1 RETAIL DEVELOPER S GUIDE
2 Karina Kreja, Assciate Directr, CBRE: After tw decades f dynamic develpment the Plish retail market is nw mature. Despite increasing cmpetitin it still ffers cnsiderable develpment ptential, albeit far mre selective than in the past. We address the fllwing publicatin t bth seasned and future retail develpers t supprt them in their retail investment plans. It is essential t understand that shpping center planning is a cmplex prcess that requires in-depth knwledge f bth cnsumer and cmpetitive market. Hanna Bmba-Wilhelmi, CEO, RegiPlan Cnsulting Lcatin determines a shpping centre s success, but the chice f a right lcatin is nly the first step. An in-depth knwledge f the catchment area is equally indispensable. One step leads t anther and each decisin determines the range f further alternatives. It is essential fr a develper t embrace this prcess in its full cmplexity in rder t deliver a successful and durable scheme that will first and fremst serve the custmers well. The fact is, that the cnsumers determine whether the tenants r the wners f centers will be successful r nt. Dariusz Gardener, Managing Directr, ADV POR: Despite grwing cmpetitin frm the part f ther develpers, the shpping centers remain very attractive fr cnstructin sectr. Hwever this is the market that requires deep expertise especially with regards t the specialized prjects. That is why we decided t wrk with CBRE as exclusive advisr and agent n ur first utlet prject in Lublin. The knwledge and cntacts f cnsultants led by Magda Fratczak resulted in a gd cncept that has already attracted huge tenants attentin. We plan t wrk with CBRE in future n ur next retail prjects. Dr. Nils-Christian Hakert, COO, Atrium Real Estate Atrium Real Estate has a large prtfli f shpping centers in the CEE regin, which has been cnstantly and successfully grwing. RegiPlan has been cnducting the shpping center analyses fr the whle prtfli nt nly in Pland, but in ther CEE cuntries as well. These analyses represent a great secnd pinin fr management decisins and big supprt fr ur marketing. RegiPlan team has a great knwledge abut the Plish market, is highly custmer-riented and a pleasure t wrk with. A great team I can highly recmmend!
3 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 DEVELOPER S CHECK LIST 14 MARKET PRACTICE KEY TERMS KEY SHOPPING CENTRE FORMATS
4 INTRODUCTION COPING WITH A MATURING MARKET After tw decades f rapid develpment the Plish retail market is nw reaching maturity. The end f 2012 saw ttal shpping centre stck increase t 9.5 millin sq m f GLA cmprised in 380 schemes f which 38 are specialized frmats, including retail parks and factry utlets. Undeniably, times are increasingly challenging fr retail develpers. With cnsumer demand easing in respnse t the prspect f the prlnged ecnmic slwdwn and market saturatin symptms already bserved in a number f lcatins, shpping centre develpment is lsing its reputatin as ne f the safest real estate investment sectrs. Additinally, the level f risk attached t retail scheme cnstructin is being reassessed, with a number f uncertainties emerging frm the cmbinatin f reduced levels f financing, cntinuusly mderate retailer demand as well as quickly changing cnsumer habits. Fr a market that has s far develped in extremely favurable cnditins, difficult times are appraching. Clearly, the gap between market leaders and thse lagging behind is grwing. With prime shpping centres such as Manufaktura r Galeria Mktw trading at a yield belw 6%, ther shpping centre transactins are ften being cmpleted in duble digits. Frm an investr s perspective, the nging run t safety translates int decreasing prime yields while the spread fr secndary and tertiary prducts is widening. This mirrrs tenants demand, with the best schemes enjying negligible vacancies and waiting lists while an increasing number f shpping centres are suffering frm persisting high vacancies. In terms f client interest, the best schemes in Pland recrd ftfall levels f ver 30 millin visitrs per year while the majrity f schemes fail t reach the 5 millin visitr threshld that in the recent PRCH Ftfall Index research has been indicated as the 2012 average. Kneser Warsaw Outlet Centrum Lublin At that same time an alternative retail cncept is prviding cmpetitin fr shpping centre schemes. Frmat-wise, the recent strip mall expansin is the mst prminent trend that als marks the grwth f small (under 5,000 sqm f GLA) cnvenience and neighburhd frmats. Als, the market has seen several cmpletins f themeriented prjects with husehld equipment centres at the lead. This publicatin is aimed at supprting shpping centre develpers as well as ther market players engaged in planning, cmmercializatin, cnstructin and strategic elements f a shpping centre cncept. Tapping n the market expertise f CBRE and RegiPlan Cnsulting, it aims at guiding them thrugh the key elements f this cmplex prcess. Outlet Centrum Lublin
5 IS IT WORTH BUILDING ANOTHER RETAIL GALLERY? The answer in general is yes, as market niches persist, but a develper needs t be increasingly selective and sphisticated in rder t hit the market with the right type f prduct. Already market saturatin is high in a number f medium-sized Plish cities such as Ople, Rzeszw r Legnica. Still, in many ther lcatins tenant demand remains unsatisfied, as the existing retail ffer des nt match their requirements. Fr example, apprximately 1/3 f the stck is lcated in 1st generatin, hypermarket-anchred schemes, while the majrity f expanding tenants are lking fr retail gallery space, where fashin, accessries, as well as ther cmparable gds are the key merchandise. Retail investment in Pland There is als a majr mismatch lcatin-wise between tenant s requirements and shpping centre prvisin, as 2/3 f currently cnstructed prjects are t be delivered in medium and small cities, whereas purchasing ptential remains the highest in the eight key urban centres f Pland, presented in mre details in CBRE s annual Pland Retail Destinatins reprt. Warsaw, Silesia and Szczecin all recrd very lw vacancy levels that indicate a landlrd s market. Fr example, in Warsaw the lack f quality shpping centre space has already had a very psitive impact n its high streets but als pushes shpping centre rents up, whereas elsewhere they remain stable r have slightly declined. Althugh the entry threshld fr the mature markets is higher than in the case f a new lcatin, there are additinal incentives available t any develper building in large cities, such as cnsiderably lwer market risks and higher returns. Mrever, the current market envirnment clearly prmtes several frmats that were previusly verlked. Small r large strip malls that were ften neglected in the past are nw rapidly expanding in bth city centre and ut-f-twn lcatins. Retail parks, als with minimum cmmn space required, are recrding an increasing pipeline. Furthermre, a number f hybrid schemes, such as Szczecin Outlet Park with a Helis cinema leisure additin, are emerging t fit best in their lcal cntext. At the ther end f the shpping centre spectrum, a new generatin f inner-city galleries that cmbine a retail functin with a transprt hub are n the increase, with tw flagship prjects in Katwice and Pznan nw at the advanced stages f cnstructin. The retail develpers list is cntinuusly being extended with many new players, ften being established cmpanies frm the residential sectr r experienced main cntractrs, wh are nw trying their chances in the retail sectr. But the times f the build and they will cme apprach are nw ver, as bth tenants and investrs are increasingly selective. The market is ever strnger in discriminating between prime and nn-prime schemes. Even experienced develpers have seen their centres suffering, when built withut sufficient market intelligence. It is essential fr a shpping centre s lng-term success that a thrugh and cmprehensive assessment f its ptential is undertaken Surce: CBRE Pland - Key Statistics Ppulatin ( 000) Unemplyment Rate (%) 12 Mnthly Average 904 Grss Salary (EUR) Mdern Shpping 9.5 Centre stck (millin sq m) Average vacancy rate (%) 2.9 Prime rents Warsaw (EUR/sq m/mnth) Prime rents Pland (EUR/sq m/mnth) Surce: GUS, CBRE, 2013 Retail frmats evlutin in Pland in 000 sq m f GLA * I Generatin II Generatin III Generatin Surce: CBRE
6 STARTING WITH THE LOCATION LOCATION, LOCATION, LOCATION Lcatin determines success! There is a suitable lcatin fr every use and it is a precnditin fr any successful business. While seashre rcks represent a stable and weatherprf lcatin fr a lighthuse, the ptimal lcatin fr a shpping centre is characterized by high ranking accessibility, visibility and parking spaces. Even thugh these aspects are relatively easy t measure, a great number f shpping centre develpments suffer cmprmises when the lcatin is cnsidered. Seemingly irrelevant and justified by ecnmizing n the ften limited resurces, these cmprmises are smetimes fatal, particularly nce a cmpetitr cmes int play, wh has respected all f the success factrs. In ther wrds, t many cmprmises relating t the lcatin make a shpping centre vulnerable t better lcated cmpetitin. CATCHMENT AREA DELIMITATION Sufficient knwledge abut the catchment area is the basis fr every successful investment decisin when it cmes t shpping centre develpment. The catchment area defines the market capacity f a retail prject and prvides crucial infrmatin n demgraphics and purchasing pwer. Types f Catchment Areas 3 km 5 km There are, in general, three different ways f delineating a catchment area, with varying validity regarding the actual market ptential fr a prject. The simplest methd is t draw circles arund the lcatin. That hwever, ignres tpgraphy, and is hardly suitable fr a detailed lcatin analysis. A very cmmn apprach is the cncept f drive-time znes, which can be realised with mst GIS tls available n the market. Drive-time znes are based n the actual rad netwrk and are mre suitable fr the assessment f a lcatin, as they represent a realistic picture regarding accessibility. A drawback f this methd is the disregard f ne very imprtant factr which influences the catchment area: the cmpetitin. The drive-time zne des nt stp at a cmpeting shpping centre in the vicinity, whereas a ptential custmer mst prbably des. In the eyes f a custmer, cmpetitrs represent intervening pprtunities, which many are nt willing t ignre in rder t visit anther centre, lcated at further distance. This fact, in reality, limits the actual catchment area. Taking this int cnsideratin, the Huff mdel, based n the delimitatin f catchment areas, represents an apprach which takes accunt f the latter circumstances, thus preventing an verestimatin f the market size. 10 minutes catchment Surce: RegiPlan Cnsulting
7 Huff Mdel Based Catchment Area fr Stadin Nardwy City area Warsaw Primary catchment Secndary catchment Drive - time zne Existing shpping centre Prjected shpping centre Catchment vs. Drive-Time Zne Number f Inhabitants As shwn n the map abve, a 20 minute drive-time zne f a fictinal small scale prject at Stadin Nardwy cvers large parts f the city f Warsaw. Yet, its actual catchment area is much smaller as several large scale cmpetitrs limit the ptential reach f the fictinal shpping centre, especially in respect f areas east f the Vistula River. Cnsequently, the actual catchment area cmprises f abut 600,000 inhabitants, while the 20 minute drive-time zne includes a ppulatin f abut 1.5 millin peple. T cnclude, drive-time znes are an imprtant tl fr estimatins, but cannt replace the catchment area methd. Even thugh delimiting a real catchment area can be cumbersme and time-cnsuming, it represents the mdel which gets the clsest t reality. QUANTIFICATION OF THE RELEVANT MARKET POTENTIAL primary catchment 10 minutes zne Surce: RegiPlan Cnsulting secndary catchment 20 minutes zne ttal catchment ttal drive time znes Once the catchment area is drawn, we prceed t the estimatin f the ttal market ptential. This value represents the ttal amunt f mney being spent by private husehlds n retail trade. T get an even better idea f the ptential, ne can break dwn this number int different retail sectrs, and even further int different prduct grups. The basis fr calculating the market ptential are the number f husehlds, the average cnsumer expenditure per husehld, retail sectr and the lcal level f wealth, represented by the purchasing pwer index. As shwn in the accmpanying chart, the purchasing pwer varies cnsiderably between the different regins f Pland, even between the largest cities. Purchasing Pwer per Inhabitant in, in Fr plausible results a reliable data prvider is essential. Experience has shwn that fficial data prvided by natinal statistics ften deviates frm the real picture fr varius reasns. This especially cncerns fficial cnsumer spending data as the fficial statistics fail t grasp factrs such as the black market r direct mney transfers, which hwever have a significant impact n the ttal dispsable incme f inhabitants Pland Average Warszawa Krakw Ldz Wrclaw Pznan Szczecin Surce: RegiData Research
8 MARKET POTENTIAL ASSESSMENT COMPETITION ANALYSIS The retail market in many Plish cities is rapidly becming saturated. Each existing centre has its particular strengths and market psitin. Develpment prjects, n the ther hand, are numerus and ften difficult t predict, particularly relating t the likelihd f the realisatin, the quality f the cncept and its success. In cnsidering the variety, it is essential t knw wh the real cmpetitrs are; hw they stand in cmparisn t each ther; and hw they relate t the planned shpping centre prject. T answer that questin, RegiPlan Cnsulting applies a simple and effective tw-dimensinal diagram, based n tw scring mdels. One mdel assesses the quality f lcatin fr each existing centre and all knwn prjects, while the ther assesses the quality f the cncept. Only a cmbinatin f bth factrs determines the impact f a relevant cmpetitr. An example is illustrated in the diagram belw. Example scring mdel fr the lcatin analysed prject X prject P1 prject P2 center 2 maximum ttal pints Envirnment Access Public Access Individual Plt Surce: RegiPlan Cnsulting Example scring mdel fr the cncept Surce: RegiPlan Cnsulting Assuming X t be the analysed prject, the assessment shws a relatively gd lcatin and a superir cncept as cmpared t all ther centres in the market r in the pipeline. The cmpetitive prjects P1 and P2 as well as the centre 1 seem t be weaker, either cncerning the lcatin r the cncept. Cnsequently, they d nt represent a severe threat at the mment. But what abut the existing centre 2? It bviusly has the best lcatin in twn, but currently a rather utdated and unattractive cncept. Frm a strategic pint f view, this centre culd be refurbished in the future.and cu ld thus becme a ptential majr threat. DIMENSIONING OF THE PROJECT 20 0 analysed prject X prject P1 prject P2 center 2 maximum ttal pints Branch Mix Anchrs Other Tenants Layut and Interir Surce: RegiPlan Cnsulting Prductivity in /sqm, min/max/average Once the catchment area and the cmpetitive situatin are determined, the next step is a simulatin f the purchasing pwer flws. These flws are represented by achievable market shares, which lead t the turnver expectatin fr each retail sectr. Finally, the turnver ptential can be transfrmed int a GLA ptential by applying the average prductivity in EUR/sq m by retail sectr r even by tenant. In ther wrds, this prvides the answer t the questin: Which GLA can be realised per retail sectr t achieve at least an average prductivity per sq m? The result generated reflects bth the ptimal ttal size and the ptimal merchandise mix fd drugstre/perfumery clthing sprts electrnics Surce: RegiPlan Cnsulting
9 FROM CATCHMENT TO TENANT MIX DEFINING RETAIL FORMAT Merchandise mix, defined n the basis f purchasing pwer in an effective catchment area, is a starting pint fr a retail frmat definitin. Initially, ptential brand and tenant mix is defined and is then cnfrnted with the market. Als, the verall market ptential defines the maximum supprtable flr space size f a planned scheme, a key indicatr that shuld always be taken int cnsideratin. Obviusly, nt all ptential in the catchment needs t be tapped int by a new scheme, but all prpsed cncepts shuld fit int the existing demand. At this stage it is necessary t step back again and have a anther clse lk at all f the existing and ptential cmpetitin. In-depth knwledge f the existing and planned cmpetitin is essential. Brands presence, as well as ftfall and turnver perfrmance, gathered frm the perating shpping centres all supprt an infrmed decisin-making prcess, hwever this data is ften impssible t cllect withut the prfessinal help f a market advisr such as CBRE, that is able t cmbine first-hand infrmatin cming frm leasing, management and capital markets business lines. Als, the qualitative bservatins f a seasned advisr have a great value at this stage f the decisin-making prcess, as ften it is pssible t determine the mst and the least successful cmpnents f the cmpeting prjects even withut quantitative data. Cnfidence cming frm experience is valuable and ften intuitive ideas prve crucial, particularly when supprted with a thrugh analysis. BUILDING A NARRATIVE Retail frmats in Pland 1% 9% 38% 29% 23% Ist generatin shpping centres 2nd generatin shpping centres 3rd generatin shpping centres Outlets Retail parks and theme-riented Surce: CBRE Warsaw retail market cmpsitin A shpping centre, unless it is a neighburhd scheme, needs t differentiate clearly frm its immediate cmpetitrs. In an ever mre cmpetitive retail envirnment shpping centres are increasingly required t build their wn identity based n lcatin and brand. Therefre a cnsistent, strng narrative is needed in rder t appeal t bth tenants and custmers. It is impssible t target everyne and clear chices need t be made. Fr example, a retail gallery culd be budget and family lifestyle riented, target tp market slice, r cmbine sme characteristics, but can never be all at nce. Lack f a clear shpping centre brand results in client cnfusin, which is always a drawback. 8% 2% 16% 40% 21% 13% Key shpping centre prfiles that currently dminate the Plish retail landscape are: 1st generatin hypermarket-anchred with a service gallery, 2nd generatin scheme anchred with a hypermarket and mid-market fashin gallery, as well as 3rd generatin retail gallery with a sizeable leisure cmpnent. Hwever, the spectrum f available frmats is much wider and many ther cncepts, including hybrids, r specialized and theme-riented schemes, are feasible if catchment and cmpetitin analysis indicate numerus available market niches. Ist generatin shpping centres 2nd generatin shpping centres 3rd generatin shpping centres DYI/retail warehusing Outlets Retail parks Surce: CBRE
10 TENANT MIX SOLUTIONS Once the market analysis has been cmpleted and a shpping centre s best ptential prfile identified, a preliminary tenant mix cncept can be sketched. T create an initial tenant mix CBRE takes int the accunt tenants favurable cnditins, that is a cnsideratin f rental levels including ptimum leasing space and lcatin preferences, nt nly with regards t the key layut elements, such as entrances, but als in relatin t ther retailers. Tw key tenant grups in a tenant mix include: Anchr(s) are typically the largest and key stres in a scheme, and main internal traffic generatrs. The presence f anchrs is ne f the main defining characteristics f every shpping centre. Anchrs are typically the first t be invited t a prject, ften n very favurable cnditins. Typical anchrs in Plish schemes are hypermarkets and large fashin tenants. There are n department stres as shpping centre tenants in Pland, but it is cmmn that hypermarkets duble in their rle and ffer a wide variety f ther than FMCG r cmplementary merchandise. Anchrs usually ccupy frm 20% t 40% f a centre s GLA, and, depending n the size f a scheme, can take up t 12,000 sq m. In-line tenants, including all ther than (primary and secndary) anchr tenants present in the scheme, which usually lease retail space fr market level rents, and are ffered typical units. Hwever, the rental differences even between in-line tenants remain cnsiderable. Fr example, ften similarly sized tenants cming frm different market segments can pay cnsiderably different rental levels as their prfit margins and sales prfiles vary. Other key tenant grupings that have a vital imprtance t bth tenant mix and a scheme layut are based n their merchandise and service ffer, including key categries such as grcery, fashin, hme, restaurants and fd curt, cmplementary services, and leisure. Frm the financial perspective, preliminary tenant mix is an essential element in the prject fundatin prcess, as it gives the first insight int its future financial perfrmance, with an initial assessment f achievable rental levels as well as cash flw estimatins. Therefre, preliminary tenant mix clses the analysis stage and serves as the key reference when the decisin n a prject s financing is made. Key Anchres Categry Hypermarket Supermarket DYI Electrnics Fashin Surce: RRF, CBRE Tenants presence per categry 6% 6% Surce: RRF, CBRE 3% 2% 2% 3% 3% 5% 5% 9% Fashin Shes and leather Health & Beauty Accessries & Jewellery Fd specialty Multimedia Operatr Tesc, Carrefur, Real, e.leclerc, Auchan Pitr i Paweł, Alma, PlMarket, Stkrtka, Biedrnka OBI, Praktiker, Lery Merlin Saturn, Eur RTV AGD, Media Expert Inditex Grup, LPP Grup, C&A, H&M 11% 12% 33% Services Fd Other Hme Accessries Children & Maternity Electrnics Other Other Anchres Anchres Categry Cinema Bwling Children playgrunds Fdcurt Fitness Surce: CBRE Examples f tenants CinemaCity Mulitkin, Helis, Imax Independent tenants Fantasy Park, Kidsplay, Kinder Planet McDnald s, KFC, Burger King, NrthFish Pure, Gymnasin, Fitness Academy
11 DESIGNING THE BEST LAYOUT Tp 10 tenants in Plish shpping centres Tenant Categry In % f Schemes FROM TENANT MIX TO LAYOUT A preliminary layut can be put in place nce the first tenant mix has been cmpleted, after all key ccupiers have been identified and their size, as well as their psitin in the scheme, has been initially assigned. Hwever, bth tenant mix and layut creatin are fine-tuning prcesses that are clsely interlinked and typically are cnsidered tgether thrugh a number f layut versins. Depending n the prject s cmplexity, the tenant mix (re)drafting prcess takes frm several t dzens f re-iteratins between leasing and design teams. The mst successful prject achieves a relative balance in custmer traffic levels acrss a scheme, be-tween entrances, anchrs and tenant s clusters (such as a fd curt r butique fashin cluster), prviding equally gd retail cnditins fr every unit in the scheme. The preliminary layut includes all key features f a given lcatin, such as access pints t the site, a building lcatin n a given plt, varius entry pints t the site and buildings, delivery znes, car parking, as well as ther key determinants such as shpping mall (hrizntal and vertical) traffic. At this stage a specialised sftware package, fr example based n Space Syntax thery, can be used t simulate traffic flws, but mre ften the expertise f bth leasing agents and the management team is emplyed in rder t anticipate levels f custmers activity in varius parts f a centre. The anchr and ther key tenants views are imprtant in the layut fine-tuning prcess, whereas the majrity f in-line tenants, wh jin the prject later, have cnsiderably less say with regards t their psitin and unit shape. Preferably, they are gruped in clusters t create the equivalent f an anchr in terms f a traffic flw. Hwever, such key features as unit size and prprtin, visibility, frntage and signage, as well as lighting and air-cnditining, must be prvided in accrdance with market standards. Preliminary layut Final layut Inmedi Multimedia CCC Shes Triumph Fashin Inmedi Apart Accessries Deichmann Shes Visin Express Health & Beauty 5àSec Services Orsay Fashin Reserved Fashin Eur RTV AGD Electrnics Surce: RRF, CBRE Surce: RRF, CBRE Examples f layut slutins Fashin Shes Grcery Hme Appliances Media Children Restaurants & Bars Accessries Health & Beauty Services Other Fdcurt
12 VALUE ADD INVESTMENT REFURBISHMENT OPPORTUNITIES AND PITFALLS Refurbishment and revitalizatin f shpping centres will be gaining in imprtance in the next few years. Nt nly des this apply t shpping centres f the first generatin, but als t hypermarkets, which have been grwing rapidly in number between 1996 and Since 2005, hwever, the expansin f this frmat has experienced a substantial slwdwn, which is a cnsequence f the high hypermarket density and changing cnsumer needs. Well-patrnized hypermarkets with great accessibility, surrunded by undevelped plts (representing space fr expansin) are nw cming t the attentin f many real estate develpers. At present, the leasable area f shpping centres, retail parks and hypermarkets pened until 2002 amunts t abut 4.1 millin sq m. Even thugh sme f these investments have already been revitalized, the Plish retail real estate market ffers tremendus pprtunities fr successful refurbishments. Pssibilities fr extensin need t be examined at each site in advance, and shuld frm the part f a cmprehensive assessment f the prperty and lcatin. Cmprmises in layut, tenant mix, r architectural design represent risk factrs and need t be avided by all means. Despite the high value-add ptential f refurbishments, such investments are very cmplex and ften invlve greater risks than new develpments. Develpers f green field prjects can be largely flexible in designing access rads, ensuring visibility and sufficient advertising area, as well as in determining the centre layut and psitin f anchr tenants. Refurbishments n the ther hand cnsiderably narrw these elements f flexibility. Architects may als face structural limitatins, whereas the leasing and marketing teams might in sme cases have a tugh time dealing with the established negative image f a given retail destinatin. Mrever, nn-cancellable, lng-term lease agreements may seem favrable frm an ecnmic and legal perspective, but fr the restructuring f the tenant mix such agreements can becme prblematic. Retail stck grwth in millin sq m f GLA 3,0 2,0 1,0 0, Hypermarket Retail Park Shpping Center Surce: RegiPlan Cnsulting Current retail stck by age in millin sq m f GLA Under Cnstructin ( ) New additins ( ) Maturing schemes ( ) Mature stck ( ) T diminish these risks, it is necessary t carry ut a careful due diligence analysis and t address relevant experts fr each particular area. As a lcatin analysis expert, RegiPlan Cnsulting believes retail centres shuld underg a thrugh check f their lcatin, their cmpetitive strengths, and their ability t generate sufficient turnver. At the very initial phase, investrs cnsidering a refurbishment shuld answer the fllwing yes/n questins. The mre questins that are answered with yes, the lwer the number f cmprmises that may have t be made and cnsequently the risk f failure is reduced. Old perfrmers ( ) Surce: CBRE
13 DEVELOPER S CHECK LIST Lcatin Building Des the site have an intact image as a retail destinatin? D yu have full cntrl f the land required fr the retail facility, including accesses and parking spaces? Des the lcatin ffers sufficient space t achieve the adequate size necessary fr the intended market psitining? Des the existing building ffer the structural (especially in terms f statics, strey height, vertical cnnectins, sightlines, mall width, etc) and technical (IT, hme autmatin, etc.) cnditins necessary fr creating a mdern shpping envirnment? Given the existing building structure, is it pssible t implement a cmprmise-free slutin fr access rads, parking spaces, ptical image and visibility f the building and the advertising space? Cmpetitiveness Tenants Given cmpetitrs perfrmance, is it pssible t achieve the targeted market psitining r strengthen the existing ne? Can, even in a tugher cmpetitive situatin, a sufficiently high prductivity and rental incme be achieved? Are yu ahead f cmpetitrs with yur cncept r are thers already filling that market gap? Des the centre have a critical mass f existing tenants wh are suitable fr the new market psitining f the prject and wh shuld remain in the centre? Can yu attract at least ne f the tp three ut f the five leading tenants in the mst relevant retail sectrs fr the targeted psitining? Is there a time windw f cncurrent lease cntract expiries, which is favrable fr the realizatin f the refurbishment? Strategic issues Des yur intended cncept meet the expectable demands f real estate investrs? D yu have a clear exit strategy? Is yur financing structured accrdingly?
14 MARKET PRACTICE LEASE LENGTH AND TERMS Typical lease cntract perid is 5 t 10 years with an ptin t extend. Mst rents are denminated in Eur and paid in zltys, but service charges and ther payments (e.g. marketing fees) are ften denminated in the lcal currency. Only the ldest leases can still be denminated in dllars. Rents are typically the subject t annual indexatin by the Eurpean (Eurstat) price index. RENTAL PAYMENTS Rent is payable mnthly in advance, and is quted withut VAT. SERVICE CHARGES Service charge payments cver rdinary building maintenance csts such as repairs, cleaning and security. Denminated in zltys, they typically reach between PLN /sq m/mnth. MARKETING COSTS Additinal regular payments cvering shpping centre management expenses n advertising and events. Denminated in zltys, typical mar-keting payments vary between 5 20 PLN /sq m /mnth. TENANT S COVENANT Cvenant strength is very imprtant within the Plish market. Rental depsit, bank r parent cmpany s guarantee equivalent t 3-6 mnths rent, service charge, marketing csts and VAT is expected frm all tenants. INCENTIVES Incentives include capital cntributins twards shp fitting and rent-free perids, individually negtiated between the parties. Anchr tenants can expect a fit-ut cntributin. KEY TERMS MARKET TRANSPARENCY the prperty market has strng and transparent fundamentals regarding prperty titles but a degree f pacity persists with regards t the availability f market infrmatin. The infrmatin n histrical freehld and perpetual usufruct transactins registered as Ntarial Deeds is freely accessible t the listed prperty valuers, but there is n public recrd n lease transactins. KEY SHOPPING CENTRE FORMATS TRADITIONAL SHOPPING CENTRE a scheme that is planned, built and managed as a single entity, cmprising f units and cmmn areas, with a minimum Grss Leasable Area (GLA) f 5,000 sq m and at least 10 shps and services. 1ST GENERATION Hypermarket driven (accunting fr 40-50% f the ttal GLA) scheme tgether with a small, service-riented accmpanying gallery. 2ND GENERATION A shpping centre driven by a retail, typically fashin gal-lery, that represents ver 70% f the ttal centre space. 3RD GENERATION A lifestyle scheme enhanced with and ften driven by a leisure element, such as a multiplex cinema, fitness element, r increasingly a fd curt ffer. SPECIALISED SCHEMES: RETAIL PARK Cnsistently designed, planned and centrally managed scheme that cmprises f mainly medium - and large-scale specialist retailers ( big bx r retail warehuses ). FACTORY OUTLET Shpping centre scheme where manufacturers and retailers sell merchandise at discunt prices that may be surplus stck, prirseasn r slw selling items. THEME-ORIENTED - A cnsistently designed, planned and managed scheme that can either be leisure-based r nn-leisure-based. This scheme includes sme retail units and typically cncentrates n a narrw but deep selectin f merchandise within a specific retail categry, such as hme furniture r hbbies. OTHER FORMATS: NEIGHBOURHOOD CENTRE ften small r very small (belw 5,000 sq m f GLA) scheme that serves almst exclusively its immediate catchment and cncentrates n a FMCG ffer cmplemented with services r value fashin merchandise. Typically anchred by a supermarket grcery stre (belw 4,000 sq m f GLA). RETAIL SPACE GLA grss leasable area in sq m refers t the area leased t tenants and includes all ther cnstructin elements. TURNOVER Sales vlume, reprted n a mnthly r quarterly basis. Average shpping centre turnver reached apprx. 850 PLN / sq m / mnth in Q FOOTFALL The number f shpping centre visitrs, typically reprted n a mnthly r quarterly basis. Estimated average mnthly ftfall in Pland reaches 420,000 visits. TENANT MIX The cmpsitin f tenants in a scheme and their psitin relative t each ther. LAYOUT A shpping centre s layut is the design in which the interir is set up. It is imprtant t prvide gd shp windw expsure, a gd width f the malls and clear cmmunicatin.
15 CONTACTS Fr mre infrmatin regarding CBRE and RegiPlan Cnsulting reprts r any ther CBRE and RegiPlan Cnsulting services please cntact Karina Kreja Assciate Directr - Develpment Cnsultancy Rnd 1 Rnd ONZ Warsaw DDI M Nada Mumdžiev Senir Accunt Manager Thebaldgasse 8 A-1060 Vienna DDI M Janna Mrczek Directr - Head f Research & Cnsultancy Rnd 1 Rnd ONZ Warsaw DDI M Hanna Bmba-Wilhelmi CEO Thebaldgasse 8 A-1060 Vienna DDI M Abut CBRE Grup CBRE Grup, Inc. (NYSE:CBG), a Frtune 500 and S&P 500 cmpany headquartered in Ls Angeles, is the wrld s largest cmmercial real estate services and investment firm (in terms f 2012 revenue). The Cmpany has apprximately 37,000 emplyees (excluding affiliates), and serves real estate wners, investrs and ccupiers thrugh mre than 300 ffices (excluding affiliates) wrldwide. CBRE ffers strategic advice and executin fr prperty sales and leasing; crprate services; prperty, facilities and prject management; mrtgage banking; appraisal and valuatin; develpment services; investment management; and research and cnsulting. Please visit ur website at Abut RegiPlan Cnsulting RegiPlan Cnsulting is ne f the leading Eurpean cmpanies fr retail lcatin cnsulting and retail market analyses in Eurpe. Drawing n 25 years f internatinal crss-industry experience, RegiPlan experts prvide cnsulting services t retail trade and service cmpanies, retail real estate develpers and investrs. The scpe f services ranges frm market feasibility fr new retail develpments, ver refurbishment and redevelpment cncepts, t expansin cncepts and market analyses fr retailers. RegiPlan als prvides market intelligence and reprts n cnsumer and retail market. Disclaimer CBRE Sp. z. cnfirms that infrmatin cntained herein, including prjectins, has been btained frm surces believed t be reliable. While we d nt dubt their accuracy, we have nt verified them and make n guarantee, warranty r representatin abut them. It is yur respnsibility t cnfirm independently their accuracy and cmpleteness. This infrmatin is presented exclusively fr use by CBRE clients and prfessinals and all rights t the material are reserved and cannt be reprduced withut prir written permissin f CBRE. RegiPlan Cnsulting GmbH cnfirms that infrmatin cntained herein, including prjectins, has been btained frm surces believed t be reliable. Hwever, nt all data has been verified and we make n guarantee, warranty r representatin abut them. Anyne wh uses the data shuld independently verify their accuracy and cmpleteness. This infrmatin is presented exclusively fr use by RegiPlan clients and prfessinals and all rights t the material are reserved and cannt be reprduced withut prir written permissin f RegiPlan Cnsulting.