High Street Retailing - July 2010”Fashion is architecture: It is a matter of proportions.” Coco Chanel Can Poland cut it?
2 On Point • High Street Retailing • July 2010Polish High Street Retail: Evolution or Revolution?High street retailing has undergone an evolution since 1995, in line This report examines the high street retailing in major Polish cities ofwith wider changes to the retail picture in Poland, albeit much slower Warsaw, Kraków, Wrocław, Poznań, Tri-City, Katowice and Łódź.and to a lesser extent. Renowned national and international brands, The following central parts of the cities were included in thecafes and restaurants have all populated city centres, replacing research:reminders from the Communist era. Luxury, high-end brands in • Warsaw: Marszałkowska, Nowy Świat, Three Crosses Squareparticular have a preference for high street locations over regular (Plac Trzech Krzyży), Chmielna, Mokotowska;shopping centres reflecting their strategy on home markets of Italy, • Kraków: Old Town Square (Rynek), Grodzka, Floriańska;France and Germany. • Wrocław: Old Town Square (Rynek), Świdnicka, Oławska,There are certain areas of Polish city centres which are natural retail Kiełbaśnicza;destinations featuring high pedestrian flow. These are typically • Poznań: Old Town Square (Rynek), Paderewskiego, Półwiejska;areas in a close proximity to the main touristic attractions of the • Gdynia/ Tri-City: Świętojańska;cities’ such as Main Square (Rynek) in Kraków, Wrocław, Poznań or • Łódź: Piotrkowska;Royal Tract (Krakowskie Przedmieście Street - Nowy Świat Street) • Katowice: Stawowa, 3 Maja, Dworcowa, Dyrekcyjna, Św. Jana,in Warsaw. Also the vicinities of major transportation hubs defines Staromiejska, Szewczyka Square, Młyńska.an interesting and natural high street retail destination, which ismost pronounced in Katowice with retail located in the area of the City differentialsmain train station (PKP). Revitalisation and re-development of old, The field research undertaken allowed us to determine the retailneglected central parts of the cities’ is another incentive for retailers mixes on each of the main street included in the report, high streetto open in downtown areas. Again Katowice can be referred to as an retail mixes on a city level as well as an aggregate retail mix forexample with Dworcowa and Dyrekcyjna streets clearly gaining on Poland.importance following the refurbishment of the old historic Monopolhotel, and are likely to attract more high-end retailers in the future. The „clothing, footwear & accessories” category dominates retail mixes on all the markets with shares between 21% and 35% of the total number of high street stores on a given market. On average, this retail category accounts for 30% of the total number of unit shops on the Polish high street. The clothing, footwear and accessories category is best represented in Warsaw (35%), Poznań (34%), Kraków (32%) and Katowice (32%) and Wrocław with 21% seems relatively underrepresented in this respect. Numerous fashion boutiques are outlet stores, which is particularly pronounced for Chmielna street in Warsaw, Piotrkowska street in Łódź, and to a lesser extent, Świętojańska street in Gdynia. Interestingly, luxury high-end brands tend to form clusters. This is visible in Warsaw around Three Crosses Square, Main Square and Grodzka street in Kraków, on Paderewskiego street in Poznań and aforementioned Dworcowa and Dyrekcyjna streets in Katowice. Wrocław (31%), Kraków (29%) and Poznań (29%) have an extensive selection of cafes, restaurants, bars and pubs, with 47, 82 and 54 units operating on these markets respectively. The lowestWarsaw, Three Crosses Square share of this category is registered on Świętojańska street in Gdynia (10% of units) and in downtown Katowice (11%).
On Point • High Street Retailing • July 2010 3Świętojańska street in Gdynia is dominated by service operators Capturing power and attractiveness of high streets varies greatly(nearly 24% of units), of which the main occupiers are banks and between cities. Often only a short stretch of the streetproviders of financial services (11%). In addition, also Piotrkowska enjoys retailer demand. This is the case of Marszałkowska street instreet in Łódź (23%) and the Wrocław high street area (22%) are Warsaw where popular mid-market brands such as H&M, C&A,home to numerous service units. Reserved, M&S, Mexx, Esprit are located on ground floors of department stores of Wars, Sawa and Junior. The remaining part ofŚwidnicka / Oławska street and Main Square in Wrocław (15%) and this street is much less appealing to retailers. A similar situation is inPiotrkowska street in Łódź (12%) are preferable locations for banks. Kraków, where particularly attractive to retailers is a 150 metreThe smallest representation of banks is registered in Warsaw and stretch of Grodzka street neighbouring the Main Square.Kraków (approximately 2% each). Conversely, the high street retail in Katowice is far more balancedUnit shops broken down by retail categories and spread across Stawowa, 3 Maja, Dworcowa, Dyrekcyjna, Św. Household goods and accessories 7% 8% Jana and Staromiejska streets. Clothing, footwear and accessories 7% Gastronomy 5% Banks and financial services 4% 30% Services Groceries 9% Vacant units Health and beauty 8% Other 21%Source: Jones Lang LaSalle, May 2010Is vacancy a problem?The vacancy rate as defined as the number of unoccupied unitscompared to the total number of retail units on the high streets iscurrently at approximately 5%. Łódź (18), Warsaw (17), Katowice(17) and Gdynia (16) feature the highest vacancies while only twoempty unit shops were identified in Poznań. There are clearly morevacant units on Polish high streets now than two years ago – a clear Kraków, ul. Grodzkaconsequence of the economic slowdown and retailers retrenching in2009 rather than expanding. Notably, the bankruptcy of GaleriaCentrum brought about fundamental changes on the retail scene. Kraków and Warsaw: leaders in Poland but trailing inHowever, the slowdown also created room for new tenants to arrive Europein city centres, such as Marks&Spencer and TK Maxx in Warsaw. Attractiveness of high street area differs significantly betweenVacancy rate (%) and number of empty unit shops particular cities and, most notably, areas of the cities. This is clearly reflected in rental levels, as shown on the following graph. TheKatowice 17 units highest prime rents are achievable in Kraków (€85-€95/ sq m / Łódź 18 units month), where high street retailing is most developed, and inWrocław 9 units Warsaw (€75-€90). Łódź (€25-€30/ sq m/ month) and Gdynia (€35- Gdynia 16 units €40) command the lowest rental levels, being a function of smaller Warsaw 17 units retailer demand for high street units on these two markets. Krakow 10 units Poznań 2 units 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%Source: Jones Lang LaSalle, Maj 2010
4 On Point • High Street Retailing • July 2010Prime high street rents (€ / sq m / month) For the majority of the survey respondents the main Polish cities Łódź were focal points of interest in this respect with 88% of them active Gdynia in these cities. One third of the retailers who responded to the survey have opened their boutiques also in cities sized 100 000 –Katowice 400 000 residents, and 25% of them have entered cities smaller Poznań than 100 000 people.Wrocław Warsaw High Street Positives Kraków According to the survey results, unit shops on the high street do not €0 € 20 € 40 € 60 € 80 € 100 offer direct competition to the stores in regular shopping centres.Source: Jones Lang LaSalle, May 2010 Conversely, they are seen as an additional sales and distribution channel. Moreover, incentives and reasons for opening a high streetFor comparison, prime rents in West-European cities range from store are completely different from those underlying decisions to€310/ sq m/ month in Munich, €270 in Frankfurt, €220 in Madrid, up enter a particular shopping centre. Retailers choose locations in theto €625 in Paris and €650 in London. high streets for several reasons, with the most important being:Also prime rents in the CEE capitals are above that in Poland, e.g. • enhancement of brand awareness (marketing tool);in Budapest prime rents on Vaci Utca street are €120/ sq m/ month, • capturing of new target group of customers;while in Prague on Parizska street they stand at €150. • lack of a properly positioned shopping centre matching the profile of a given retailer.Prime high street rents (€ / sq m/ month ) in major European cities Other reasons behind opening a high street shop are lower rents compared to the shopping centres, lower personal costs resulting Londyn from shorter opening hours, strategy of a mother company regarding Paryż Monachium high street locations, high footfall figures in the high streets, and last Frankfurt/M but not least, the lack of interesting offers in the target shopping Mediolan Madryt centres. Moskwa Barcelona Incentives to open a high street store Amsterdam Praga Brand awareness enhancement Budapeszt Kraków Warsaw Targeting new customer groups 0 100 200 300 400 500 600 700Source: Jones Lang LaSalle, Q1 2010 Lack of appropriate OtherRetailers’ perspective 0% 10% 20% 30% 40% 50% Other:In order for our research to be as comprehensive as possible, Jones • Rents lower than in shopping centresLang LaSalle carried out a survey amongst retailers who operate • Lower labour costshigh street shops in Poland. We questioned 60 retailers • Flagship on high street – brandrepresenting various categories to reflect the realistic profile of high • Lack of sufficient offers in existing shopping centresstreet retail in Poland. • High footfall figures Source: Jones Lang LaSalle, Survey among retailers, April – May 2010
On Point • High Street Retailing • July 2010 5High Street Negatives Relation between turnovers per sq m on the high street and in shopping centresSurveyed retailers are of the view that the expansion on high streets Turnovers on the high street:is associated with a number of constraints. These include: 12% represent less than 50% of 21%• insufficient critical mass of high street retailing resulting from turnover per sq m in a shopping underrepresentation of quality brands in these areas of cities; centre are lower by 21-50% per sq m• lack of unit shops meeting occupiers’ requirements; the need for than in a shopping centre serious capital investment to up-grade the unit and its frontage; are lower up to 20% per sq m• expected lower footfall than in shopping centres; than in a shopping centre 33%• unsatisfactory level of turnover; represent more than 20% of turnover per sq m in a shopping• too high rents on high streets; centre 33%• higher operational costs e.g. increased security;• low number of or zero parking spaces; Source: Jones Lang LaSalle, Survey among retailers, April – May 2010• limited influence on immediate neighbourhood;• expansion strategy of some companies not allowing to open more Prime high street rents are similar to that in best performing than one unit shop per city. shopping centres on a given market. This view is represented by 42% of respondents. Another 39% of retailers claim that rents onHigh streets v. shopping centres premier retail streets are below that achievable in shopping centres; this presumably applies to the stores on the market in Łódź, Gdynia,Reliable comparison of rents and turnovers achievable on high Katowice and Świdnicka street in Wrocław. The smallest group ofstreets and in shopping centres is extremely difficult. This is retailers are of the view that the high street rents are above that inbecause of a relatively small group of retailers trading in the high retail galleries, and this opinion is likely to be expressed bystreet area and the shopping centres on the given market, diversity occupiers in Warsaw and Kraków.of premier retail streets in Poland and specifics of retailers. Relation between rents per sq m on the high street andOur research proves that generally higher sales per sq m are in shopping centresgenerated in shopping centres - 79% of the respondents claim so.However, 21% of the retailers surveyed express the contrary opinion Rents on high street are: 8%and these are likely to be retailers trading on best high streets of 0% lower than in a shopping 11%Warsaw and Kraków. It means that 21% of questioned retailers centre of good qualityachieve higher turnovers per sq m on the premier retail streets, on a comparable level 39%despite the fact that shopping centres have longer opening hours, higher up to 10%more convenient access and parking facilities, and pedestrian flow higher by 11%-20%is higher and more balanced throughout the year. higher by 21%-30%Turnovers of stores trading in city centres are somewhat affected by 42%the seasonality factor, peaking off over the Spring/ Summer time.However, this effect is not as dramatic as one may think. Potentially Source: Jones Lang LaSalle, Survey among retailers, April – May 2010lower sales over the Winter time e.g. from fashion retailers resultingfrom less tourists shopping are compensated through sales of Our research clearly demonstrates that unit shops do not offer directmerchandise of higher value. competition to the stores located in shopping centres, but are additional sales and distribution channels. Through a proper marketing of premier retail streets in Poland, and creating a trend for high streets amongst occupiers, landlords and shoppers, it is – in our view – possible to increase retail sales in Poland. This is proved by observations from survey respondents. 78% of the retailers
6 On Point • High Street Retailing • July 2010surveyed did not register a drop in turnover levels in the shopping Our experience is that although the high street rents are higher, the turnovers per square meter are higher too…centre stores following the opening of a high street store on a givenmarket. Moreover, only 31% of respondents were forced to close ” We are present to develop inhigh street in Krakowhigh street plan to continue on the main this direction, since and wetheir store on the high street after opening in a shopping centre in locations is what our Italian and German business partnersthe same city, and nearly 70% have successfully continued activity expect. They simply associate the prestige of a brand not within both of the retail formats. a shopping centre, but with a high street, namely Grodzka Street in Krakow, which is a widely recognisable street.What can be done to raise retail sales, increase turnovers and When looking for an appropriate location we take into consideration a blend of factors such as the prestige, theimprove the image of Polish high streets among customers? Each of exposure and the width of a shop window, the technicalthe city centres is unique in its character but they all feature high condition of a shop and its adaptation possibilities. In townpedestrian flows. Revitalisation of downtown areas would certainly centres, shop units are often located in old, historic buildings, thus all changes must go through many procedures andincrease the dwell time of customers in the city centres, at the same approvals from a heritage conservator. Even a simpletime raising the profile of high street retailing. In order to achieve this logotype over a shop entrance may grow to a problem.aim, several steps should be undertaken whereby a support from Speaking about problems with securing a high street location,local authorities plays a key role. According to the feedback from a strictly limited supply is one of these. Let’s take Krakow ashigh street occupiers, the most important areas for improvement an example; our interest is restricted to Grodzka Street, and to be precise, only its 100 m long stretch. This requires fromare: us a constant monitoring of places where we want to be.• lack of parking facilities, the need for well accessible parking Insufficient number of parking spaces and zones with restricted parking are also problematic. The development of spaces in the vicinity/ at the rear of the premier retail streets; widely available parking areas would boost sales and raise• improvement of technical conditions of buildings along central competitiveness of high street retail. retail streets, refurbishment of neglected facades; However, the fundamental incentive to enhance the image of• classification of buildings’ ownership status, which currently high streets is the improvement of technical condition of disables applying a consistent leasing policy. buildings and renovation of facades. What is also discouraging in respect of a high street shops is the lack of control over neighbourhood, which is typically one of theThe current situation whereby city centres are often quadrants with competences of shopping centre managers.old neglected buildings and facades, where next to a high-end Our experience shows that the high street rents are up to 20%boutique with luxury apparels there are “kebab” bars, should be above those in the shopping malls. We also register a higherchanged. Let’s take an initiative. An interesting example of the turnover per square meter on the high street despite the fact that shopping centres have longer trading hours, easierinitiative, albeit abandoned, is Piotrkowska street in Łódź (currently access and higher and more stable footfall figures.”a walking passage), where local retailers intended to revert the cartraffic into this street. Let’s create a fashion for high street shopping. Iwona Kasprzyk, Mirage*Let’s make use of a downtown pedestrian flow potential. Let’s keep * Brands under Mirage’s umbrella: Warsaw: Paul & Shark, Marina Rinaldi, Katowice:and entertain people in city centres with shopping and gastronomy. Marc Cain, Marina Rinaldi, Mirage – multibrand store (Furla, Dolce & Gabana, Richmond, Francesco Biasia etc.), Kraków: Max Mara, Marina Rinaldi, Paul & Shark, Escada. Warsaw, Nowy Świat
On Point • High Street Retailing • July 2010 7Conclusion High street locations are prestigious and Italian brands are City centres and main, centrally located streets set out on p. 2 of accustomed to their stores being right there... this report, are natural retail destinations. This is where the ”The expansion of our company is via shopping centres as well as high street shops. We have decided to open in natural pedestrian flow peaks. Warsaw, Krakow, Poznan, Katowice and Wrocław, because high streets locations in these cities are prestigious, and Shopping centres, most notably those in out-of-town locations, Italian brands are accustomed to their stores being right there… are struggling for customers; they also have to ensure a good connectivity with residential districts/ catchment area and City centre retailing is currently undergoing changes, which are often not to our benefit. There is a clear shortage of availability of public transportation means. downtown places associated with fashion retailing. A large portion of Polish main streets have been dominated by banks, Downtown areas have all the attributes mentioned above. They mobile phone operators, gastronomy concepts of all kinds, and are therefore not particularly appealing to us. offer a unique, and most importantly natural retail potential which should be promoted and built upon. Among typical problems with a search for an interesting high street location are poor quality of neighbouring stores, lack of parking possibilities and complicated legal status of the Polish city centres should be local focal points drawing premises, often too difficult for us to accept. customers by a wide retail and catering offer similarly to what is However, Italian brands are accustomed to high street observed in the major cities of UK, Italy, Germany and France. locations being home to high-end brands. Stores of luxury retailers operate on the high streets of Milan, Paris or London. Shopping centres are simply not the target location The enhancement of the high street areas would also raise for brands such as Max Mara, Versace or Armani. Our competitiveness of the Polish cities in a race for new, strategic Italian partners aspire to open flagship stores on up-market investors representing the business process outsourcing/ shared positioned stretches of city centre streets. services centres (BPO/ SSC) sector. It is not seldom that the We are looking for units in areas already established as macro-location is assessed by a potential investor based on the fashion clusters with some critical mass. We believe that main streets in biggest cities such as Nowy Świat St. in quality of living soft factor, which is correlated to how Polish high Warsaw, Paderewskiego St. in Poznan, Dyrekcyjna / streets look. Dworcowa St. in Katowice, Grodzka St. and Main Market Square in Krakow will develop in this direction. In smaller cities, which still lack properly positioned shopping centres, we are opening our stores in retail clusters, where the city life is. These usually tend to be market squares, main pedestrian routes and high streets. If Polish high streets are to gain on representativeness, this shall be based on a long term strategy, included putting in place necessary infrastructure, especially parking places. This is once of the main challenges for retailers as well as their customers.” Angelika Pranke, R&D Poland/ OWL International/ TRS Polska* * Brands under the umbrella: Max Mara, Marella, Pennyblack, Tru Trussardi, Liu Jo, Patrizia Pepe, Armani Jeans, Pinko, Versace Jeans, Furla, Francesco Biasia, Ice Iceberg. Rome, Via Condotti
8 On Point • High Street Retailing • July 2010We are searching for an interesting concept to draw H&M expansion plans are not specified as to the number of newcustomers to city centres and offer them add-on value, a openings in the future. Our ambition is to grow approx. 10-15%unique shopping experience compared to what they typically annually; this is why we are always looking for new locations, but only for the really best ones. We are thoroughly reviewing markethave in shopping centres… offers; however, if we are not convinced to a particular location, we Opening stores in best available locations in the city is a part of simply reject it and wait for a better opportunity.” development strategy. High streets are part of this strategy, thusour An interesting case is our store in Katowice on Stawowa Street.our shops are present there. After the opening, the footfall and retailing street increased and,A good visibility and exposure are critical in our search for new additional services and gastronomy points arrived.high street locations thus our natural choice are corner buildings, if I think that at present the retail in Poland is shopping centre driven,possible. Another important factor is the prestige of the location. and high street retailing is further down in the retail hierarchy.Other elements that we take into account are the relocation of space H&M aims to launch stores, which will draw people not only byacross the storeys, availability of ground floor area, storey height, their offer, but also the atmosphere of a place, some form ofand last but not least, the quality of the premises. We are always additional value. Opening of stores with a fresh design idea or atrying to create a unique shopping atmosphere for our customers; revitalisation of a building in a market square, tenement house on athis is why we arrange our shops in a way that offers something high street is an interesting idea to draw different group ofexceptional. customers and offer them more than a regular shopping centre experience.” Filip Pietkiewicz-Bednarek, H&M
John Duckworth Anna Bartoszewicz-Wnuk Patrycja Dzikowska Edyta PoteraManaging Director CEE Associate Director, Head of Research Senior Researcher Associate Director, Retail AgencyJones Lang LaSalle Jones Lang LaSalle Jones Lang LaSalle Jones Lang LaSalle+48 22 318 0044 +48 22 318 0007 +48 22 318 0003 +48 22 318 firstname.lastname@example.org email@example.com firstname.lastname@example.org email@example.comHigh Street Retailing – July 2010OnPoint reports from Jones Lang LaSalle include quarterly and annual highlights of real estate activity, performance and specialised surveysand forecasts that uncover emerging trends.www.joneslanglasalle.com