A consumer-driven retail evolution in Central and Eastern Europe is having an impact, not just on the retail sector but on logistics and residential, delegates heard at a PropertyEU CEE Investment Briefing which was held in Warsaw recently.
‘There is a huge potential for change as CEE moves away from traditional sectors and into a completely new age of what is needed,’ said Damian Harrington, head of research EMEA at Colliers International. ‘Sectors are morphing together and opportunities are emerging in niche and less traditional sectors.’
One example has been the success of convenience stores in Poland. ‘The emergence of the convenience store has been the most interesting development in CEE recently,’ said Brian Jenkins, President and CEO of Multi Corporation’s King’s Street Retail Properties. ‘Zabka in Poland is the biggest employer and it has blown supermarkets out of the water, gaining a 30% market share. They understood that convenience is not just about proximity but also ease of access and a good experience all the way through.’
Zabka’s success is a sign of the increasing importance of city life. CEE may not have global cities like London, but it has many successful and vibrant cities where people want to live. Urbanisation is as strong a trend in the region as it is in the rest of Europe: the population of Warsaw, for example, is growing at a faster rate than the urban population of Paris. Youth mobility is driving this, as the young go where the jobs are.
This creates opportunities for developers who are able to provide the right product, be it student housing, microliving or affordable housing. ‘There is no point in Poland in building the high-end, high-amenity student housing targeted at Chinese or Russian students that you find in Central London,’ said Brian Klinksiek, director of research and strategy at Heitman.
Affordable housing is a pressing need, agreed Xavier Jongen, head of Catella’s Residential Investment Platform: ‘The big mismatch between demand and supply is becoming a problem, and seniors and millennials have to compete for the same scarce assets. Developers tend to go for the high-end market because it is the easiest and safest, so affordability doesn’t figure. It will take some time for the market to institutionalise downwards and bring the volume needed.’
The residential sector is very fragmented in CEE, which means there are opportunities, said Klinksiek: ‘We are very interested in the rental sector, as well as student housing. We are methodically looking at sectors and markets that have lack of supply.’
Multi-storey warehouses
The urbanisation trend and the growth of e-commerce are also having a big impact on logistics, the panellists agreed. ‘The costs of real estate are going up because of the need for last-mile delivery centres closer to the city,’ said Robert Dobrzycki, CEO Europe of Panattoni. ‘It will be necessary to build multi-storey warehouses and fulfilment centres ever closer to city centres to satisfy customers’ same-day delivery expectations.’ While retail will continue to be under pressure, e-commerce and logistics will grow, he added. 'The market is going through a real revolution now.’
The evolving CEE market offers opportunities in retail, residential, logistics and alternative sectors, but the biggest obstacle to those opportunities being realised is uncontrolled planning, the panellists agreed. ‘I do not want to be Dr Doom but planning is the most problematic issue for retail and it is getting worse,’ Jenkins said. ‘Government does not plan and developers cannot, so it makes for very uncomfortable dynamics. It must be brought under control.’
There are new shopping centres being built right next to existing and successful shopping centres, or retail parks sabotaged by being located right next to a busy and noisy motorway roundabout, said Klinksiek: ‘There is a terrible lack of discipline at the moment. What is needed is careful planning that will create destinations with locational stability and a sense of place. In short, places people want to go to.’
CEE and Poland in particular have benefitted greatly from being part of the European Union and receiving EU structural funds, but now it is time for governments to step up to the plate, plan and invest in infrastructure, said Petr Zemcik, director of economic research at Moody’s Analytics: ‘The region is doing well and governments should now invest. There has never been a better time to invest for the long-term.’
