SHOPPING IN OFFICE BUILDINGS

Transcription

1 Poland Retail Market SHOPPING IN OFFICE BUILDINGS Q1 2018

2 Poland Retail Market CONTENTS INTRODUCTION 3 THE WARSAW OFFICE MARKET USERS EXPECTATIONS RETAIL AND SERVICE OUTLETS AMSTERDAM, FRANKFURT, LONDON

3 Poland Retail Market INTRODUCTION Warsaw s office market has been developing rapidly since the 1990s currently, almost 530,000 people work in approximately 500 modern office buildings in the city, spending often more than eight hours a day in them. What retail and service outlets, in terms of both size and quality, are provided to them by office buildings? Is it sufficient, especially given the highly competitive labour market in the capital? Is the list of commercial tenants in office buildings diversified? Which sectors, in addition to catering, are developing in these locations? And finally, is there any one recipe for successful retail and services and does this function constitute added value in every case? Colliers International experts studied retail and service outlets in the capital s office buildings in February and March 2018 and they looked at approximately 300 buildings (all that have commercial premises). We researched location by office zones, the number and size of units, tenants by sectors, vacancy and the level of rents and service fees. A survey, carried out on a sample of approximately 200 employees of Warsaw office buildings in March this year, is an integral part of our report. In the survey, we asked respondents about the quality of the existing retail and service outlets in their workplace and their expectations about them. The report also includes several examples of investments from Amsterdam, Frankfurt and London that show an innovative approach to complementary functions in office buildings, depending on their location. The report also contains statements from market practitioners. We encourage you to read our latest report. 3 Rynek Retail Market handlowy SHOPPING ZAKUPY IN W OFFICE BIUROWCU BUILDINGS Colliers Colliers International International

4 Poland Retail Market THE WARSAW OFFICE MARKET Last year, 27 office buildings were completed with a total area of over 275,000 m². At the end of 2017, the largest increase in stock was recorded by the following zones: Mokotów (72,300 m²) where 6 projects were completed, Żwirki i Wigury (62,200 m²) mainly as a result of the completion of the Business Garden office park (54,900 m²), and the City Centre (52,500 m²). The largest buildings completed in 2017 were the second stage of West Station (35,000 m²) on Jerozolimskie avenue, D48 (23,400 m²) in the Mokotów zone (Służewiec), the first buildings of the Generation Park X complex (20,100 m²) and the Bobrowiecka 8 project (20,000 m²). Development activity in the office sector in Warsaw is not slowing down. At the end of 2017, nearly 800,000 m 2 of office space remained under construction. Gross demand recorded last year in the capital was at a high level, similar to the previous two years ( ). The total transaction volume was above 820,000 m², which is an increase of 9% compared to Office absorption was also high 341,000 m². Most lease agreements were signed in the following zones: City Centre (208,500 m²), Mokotów (204,500 m²) and CBD (163,800 m²). New contracts accounted for over 63% of demand, and pre-let transactions almost 18%. Tenants interest in office space in Warsaw will continue to be high as the capital continues to attract new companies, and present tenants are renegotiating their agreements, often expanding their space. At the end of the fourth quarter 2017, the vacancy rate stood at 11.7%, which is a decrease of 2.5 p.p. compared to the end of Most space was absorbed in the two central zones, where the decline amounted to 8.2 p.p. This was due to the high level of demand and much lower new supply than in WARSAW OFFICE ZONES North N West W Jerozolimskie Corridor SW Żwirki i Wigury Corridor Mokotów US 7 LS Puławska Corridor CBD Central Business District City Centre - (1) City Centre North - (2) City Centre East - (3) City Centre South - (4) City Centre West East Jerozolimskie Corridor - (5) Upper, (6) Lower CBD 3 City Centre 2 SE Ursynów, Wilanów E East Mokotów - (7) Służewiec North Puławska Corridor Ursynów, Wilanów West Żwirki i Wigury Corridor Source: Colliers International, April Rynek Retail Market handlowy SHOPPING ZAKUPY IN W OFFICE BIUROWCU BUILDINGS Colliers Colliers International International

5 Basic rents remained stable, with tenants paying from EUR 17 to EUR 22/m²/month in the central zone and EUR 12 to EUR 16/m²/month outside the centre. The unemployment rate is low and employers are competing to acquire talented staff. A staff-friendly office is now a motivational element for potential staff. The trend of changing work space and the business environment will strengthen, which will positively affect the demand for office space and the quality of developments in the market. A derivative of this trend is an increase and diversification in retail and service outlets in office buildings, both on the ground floors (cafés, restaurants, stores) and on higher (fitness clubs, medical centres, canteens), and lower levels (car washes, laundries). CEDET 5 Retail Market SHOPPING IN OFFICE BUILDINGS 2018 Colliers International

6 Once a simple canteen MICHAŁ ŻELSKI SENIOR LEASING MANAGER, ECHO INVESTMENT (...) Once a simple canteen - today a well-equipped restaurant or bistro. Once a gray coffee machine with instant coffee - today a café with aromatic coffee and delicious homemade cake. More and more often small boutiques, beauty salons, a beautician, hairdresser, barber, and even a manicurist who are able to refresh our image at an express pace. Today, office buildings are more than just a space where you only work. The new generation of employees brings freshness and energy to companies, but it needs space to develop it. More and more companies are noticing that if they do not provide such a space, they will have problems with acquiring and retaining employees. Tenants who use these spaces on a daily basis want to have the same services that the city centre offers them. Therefore, in our office buildings, the ground floors are intended only for services such: kindergartens where we can safely leave children under the professional care, shops in which we will arrange everyday shopping, restaurants where we meet with friends, or various service points. According to today s standards, this is a place for a moment of respite in a relaxed atmosphere, seeking inspiration or settling the mundane needs of everyday life. Employees in modern office buildings are welcomed by a friendly lobby, further invites to an appetizing restaurant, cosy café, energy gym or fitness club. What will be found in the common spaces depends precisely on the tastes of the tenants. We give our employees opportunity to say what they need to feel good in the place where they spend most of their day. We are open to such conversations, because in this way we learn how to respond to changing requirements and social needs. That s how we gain the trust of our partners (...). Convenience shopping RONAN MARTIN, OPERATION DIRECTOR, CARREFOUR POLSKA (...) Carrefour Polska currently has 6 convenience format stores located in office buildings two in Kraków, three in Warsaw and one in Łódź. Carrefour Express stores have an area of approximately 100 m 2, and their range is tailored primarily to the needs of office workers, who are the main customers in these locations. These customers are loyal and they buy what they need in the store during the day. Dairy products, bread and other typical breakfast products as well as ready-to-eat food make up a large proportion of sales. Other popular products are more expensive purchases such as alcohols, chocolates and confectionary bought as gifts. To more accurately respond to the needs of office workers, the Bistro Express concept is also available in our stores, where customers can buy hot dogs, home-made pizza, French fries and chicken strips as well as hot drinks. Customers can also heat up ready-made dishes bought in the store or pour boiling water into a soup or porridge, and then eat the meal on the spot using tables in the store. Shops located in office buildings are also visited by local residents and people passing the store on their way home or to work. Although, they are less frequent customers, their shopping basket is usually bigger. Due to the specificity of the location, these stores have a much lower turnover at weekends, when offices are closed. Therefore, opening hours on Saturdays and Sundays are much shorter, and some stores such as the Kraków Carrefour Express at Czerwone Maki street are completely closed (...). 6 Retail Market SHOPPING IN OFFICE BUILDINGS 2018 Colliers International

7 Poland Retail Market USERS EXPECTATIONS Colliers International experts surveyed nearly 200 employees working in office buildings in Warsaw about their expectations in terms of commercial outlets in their workplaces. We asked what they use most often and what type of shopping they do, how much they spend on everyday shopping and what is missing to satisfy their needs during an eight-hour working day. In line with predictions, respondents use cafés, newsstands and canteens most often during the working day, followed by restaurants and grocery stores. Interestingly, women s responses were a little different to those of men. Women often use drugstores and banks during the working day, while men use banks and medical centre. The use of commercial outlets in office buildings also depends on the age of respondents. Cafés and grocery stores are most often used by younger people, newsstands and canteens are used by all age groups and restaurants are used by the middle age group. The products most often bought by respondents during the working day are: sandwiches, lunch, small snacks and coffee or tea. Daily purchases also include medicines and newspapers, and 5% of respondents also buy tobacco products. The type of daily purchases is illustrated by the amount spent 70% of respondents answered that they spend PLN per day on shopping. Only 30% of respondents are satisfied with the commercial outlets in their workplaces and they lack nothing. Despite the fairly well-developed catering in office buildings, a large group of respondents would like canteens with simple, good quality meals at an affordable price (home-style dinners). A lack of choice and high prices were emphasised. WHAT IS MISSING IN THE RETAIL AND SERVICE OUTLETS IN THE OFFICE BUILDING WHERE YOU WORK? Nothing Other Lunch bar/ canteen Fitness/gym Pharmacy Grocery Drug store Bakery Post Office Medical Centre Hairdresser Café Newsstand ATM 0% 5% 10% 15% 20% 25% 30% Source: Colliers International, April Rynek Retail Market handlowy SHOPPING ZAKUPY IN W OFFICE BIUROWCU BUILDINGS Colliers Colliers International International

8 WHAT AMOUNT DO YOU SPEND ON EVERYDAY SHOPPING IN THE OFFICE BUILDING WHERE YOU WORK? WHAT DO YOU MOST OFTEN USE IN THE OFFICE BUILDING WHERE YOU WORK? 14% 1% 14% Café Newsstand Lunch bar/canteen Restaurant Grocery Bakery Pharmacy Drug store below PLN 10 PLN PLN above PLN 50 71% Bank Medical Centre Fitness/gym Other Post Office Source: Colliers International, April 2018 Clothing Store 0% 20% 40% 60% Source: Colliers International, April 2018 Fitness clubs and grocery stores are often listed among expected amenities. Respondents expect a larger range of health and beauty outlets women need pharmacies and drugstores and men need more services, for example hairdressers. Respondents say that clothing outlets in office buildings would be also useful in the case of accidents and unexpected business meetings (for example men s shirts, ties, tights, umbrellas, etc.). Royal Wilanów 8 Retail Market SHOPPING IN OFFICE BUILDINGS 2018 Colliers International

9 Multi-functional spaces (...) Business centres are becoming multi-functional spaces and it is only a matter of time before new facilities for new generations of employees will appear. There are already fitness centres, banks, laundries, travel agencies and pharmacies in office buildings. Increasingly, grocery stores, drugstores, clinics, electronics stores, and even fashion boutiques are opening. You can also see a big change in catering. In the office buildings, people will be eating not only in canteens, but also in a la carte restaurants and cosy bistros. KAROL WYKA COUNTRY LEASING DIRECTOR, HB REAVIS This is a trend that we have been considering in all HB Reavis projects for several years. The public areas of the Gdański Business Center, West Station and Postępu 14 create an attractive space also used by employees of neighbouring buildings or local residents. The same will be in Varso our largest investment in Warsaw. We have designed 8,000 m 2 of commercial space, and a special attraction will be an observation deck, a restaurant and bar at the highest part of the complex. It is especially important to think carefully about commercial space that meets market requirements at the design stage. For example, fitness centres need large premises and restaurants need efficient ventilation and access for suppliers. In turn, medical centres need more complicated water and waste systems, which to introduce in an existing building is always more complicated (...). Cafés in office buildings ADAM RINGER OWNER, GREEN CAFFÉ NERO (...) A café in an office building has a different character than other city cafés. We have spent a lot of time working on this model we see a café in an office building as a place to meet and work. Of course, it all depends on what the office building is and where it is, but generally our cafés in office buildings are large and open five days a week (except those that are mixed in nature office and city functions). Many of these cafés have a second life after office hours when they become kind of co-working centres for self-employed people, meeting places for local residents and even places to learn foreign languages. The first thing we look at is how many people work in a given office building. Empty rooms do not drink coffee. This is a huge risk for a retailer leasing a commercial unit in an office building, especially since deals are often done at the pre-let stage. With multi-stage investments it is difficult to assess in which phase to enter, how much space to rent and on what financial conditions. Office properties are deserted periodically when tenants move out of the building. There are no people on Saturdays and Sundays in office buildings. Therefore, the best are mixed office and city locations (...). 9 Retail Market SHOPPING IN OFFICE BUILDINGS 2018 Colliers International

10 Poland Retail Market SHOPPING IN OFFICE BUILDINGS TYPICAL TENANT MIX IN OFFICE BUILDINGS BY SECTOR The map shows Warsaw office buildings with commercial and service space. The most of them are located in office zones such as City Centre, Central Business District (CBD), Mokotów, which are office hubs of the capital. However, the largest saturation of retail and service space per employee is outside the City Centre and CBD zones - in the Ursynów/ Wilanów zone. Grocery discount Drugstore Bank branch Café or fast food Newsstand North UNUSUAL TENANT MIX IN OFFICE BUILDINGS East Medical centre/doctors surgery Food speciality store Canteen/restaurant Fashion store Kindergarten West CBD City Center CHAIN TENANTS MOST FREQUENTLY APPEARING IN WARSAW OFFICE BUILDINGS Nowakowski Gorąco Polecam Jerozolimskie Corridor Mokotów Costa Coffee Green Caffé Nero InMedio Żabka Żwirki i Wigury Corridor UNUSUAL COMMERCIAL TENANTS IN OFFICE BUILDINGS Tenant Activity Building Wash-dog Self-service "carwash" for dogs Natpoll Shooting Shooting range Natpoll Praha cinema Cinema Centrum Praha Pomarańczowa Ciuchcia Kindergarten Adgar Plaza Kuchnia Spotkań IKEA Showroom/meeting place Pasaż Lipińskiego 10 Rynek Retail Market handlowy SHOPPING ZAKUPY IN W OFFICE BIUROWCU BUILDINGS Colliers Colliers International International Puławska Corridor Ursynów, Wilanów Legenda Office buildings with commercial and service space Współczynnik powierzchni handlowo - usługowej na pracownika Other office buildings

11 Poland Retail Market RETAIL AND SERVICE OUTLETS Size and characteristics According to the results of the study conducted by Colliers International experts in February/ March 2018, as many as 60% of office buildings in Warsaw offer retail and service outlets space nearly 1,200 units with a total area of 332,000 m². This stock is analysed in this report. The commercial units are small in most office buildings 90% of properties have a maximum of 10 units, and 80% have a surface area that doesn t exceed 2,000 m². The largest retail and service outlets modules are in Plac Unii (office building and Plac Unii City Shopping), Koszyki (office building and Hala Koszyki), Royal Wilanów, Millennium Plaza and Europlex. The vast majority of commercial units are on the ground floor (80%), the first floor has about 5%, and levels below and above are used sporadically for commercial purposes. The majority of retail units in office buildings are accessible from the outside (70%); however, nearly 30% are accessible and visible only from inside the building. In terms of location, the largest amount of commercial space in office buildings can be found in City Centre (Southern and Western), CBD and Mokotów the most attractive and largest office locations of the capital. However, in terms of square metres per employee, complexes in the CBD and City Centre and also in Ursynów/Wilanów offer the most. In the latter zone, office developers were also targeting the needs of residents in new housing estates. The office buildings with the largest commercial modules in the CBD zone include LIM Center, Ethos, Rondo 1 and Spektrum Tower. In the City Centre zone, the largest modules can be found in Pl. Unii, Europlex, Millennium Plaza, Koszyki and Swede Center. In Mokotów, commercial space can be found in Mokotów Box, Konstruktorska BC THE AMOUNT OF RETAIL AND SERVICE OUTLETS SPACE PER EMPLOYEE BY OFFICE ZONE CBD City Center East Jerozolimskie Mokotów North Puławska Ursynów/Wilanów West Żwirki i Wigury 0,0 0,5 1,0 1,5 Source: Colliers International, April Rynek Retail Market handlowy SHOPPING ZAKUPY IN W OFFICE BIUROWCU BUILDINGS Colliers Colliers International International

12 and Marynarska BP. In the Ursynów/Wilanów zone, developers have built space in Royal Wilanów and Wilanów Office Park. For this report, Warsaw s office buildings were divided based on retail, services and catering. Six types of office buildings were distinguished: complexes on high streets (in the vicinity of intense, natural pedestrian traffic), in the vicinity of transport hubs, mixed-use facilities (office and shopping centres), office buildings where retail serves employees and residents (in the vicinity of large residential complexes), office buildings where commercial outlets are used mainly by employees and office parks. Developers appreciate the potential of high streets, where as much as 22% of the total commercial space in Warsaw s office buildings is available. There is also a visible trend to provide employees with a comprehensive range of commercial services in the workplace. As much as 20% of commercial space is in office parks, and 18% mainly serves the needs of employees. There are not so many mixed-use office and shopping centres in the Warsaw market (9%) however, the situation is beginning to change, as several such complexes are being built. THE AMOUNT OF RETAIL AND SERVICE OUTLETS SPACE BY BUILDING TYPE Space availability The availability of commercial space in Warsaw s office buildings is average. The market research carried out by Colliers International experts showed that there were approximately 170 available commercial premises with a total area of 42,300 m². The vacancy rate was 13.8%, calculated according to the number of premises, and 12.7% calculated according to vacant space. The largest number of commercial units for rent are in the City Centre, CBD and Mokotów zones, and the fewest are in West, East, Żwirki i Wigury and Puławska. STRUCTURE OF AVAILABLE RETAIL AND SERVICE OUTLETS IN OFFICE BUILDINGS below 50 m² m² m² m² above 500 m² 33% 10% 10% 32% 15% 12% 9% 5% 22% Source: Colliers International, April 2018 Most popular are small units of less than 50 m² and m². The most difficult to rent are medium-sized units of m² and m². 14% 18% 20% complexes on high streets complexes with retail mainly for employees needs office parks complexes with retail both for emplyees and residents complexes in the vicinity of transport hubs mixed-use complexes (office building and shopping centre) other Source: Colliers International, April 2018 In terms of the type of office building, the largest availability of commercial space is on main high streets (47 vacant premises with a total area of over 11,000 m²). In complexes where retail, services and catering mainly serve employees, 36 rental offers for a total area of over 10,000 m 2 are available this may indicate a mismatch between built units and the needs of users. The situation is similar in office parks, in which 34 premises with a total area of 8,500 m 2 can be leased. Rental rates and other lease conditions Rental rates for commercial space vary widely. The highest rental rates are achieved by premises 12 Retail Market SHOPPING IN OFFICE BUILDINGS 2018 Colliers International

13 on the ground floors of the best office buildings on main high streets (EUR 35-55/m²/month). There are also a few cases where expected rents fluctuate at around EUR 100/m²/month. Rents in office buildings located in the vicinity of transport hubs are in the range of EUR 20-25/m²/month, while in office buildings with commercial space aimed mainly at employees and local residents EUR 15-20/m²/ month. Rents of EUR 25-35/m²/month are offered on average for commercial premises in office areas such as CBD, City Centre and Mokotów. In less attractive office locations, rental rates are in the range of EUR EUR/m²/month. Exceptions include rates for commercial space on the ground floor of a modern office building below EUR 15/m²/month. However, developers sometimes design premises for a specific type of business that adds value to an investment (for example fitness clubs and medical centres) in this case, the expected rental rate may be below EUR 10. RENTAL RATES IN COMMERCIAL PREMISES IN OFFICE BUILDINGS (EUR/M²/MONTH) rents in complexes on high streets rents in complexes in the vicinity of transport hubs rents in complexes with retail mainly for employees needs rents in complexes with retail both for employees and residents rents in office parks Source: Colliers International, April 2018 Rental rates also depend on the size and location of the unit in the building, although the differences are not as significant as in the case of the location itself. Similarly, service charges depend mainly on the location of the building in the central zones these exceed PLN 20/m²/month, and outside the centre they are PLN 15-17/m²/month. An additional fee for a commercial tenant in an office building is the add-on factor, which is the share in the common area of the building. In many buildings, asking rents and lease terms are the same as for office space (the use of the area is optional). For this reason, as in the case of an office tenant, a financial analysis of the stability of a potential tenant is carried out, additional security is required (bank guarantee, deposit or surety) and additional costs resulting from the conversion of the add-on factor need to be covered. However, there are an increasing number of offers for tenants from the retail, service and catering sector that take into account the specificity of their business. Commercial offers in office buildings Three groups of tenants can be distinguished in the capital s office buildings depending on the storey. Ground floors are usually rented by catering and retail tenants, underground levels by services (for example car washes) and above-ground levels by medical centres, fitness clubs and canteens. The research carried out by Colliers International experts confirms that the commercial offers in Warsaw s office buildings unfortunately is not very diversified. Catering tenants form the largest group (both chain and private), followed by financial institutions and services. Sectors such as sport, articles for children, electronics, accessories & jewellery and homeware rarely choose this type of location. However, grocery stores and health & beauty operators (including medical centres) are quite well represented in the office buildings. Each sector has its own specifics that may favour or hinder operating in office buildings. For example, tenants in the food industry face problems everyday business operations (for example delivery, sale of alcohol). On the other hand, tenants from the fashion sector need other stores in the immediate vicinity. A barrier to catering operators are legal requirements that stop them fitting out units in line with their needs. Medical centres need a specific fit-out and a separate entrance is often necessary. The lack of public parking in an office building or nearby may also be a barrier. While tenants in the commercial sector add value for the owners of office buildings, some retail chains perceive these locations as a part of their overall development. There is a group of chain tenants in the Warsaw s market, which have entered the development in office buildings into their strategies. 13 Retail Market SHOPPING IN OFFICE BUILDINGS 2018 Colliers International

14 COMMERCIAL TENANTS IN OFFICE BUILDING BY SECTOR (NUMBER OF UNITS) gastronomy financial institutions health & beauty (including medical centres) services grocery 5% 6% 6% 3% 2% 3% 10% 9% 10% fashion 33% multimedia entertainment & leisure homeware accessories & jewellery other sectors Source: Colliers International, April 2018 These include mainly catering and food chains such as Costa Coffee, Green Caffé Nero, Nowakowski Gorąco Polecam and Żabka. 13% The sector of commercial tenants in office buildings varies depending on the zone. While in the CBD and City Centre zones there are many tenants from the fashion sector, there are practically no such stores in office buildings in Mokotów, where these needs are largely satisfied by the Galeria Mokotów shopping centre. In turn, the largest number of fitness clubs as well as health & beauty sector are in office buildings in the City Centre zone. However, medical centres are located mainly in City Centre and Mokotów, where apart from office workers they serve residents of new housing estates. The type of office building also affects the sector structure. Complexes on main high streets offer the most fashion stores, cafés, restaurants, bank branches and services. In buildings where the commercial space serves mainly employees, cafés, canteens, bars and newsstands dominate. A wide range of medical services and homeware stores can be found in locations that serve local residents as well as employees. A characteristic feature of office buildings near transport hubs is the relatively small number of catering concepts. In mixed-use projects and office parks, the commercial offer is very diverse although on a much larger scale. Centrum Praskie Koneser 14 Retail Market SHOPPING IN OFFICE BUILDINGS 2018 Colliers International

15 Newly built commercial space in office buildings The retail map of Warsaw is changing. Shopping centres remain one of its most important elements; however, a new trend consisting of increasing the retail space in new office buildings and mixed-use investments can be observed mainly in the city centre. Large amounts of retail space in office buildings is a relatively new phenomenon in the Warsaw commercial real estate market. At the design stage, developers are increasingly allocating space retail, services and catering. Examples of investments of this type that are currently under construction include: Varso, Rotunda Towers, CEDET, Centrum Marszałkowska, The Warsaw Hub, Skyliner and Mennica Legacy Tower. The trend can also be seen in mixed-use projects, for example the completed Hala Koszyki, or Koneser, EC Powiśle and Browary Warszawskie which are currently under construction. In total, approximately 40,000 m 2 of commercial space is currently being built in Warsaw in nearly 45 office buildings, mostly in the CBD and City Centre zones (over 70%). In the coming years, the health & beauty sector will develop most rapidly in office buildings in Warsaw. In addition to medical centres, opticians, dental surgeries and small specialist clinics will appear in office properties. Office buildings will continue to be interested in fitness chains that open their clubs to external customers, but also those that serve only employees of the office building (for example Calypso in Q22). Based on a popular trend in Western Europe, kindergartens will also become more common in office buildings in the capital. Catering (both private and chain) and food (grocery chains and food specialty stores) operators will further develop in these locations. The development of international cuisine comes on the back of a change in consumer habits with people travelling and eating out more often. Specialised food products are also more popular, which are offered, for example, by health food stores such as Organic Farma Zdrowia and stores selling chocolate, alcohol and cigars in office buildings. In contrast, for the fashion sector, shopping centres will remain predominant. However, it does not mean that this sector will not develop in office buildings. Individual concepts have a chance to exist both in convenience shopping and exclusive formats, depending on the type of office building and its location. Space in office buildings in the best locations will be rented more often for showrooms Ferrari uses Adgar Park West 15 Retail Market SHOPPING IN OFFICE BUILDINGS 2018 Colliers International

16 a unit in the Banking and Financial Center, while Samsung has a showroom in the Postępu 14 office building. Showrooms will soon appear in other prestigious locations, such as in the Ethos building by Trzech Krzyży square. The tenant mix in Warsaw s office buildings is planned increasingly often at the design stage and depends on location, building class and positioning. Commercial tenants are very important at the pre-let stage of a complex. Increasingly, developers are aware of the needs of different businesses and the need to prepare special offers for them (for example canteens need to be located on the ground floors instead of -1 or +1, and medical centres need specific fit-outs). New office projects with extensive commercial modules in the centre of Warsaw are an opportunity for the revival of high streets. However, many stakeholders need to be involved in this process, such as: city authorities, developers and investors, tenants (current and potential), advisers as well as non-governmental organisations representing local communities. So far, e-commerce is minimally exploiting the potential of office locations and this will not change in the near future. This is mainly caused by the cost of renting space, limited car parking and delivery difficulties. An example of using space for e-commerce in a Warsaw office building is the Perfumesco store in Proximo II. Interestingly, retail in office buildings will be the least affected by the Sunday trading ban that is gradually being implemented in Poland, as shopping in office buildings is naturally done only five days a week. Plac Unii City Shopping 16 Retail Market SHOPPING IN OFFICE BUILDINGS 2018 Colliers International

17 Run through the functions (...) We definitely see the trend to merge and penetrate office and retail functions. The tenant mix of commercial space depends primarily on the positioning of the office building and its location, but in general the number of premises of this type is growing on the Warsaw s market. ANNA DUCHNOWSKA SENIOR DIRECTOR, INVESCO REAL ESTATE The way people work is changing, and co-working concepts are becoming popular. Companies have to fight for the best staff and meet their expectations. Office tenants expect good quality convenience stores (for example we have Organic Farma Zdrowia in Q22), cafés, restaurants, hair salons, cosmetics stores, drugstores, fitness club, dance schools and kindergartens. As a result, developers are increasingly allocating ground floors or other floors for commercial functions. From Invesco s point of view, it is important to find good commercial solutions by developers as early as at the design stage. Utilities have to match the functionality of the space and the space must be flexible. We believe that over time the understanding of the absorptive capacity and the specificity of this market will grow and the plans of property developers will be improved (...). Polish climate PIOTR KAŁDAN CHIEF EXECUTIVE OFFICER, REDFORD & GRANT (...) Having a fashion store, especially an exclusive one, is very good in an office building parking facilities, additional services and professional building management create a positive synergy. Of course, the location, building class and its surroundings are important. Metropolitan is more than just an office building. We have been here since 2003, and the building has not aged and it is well-known. A luxurious Raffles hotel will open soon in the neighbourhood. However, in Warsaw most retail space is in shopping centres that offer a large selection under one roof, which is important given the Polish weather. Fashion stores on streets are only effective when they can create a strong and unique shopping destination by what they offer. Office buildings are not good places for chain stores as they are available in many places and customers can choose the outlet that is most convenient, usually in a shopping centre. However, if it is the only place in a given city, the weather and other factors don t matter customers from all over Poland come to us (...). 17 Retail Market SHOPPING IN OFFICE BUILDINGS 2018 Colliers International

18 Poland Retail Market AMSTERDAM, FRANKFURT, LONDON Atlas ArenA (Amsterdam, Netherlands) The Atlas ArenA is a work environment created for peoples comfort. The office park is in the southeastern part of the city, near the intersection of highways, the Bijlmer railway station, a stadium, shopping centre, cinema and concert hall. The total office space for lease is over 75,000 m². There is a large number of parking spaces, green areas for walks, sports activities (including a gym), a school, kindergarten, canteens, cafés and restaurants, as well as a laundry and car wash. The complex also has a hotel. The park is actively managed and offers employees various types of educational, cultural and sports events. Fitzroy Place (London, United Kingdom) Fitzroy Place is a unique complex located in the centre of London, combining two new office buildings (approximately 7,500 m²), apartments and exclusive boutiques, stylish cafés and trendy restaurants around a newly designed green square. The luxurious Fitzroy Club operates in the complex, available to residents and their guests. Thanks to such a set of functions, the investment is part of a district where life goes on 24 hours a day. The retail and catering outlets at Fitzroy Place are a continuation of what is available in Mayfair, Marylebone, Oxford Street and Regent Street. TaunusTower (Frankfurt, Germany) TaunusTower is an office building located in the heart of Frankfurt s banking district, offering 60,000 m² of office space, integrated with neighbouring green areas (a park renovated by the developer with preserved remains of the city walls), shops and catering on the main high streets and an apartment building. In order to meet the needs of the local community, 2,000 m 2 of space was made available for a branch of the Museum of Contemporary Art. Apart from office space, TaunusTower offers a canteen, restaurant and a fitness and business club with a conference area. TaunusTower 18 Rynek Retail Market handlowy SHOPPING ZAKUPY IN W OFFICE BIUROWCU BUILDINGS Colliers Colliers International International

19 ACROSS RETAIL: YOUR BUSINESS WITH FULL POTENTIAL YOUR BUSINESS OBJECTIVES OUR EXPERTISE AND SERVICE To achieve success in today s market, your company needs solutions that use its potential, resources and take advantage of all opportunities. The ACROSS Retail platform provides full access to all services on the real estate market shaped by the needs of a tenant, owner, developer or investor in the retail sector. ACROSS Retail is the sum of our experts experience, a tailor-made service package and a dedicated multi-skilled advisory team that understands your business all available for you in one place. Let us help you untap your potential.

20 413 offices in 69 countries on 6 continents United States: 145 Canada: 28 Latin America: 23 Asia Pacific: 86 EMEA: 131 2,4 billion revenue in 2017 CONTACT: Dominika Jędrak Director Research and Consultancy Services Dominika.Jedrak@colliers.com Katarzyna Michnikowska Assocciate Director Research and Consultancy Services Katarzyna.Michnikowska@colliers.com Klaudia Sionek Junior Analyst Research and Consultancy Services Klaudia.Sionek@colliers.com 180 million m 2 space under management 15,400 employees Colliers International Colliers International Group Inc. (NASDAQ and TSX: CIGI) is a global leader in commercial real estate services with 15,400 professionals operating in 69 countries. With an enterprising culture and significant insider ownership, Colliers professionals provide a full range of services to real estate occupiers, owners and investors worldwide. Services include brokerage, global corporate solutions, investment sales and capital markets, project management and workplace solutions, property and asset management, consulting, valuation and appraisal services, and customized research and thought leadership. Colliers International has been ranked among the top 100 outsourcing firms by the International Association of Outsourcing Professionals Global Outsourcing for 10 consecutive years, more than any other real estate services firm. Colliers International has been active in the Polish market since 1997 and operates through offices in Warsaw, Kraków, Wrocław, Poznań, Gdańsk Katowice and Łódź with over 250 employees in total. The company has been often honored for its achievements by industry organizations such as Eurobuild, CIJ Journal, CEE Quality Awards and the International Property Awards. Colliers most recent distinction in Poland include the Outsourcing Star, given in recognition of its status as one of the most active real estate advisors in the outsourcing sector; and the Gazele Biznesu for being one of the most dynamically developing companies in Poland. Copyright 2018 Colliers International. The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No resposibility is assumed for any inaccuracies. Readers are encouraged to consult their profesional advisors prior to acting on any of the material contained in this report.