Piotr Miączyński: A few years ago you said: "If I were to envy the West, and even our southern neighbours, it would be the real shopping streets. I would like the trade to return to Nowy Świat, Krakowskie Przedmieście and Chmielna in Warsaw". Paradoxically now your wish can come true.
Marek Noetzel, Member of the Board of NEPI Rockcastle*: There is no such possibility. My wish will remain only a wish. For two fundamental reasons. The shopping streets have certain catalysts that drive them. The most powerful is tourism.
And tourism has now ceased to drive trade across Europe.
So not only is there no chance for the renaissance of shopping streets in Polish cities, but I have serious concerns whether the ones I admired in Prague or Budapest will survive.
Let me just add that on Parizska Street - this is a prestigious street with expensive brands in Prague - 80% of the turnover is generated by tourists.
Where are the tourists? When will they return?
And the second fundamental reason why there will be no real shopping streets in Poland is the ownership structure of real estate. Some of the premises in such places belong to the municipality or the state treasury, some are in private hands, so it is difficult to combine them, it is difficult to generate areas on them that would be suitable for sensible commercialization.
So shops from the centres will not move to the shopping streets, which now seem to be a safer place for people to shop?
No. What do people value in galleries? The fact that they are clean, air-conditioned rooms - and the weather we have in Poland is what we have. The fact that I can freely park or easily reach by public transport, because the centres are usually located in nice, easily accessible places.
Tenants see it differently: "The shopping malls we remember are gone. It will be different now."
- I think these are phrases repeated in order to force a fundamental change in the relationship between landlords and tenants. If someone tells me two weeks after the reopening of the malls that are commercial centres are ghost towns, that the malls are not the same and will never be again, then I simply disagree.
Customers keep coming to us. Galleries did not become, as somebody put it, atrophied. The darkest scenarios didn't come true. Rumours of our proverbial death are definitely premature.
Sławomir Łoboda, vice-president of LPP clothing company, which includes Cropp, Sinsay, House, Mohito and Reserved brands, recently spoke in "Wyborcza": "My colleagues from the gallery say now, you know what? We'll give you a 50% discount. And I know that's a lot. And I also know how difficult it is for them to offer such a thing. I answer that unfortunately I don't know if it's enough. Maybe it's not enough.”
- The biggest financial burden in galleries is the rent. Now we have a discussion about adjusting them to what the new reality has confronted us with.
However, I would like to emphasize: nowhere in the world - apart from Poland - have the tenants been exempted from any charges for the time of closing the mall.
In Lithuania, rents are subsidized, tenants pay 20 percent of the fees, landlords give 30 percent reductions, and half is financed by the state. This model will be valid there until the end of July. A similar model is in force in the Czech Republic. In Slovakia, rents are moved to other dates.
Tenants in Poland have been given a big breath of air thanks to this exemption from charges.
Tenants now want to make their rent dependent on their turnover. And they terminate contracts in droves. Why don't you give them what they want?
- Let us try to reverse this narrative. Did we ask the tenants before COVID, when the dizzying consumption in stores was driving the economy, to meet with us so that we can demand that they pay a higher rent before the end of the contract period, because their turnover was so high?
No. Contracts are made for better or for worse.
They are made for years so that they are stable and financial institutions want to finance the construction of galleries - otherwise no commercial facilities would be built. Many brands would not be internationally successful. Developers and investors have invested and taken a very big risk, thanks to which many Polish brands are nowadays internationally recognized.
Galleries have been closed for a month and three weeks and have been reopened for only two weeks. And some companies say that they want to pay turnover-dependent rent for the next few years. Is this solution commensurate with the reality we are now facing?
I don't think there is enough data to assess it now. And I don't want the current situation to be used to turn upside down the standards developed by the market for over 20 years.
We are talking, looking for solutions for the next few months. This isn't a sprint, this is a marathon.
Don't you want to help them?
- Of course we do, and we help. Our survival depends on the survival of the tenants.
But while providing this help, you also have to take into account that companies are in different situations. In some, sales are very good, in others bad.
So who is doing well and who is doing poorly?
- Usually spring or the beginning of summer was a time when there were a lot of weddings, graduation exams, baptisms, communions. There were a lot of elegant men's clothes sold. Now they don't sell.
These events are moved or cancelled. These shops have lost the season. They're in a difficult situation. The situation is similar in the tourism industry. But in turn, consumer electronics retailers are doing better, especially those who have been working in the so-called omnichannel model for a long time and skilfully combine Internet trade with trade in stationary stores.
I would also like to emphasize that most companies have a partnership approach to cooperation. Both us and them want to do business on a long-term basis, so I think we will eventually reach an agreement.
What about those tenants who disagree with your position?
- If two parties have different opinions on one subject, it must be decided by the court. So we'll go to court.
You start the day by looking at how many people were in your centres?
- This is one of my first morning readings and it concerns Poland, but also other countries of the region for which I am responsible.
What do you see?
- We were expecting big drops in visits. In China at the beginning there were on average 70 percent fewer clients.
We have 50 percent fewer clients in the first week after the opening. However, the number of visitors is growing day by day. So we are in a completely different place than Asia. And let's remember that a large part of the galleries - cinemas, fitness clubs, etc. - is still out of use.
Visiting is one thing. However, conversion is at a record level.
More plainly, what does this mean?
- Conversion, that is, by definition, the number of people who buy, compared to those who enter the gallery. Since the galleries reopened, it is extremely high. When somebody enters the center, it is for specific purchases.
The scale of redundancies is so far much smaller than various models predicted a few weeks ago.
In large part this is due to the "anti-crisis shield". These are billions of zlotys pumped into the economy, primarily to save jobs. Thanks to this, among others, consumption is slowly returning.
To sum up, we got off to a relatively good start. We were dealt a weak hand, but I think that with time our cards will get better and better.
Are there any industries/locations for which the lockdown was particularly hard?
- I am observing with concern what is happening in Silesia. New infections are falling all over the country. Silesia has a different trajectory.
Customers are returning to normal there much slower than in the rest of the country.
So where do they come back faster?
- In smaller towns, where there are simple, one-level galleries with easy access from the car park and in commercial parks. There are no multi-storey car parks where there is a higher risk of meeting someone. You can park outside and quickly enter the selected shop.
It is worse in big cities, in modern galleries, where there is a large share of entertainment space: cinemas, restaurants, play parks for children. These facilities started more slowly, but they will catch up quickly. In big cities there are no students at the moment, business is not back to normal and office buildings are rather empty.
There are no cinemas selling from several hundred thousand to over a million tickets a year. This is the first time that the promotion of new films has been stopped. The premieres have been postponed for half the holidays.
And the cinema market is very much waiting to open.
Well, I would not be so sure that they are so anxiously waiting. When they're closed, they don't have to pay their rent. And the new releases, as you pointed out, are postponed to mid-July.
- It will pass quickly. It's the end of May. The government will probably let the cinemas open in June.
What do you imagine will happen? Every other seat will be empty. People in masks can't eat or drink anything. It will be a bit of a facsimile of the old movie theatre.
- We don't know exactly what the opening protocol for cinemas will be yet. It'll probably be the way you say it is, and the beginning will be difficult. In cinemas, a lot of revenue comes from selling everything but tickets.
Marek Noetzel członek zarządu NEPI Rockcastle materiały prasowe
I expect very cheap tickets for some older productions to be sold in June so that customers show up. And at the same time, do that they get used to the new rigors. And from July or August there will be new productions that will actually make people come back to cinemas.
In June, fitness centres are also to be opened. Maybe it will be just like in the Czech Republic. You can practice, but changing rooms and showers are off.
- It's hard for me to imagine. People after training, especially in summer, they will want and in many cases will even have to take a shower. On the other hand, I read a study that more than 80 percent of people who can't use fitness clubs want to go back to them as soon as they're open.
What's happening now is a transition model that we have to get used to. We have to get through this. I believe these restrictions will be removed in a few months. And you'll be able to eat popcorn in the theatre. And you won't have to wear a mask.
There could be over 6,000 people in a medium-sized mall before the coronavirus. Now there could be 3,000. When will there be queues to enter the mall?
- I often ask myself that question. There could be a moment when it happens.
There is a chance that, as part of further economic loosening, the limits of visits to galleries will be changed. I also count, a little quietly, on the return of trade Sundays.
That would help avoid the surge of people visiting the galleries. And this happened before COVID on Fridays, Saturdays and Mondays.
When you were negotiating the sanitary protocol with the government, you talked about restoring trade on Sunday by the end of this year.
- Yes, there was that discussion. But, as you know, it's not a substantive decision, but a political one. And in this situation, it's not just about the interests of customers, landlords or tenants.
Besides, in the cultural circle where we are, Sunday is also of special importance. If it was a clean math account, shops would be open on Sundays.
What would it change for the tenants?
- Turnover. Statistically, Sunday was the second best day of the week in terms of sales. In the case of tenants, we could talk about percentage increases of several to dozen percent, and in some cases even higher. Companies would get out of trouble faster. There would be less bankruptcy.
The unions will tell you that it doesn't matter for the turnover whether the stores are closed in the centres on Sunday or not, because you can buy your pants on Saturday.
- Pants, yes, we can buy them on Saturday. No problem.
But there are a lot of industries that take advantage of the traffic generated in a given gallery. On Sunday, people go shopping, but also to the cinema or a restaurant.
Now the cafes can be open on Sunday, but what if there aren't many people coming there because there are no people in the gallery that day. On Saturday we won't buy two coffees instead of one to make up for Sunday. This is an impulse purchase. And these impulse industries, such as cafes and restaurants, could see big increases once trade is restored on Sunday.
- Some trends will accelerate. There will be more automation in the centres. I can imagine that in a moment there will be less physical security guards in the galleries, but more monitoring.
The same goes for cleaning companies. There'll be more machines than people doing. These are investments that pay for themselves quickly.
Aren't you afraid? People have started buying more things online. And when somebody starts buying online, they stay on it. The LPP has just reported that 45% of their income is from the Internet at the moment. In other companies, it's similar.
-The fact that e-commerce has been growing so fast in recent weeks is also due to the fact that off-line stores were closed.
Of course, some processes have accelerated considerably. Many people who hadn't bought online before were convinced to do so. I am convinced that none of the tenants who have only stationary stores will survive. But I am also sure that if someone who only has stores on the Internet, they will not survive either. The cost of running an e-shop - with free deliveries for customers and free returns is very high.
When does the company have the highest margin? When it sells in its stationary store. Surely, these off-line and online channels will now coexist more strongly than before. The customer will buy online, pick up and try on the goods in their physical shop and the shop will be able to sell him other things while he is there.
Galleries have a role to play here - I expect, with the development of technology, that the galleries will play the role of so called "last mile", i.e. tenants will deliver goods bought online from physical shops, not from central warehouses. Off-line shops are very close to the customer - and are essential in the implementation of the omnichannel strategy.
Will we still want to socialize in shopping malls?
- I believe in one thing. People are "herd animals." We take it very poorly when you lock us in four walls. So the traffic in the malls will come back. Of course, it will take several quarters to rebuild.
How do you know that?
- We can only compare the COVID pandemic to the SARS pandemic that Asia went through in 2003. And this is the only tangible evidence, a comparable case from which to draw conclusions.
After SARS, people in Asia continued to socialise very strongly. The economy has recovered and consumer behaviour has not changed. It will take much less time in Asia to recover from Covid than it did then. Why? Because they have already learned certain mechanisms, they have learned lessons. The rest of the world is going through this for the first time. We're learning. The next few times will be easier.
Of course, some of the security measures we use today will stay with us forever.Many people will learn to use masks every day. Even when the pandemic is over. Just like they're used every day in Asia. A culture of wearing them will be born. Until recently, we were surprised to see them on the streets. It'll stop being a surprise. It will also be a new standard that there will be dispensers with hand disinfectant in public places.
We'll come out of this as a different society. I just wonder what kind.
*The company has 12 galleries in Poland, including Bonarka City Center in Krakow, Alfa Centrum Bialystok, Aura Centrum in Olsztyn or Focus Mall in Piotrkow Trybunalski and Zielona Gora and over 50 facilities in nine countries of our region
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