Opportunities for retail redevelopment abound in CEE

‘It is an exciting time for the CEE’s retail property market,’ the company’s head of CEE Agata Brzezinska told RetailWatch. ‘Over the last decade it has developed significantly, moving from infancy to become relatively mature in most CEE nations, with maturing retail destinations now throwing up significant value enhancement opportunities for asset managers and investors. As an active asset manager Pradera is always looking to unlock value, and we already have many successful examples from CEE. We are looking to take advantage of more opportunities across our portfolio in the region.’

Ageing assets dating back to the onset of retail development in countries such as Poland and the Czech Republic are now entering an era of renovations, re-modellings, expansions and redevelopments, Brzezinska said. ‘Established shopping centres are being transformed into more modern retail destinations that appeal to today’s consumer, and are gaining value as a result. This is encouraging high volumes of capital into the CEE region from a variety of investors who are all seeking the stable returns offered by modern retail destination.’

As a head judge for the PRCH Retail Awards organised by the Polish Council of Shopping Centres, Brzezinska has visited numerous retail assets in Poland. ‘Many were excellent examples of well managed expansion or remodelling and how this can completely change the perception of the asset and enhance returns on investment. Two of the most notable examples in Poland are the Riviera Shopping Centre in Gdynia and the Ogrody Shopping Centre in Elblag which both became market leading retail destinations following transformations.’

From defined formats to multi-formats
So how are the region’s shopping centres going to be transformed? Brzezinska believes more and more stock will switch from defined formats to multi-formats. ‘We will see more mixed-use developments, more entertainment and food & beverage that will enable landlords to diversify their offer. Innovation in shopping centre operation is of course becoming a must, as it is in all markets. New technologies are developing fast, providing landlords with the opportunity to better market their shopping centres, connect with the consumer and optimise operational costs, as well as ensuring their centres are more comfortable and user friendly.’

Pradera has also been actively engaged in upgrading its own portfolio. At the Galeria nad Jeziorem Shopping Centre in Konin, Poland, the company recently signed a deal with Helios Cinema that will see it expand its cinema at the retail destination by three screens, Brzezinska said. ‘This further strengthens the shopping centre’s position as the key entertainment destination in Konin, which provides the only cinema offer in the city.’

In 2016 Pradera ‘significantly’ enhanced the asset value of its Hana Olomouc shopping centre in Olomouc, Czech Republic (pictured), by developing a 3,000 m2 retail park opposite the shopping centre, Brzezinska said. ‘We secured Sports Direct as the main tenant, the only Sports Direct in the region. It has acted as an anchor tenant, driving footfall which in turn has improved the performance of the Hana Olomouc shopping centre.’ 

Downsizing is a trend
Downsizing of hypermarkets or large consumer electronics retailers whose store formats are not in line with current demand are also creating opportunities in many locations, Brzezinska said. ‘We successfully managed a hypermarket downsizing at our Pasaz Lodzki shopping centre in in Lodz, Poland, by securing leading, popular retailers in the downsized space including Toys ‘R’ Us and TK MAXX. This added to the centre’s unique tenant mix and unlocked significant value. Another significant opportunity in the CEE is old department stores in downtown locations. They are ripe for redevelopment into modern retail or mixed use destinations.’

In March 2017, Pradera announced the first closing of the Pradera European Retail Parks SCSp fund, which will see the company acquire 25 prime retail parks next to Ikea stores in eight European countries, including in Poland and the Czech Republic. The acquisition follows analysis in which significant potential for upside within the portfolio was identified,  Brzezinska said. A key pillar of the asset management strategy going forward will be to optimise the tenant mix, she added. ‘Together with the property manager BNP Paribas Real Estate and leasing agent Cushman & Wakefield, we are working to ensure they become very strong retail destinations.’

Brzezinska believes the current macroeconomic environment in CEE will support the transformation in the retail sector. ‘Wage growth is stable and rising disposable incomes are creating opportunities for new entrants in categories such as entertainment. This is being enhanced by an increasingly dynamic tourist sector which is impacting positively on core capital markets in the region.’