVELOPERS
CHECK LIST

Location
o Does the site have an intact image as a retail destination?
o Do you have full control of the land required for the retail
facility, including accesses and parking spaces?
o Does the location offers sufficient space to achieve the
adequate size necessary for the intended market positioning?

Building
o Does the existing building offer the structural (especially in
terms of statics, storey height, vertical connections, sightlines,
mall width, etc) and technical (IT, home automation, etc.)
conditions necessary for creating a modern shopping
environment?
o Given the existing building structure, is it possible to implement
a compromise-free solution for access roads, parking spaces,
optical image and visibility of the building and the advertising
space?

Competitiveness
o Given competitors performance, is it possible to achieve the
targeted market positioning or strengthen the existing one?
o Can, even in a tougher competitive situation, a sufficiently high
productivity and rental income be achieved?
o Are you ahead of competitors with your concept or are others
already filling that market gap?

Tenants
o Does the centre have a critical mass of existing tenants who are
suitable for the new market positioning of the project and who
should remain in the centre?
o Can you attract at least one of the top three out of the five
leading tenants in the most relevant retail sectors for the
targeted positioning?
o Is there a time window of concurrent lease contract expiries,
which is favorable for the realization of the refurbishment?

Strategic issues
o Does your intended concept meet the expectable demands of
real estate investors?
o Do you have a clear exit strategy?
o Is your financing structured accordingly?
MARKET PRACTICE
LEASE LENGTH AND TERMS Typical lease contract period is 5 to
10 years with an option to extend. Most rents are denominated in Euro and
paid in zlotys, but service charges and other payments (e.g. marketing fees)
are often denominated in the local currency. Only the oldest leases can still be
denominated in dollars. Rents are typically the subject to annual indexation by the
European (Eurostat) price index.
RENTAL PAYMENTS Rent is payable monthly in advance, and is quoted
without VAT.
SERVICE CHARGES Service charge payments cover ordinary building
maintenance costs such as repairs, cleaning and security. Denominated in zlotys,
they typically reach between 25 50 PLN /sq m/month.
MARKETING COSTS Additional regular payments covering shopping
centre management expenses on advertising and events. Denominated in zlotys,
typical mar-keting payments vary between 5 20 PLN /sq m /month.
TENANTS COVENANT Covenant strength is very important within the
Polish market. Rental deposit, bank or parent companys guarantee equivalent
to 3-6 months rent, service charge, marketing costs and VAT is expected from all
tenants.
INCENTIVES Incentives include capital contributions towards shop fitting and
rent-free periods, individually negotiated between the parties. Anchor tenants can
expect a fit-out contribution.
KEY TERMS
KEY SHOPPING CENTRE
FORMATS
TRADITIONAL SHOPPING CENTRE a scheme that is planned, built
and managed as a single entity, comprising of units and common areas, with a
minimum Gross Leasable Area (GLA) of 5,000 sq m and at least 10 shops and
services.
1ST GENERATION Hypermarket driven (accounting for 40-50% of the
total GLA) scheme together with a small, service-oriented accompanying gallery.
2ND GENERATION A shopping centre driven by a retail, typically fashion
gal-lery, that represents over 70% of the total centre space.
3RD GENERATION A lifestyle scheme enhanced with and often driven by
a leisure element, such as a multiplex cinema, fitness element, or increasingly a
food court offer.
SPECIALISED SCHEMES:
RETAIL PARK Consistently designed, planned and centrally managed scheme
that comprises of mainly medium - and large-scale specialist retailers (big box
or retail warehouses).
FACTORY OUTLET Shopping centre scheme where manufacturers and
retailers sell merchandise at discount prices that may be surplus stock, prior-
season or slow selling items.
THEME-ORIENTED - A consistently designed, planned and managed
scheme that can either be leisure-based or non-leisure-based. This scheme
includes some retail units and typically concentrates on a narrow but deep
selection of merchandise within a specific retail category, such as home furniture
or hobbies.

OTHER FORMATS:
MARKET TRANSPARENCY the property market has strong and
NEIGHBOURHOOD CENTRE often small or very small (below 5,000
transparent fundamentals regarding property titles but a degree of opacity persists
sq m of GLA) scheme that serves almost exclusively its immediate catchment and
with regards to the availability of market information. The information on historical
concentrates on a FMCG offer complemented with services or value fashion
freehold and perpetual usufruct transactions registered as Notarial Deeds is freely
merchandise. Typically anchored by a supermarket grocery store (below 4,000 sq
accessible to the listed property valuers, but there is no public record on lease
m of GLA).
transactions.

RETAIL SPACE GLA gross leasable area in sq m refers to the area leased to
tenants and includes all other construction elements.

TURNOVER Sales volume, reported on a monthly or quarterly basis. Average

shopping centre turnover reached approx. 850 PLN / sq m / month in Q2 2012.

FOOTFALL The number of shopping centre visitors, typically reported on a

monthly or quarterly basis. Estimated average monthly footfall in Poland reaches
420,000 visits.

TENANT MIX The composition of tenants in a scheme and their position

relative to each other.

LAYOUT A shopping centres layout is the design in which the interior is set up.
It is important to provide good shop window exposure, a good width of the malls
and clear communication.
 CONTACTS
For more information regarding CBRE and RegioPlan Consulting reports or any other CBRE and
RegioPlan Consulting services please contact

Karina Kreja Nada Mumdiev

Associate Director - Development Consultancy Senior Account Manager
Rondo 1|Rondo ONZ 1|00-124 | Warsaw Theobaldgasse 8 | A-1060 | Vienna
DDI +48 22544 8064 DDI +43 1 586 04 53 - 22
M +48 500 000 643 M +43 699 15860412

karina.kreja@cbre.com n.mumdziev@regioplan.at
http://www.cbre.pl http://www.regioplan.eu

Joanna Mroczek Hanna Bomba-Wilhelmi

Director - Head of Research & Consultancy CEO
Rondo 1|Rondo ONZ 1|00-124 | Warsaw Theobaldgasse 8 | A-1060 | Vienna
DDI +48 22544 8061 DDI+43 1 586 04 53 - 17
M +48 500 000 583 M +43 699 15860417

joanna.mroczek@cbre.com h.bomba@regioplan.at
http://www.cbre.pl http://www.regioplan.eu

About CBRE Group

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the worlds largest commercial real estate services and
investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors
and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate
services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research
and consulting. Please visit our website at www.cbre.com.

About RegioPlan Consulting

RegioPlan Consulting is one of the leading European companies for retail location consulting and retail market analyses in Europe. Drawing on 25 years of inter-
national cross-industry experience, RegioPlan experts provide consulting services to retail trade and service companies, retail real estate developers and investors.
The scope of services ranges from market feasibility for new retail developments, over refurbishment and redevelopment concepts, to expansion concepts and
market analyses for retailers. RegioPlan also provides market intelligence and reports on consumer and retail market.

Disclaimer
CBRE Sp. z o.o confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt
their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their
accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and
cannot be reproduced without prior written permission of CBRE.

RegioPlan Consulting GmbH confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. However,
not all data has been verified and we make no guarantee, warranty or representation about them. Anyone who uses the data should independently verify their
accuracy and completeness. This information is presented exclusively for use by RegioPlan clients and professionals and all rights to the material are reserved and
cannot be reproduced without prior written permission of RegioPlan Consulting.