Eastern European Malls Add Attractions to Entice Shoppers

27 Jul 2010 - If Christian Dior’s brand name can’t attract customers, maybe dinosaurs will.

If Christian Dior’s brand name can’t attract customers, maybe dinosaurs will.

That’s the plan behind Galerie Harfa, a half-built shopping mall perched above Prague’s Vysocany suburb that will have a dinosaur-themed amusement park, fitness center and rooftop swimming pool.

As the economic slowdown squeezes retail sales in the Czech Republic and Hungary, companies such as Hochtief AG, Strabag SE and Skanska AB help construct venues with spas and electric-car tracks to lure shoppers. Mall space has more than quadrupled since the former Communist nations joined the European Union in 2004, exacerbating the need to offer more than just shopping.

“It’s not enough to line up the usual suspects like Zara, Esprit and H & M,” said Lenka Hartmanova, a Prague-based analyst at real estate company DTZ Holdings Plc. “People want a shopping experience, not just a giant box of corrugated iron sitting next to the highway.”

Construction slowed last year as the global financial crisis sapped consumer confidence. Hungary added 190,000 square meters (623,400 square feet) of retail space in 2009, down from more than 270,000 in 2008, and development slowed further this year, according to data compiled by CB Richard Ellis.

Hungarian Retail

Hungarian retail sales declined for 39 straight months through April and rents dropped as much as 30 percent from their peak in 2007, CB Richard Ellis data show. In the Czech Republic, rents fell 25 percent during the same period.

Harfa, one of two malls under construction in the Czech Republic, is seeking occupants for 10 percent of its 41,000 square meters of commercial space, four months before the venue opens.

To avoid rent markdowns, Lighthouse Group, Harfa’s developer, is luring prospective tenants by fitting out store interiors and providing extra maintenance services, said Chief Executive Officer Tamir Winterstein. It’s a significant change from two years ago when even small brands fought to get their foot in the door, he said.

“All of us were taken aback by the intensity and speed of the crisis,” Winterstein said in a July 1 interview at his Prague office on the bank of the Vltava River. “There was no comparison with previous downturns. Still, shopping centers are a long-term business, and if you differentiate yourself you have a good chance of succeeding.”

Galerie Harfa will seek to succeed by defining itself as a place for fitness and family through such attractions as a rooftop park featuring life-sized replicas of dinosaurs such as Tyrannosaurus Rex and Triceratops lurking among towering palm trees and grass knolls and areas for jogging and in-line skating.

Low End

Not all mall owners are taking the high-end route. The Lurdy Haz shopping center in the blue-collar part of Budapest’s ninth district caters to the less affluent.

“We have decided to adjust our retail offer to the purse of our customers and move in the direction of less sophisticated, more solid brands,” said Gyula Pek, Lurdy Haz’s marketing manager. “You can’t sell Gucci in this district.”

Commercial developers will have to change their strategy, said Alexander Rafajlovic, head of research at Cushman & Wakefield Inc. in Prague. An option is cutting the size of supermarkets that anchor shopping centers and rent the space to smaller retailers, he said.

Going Gourmet

Another way is to build smaller shopping malls around a distinct theme such as food or furniture depending on the location, according to DTZ’s Hartmanova.

At the 55,000-square meter Chodov mall near the southern edge of Prague, Eva Pleskacova and her friend Iva took a break from summer shopping to watch their children romp at an indoor playground on the second floor.

“I come here when I get depressed because it’s so pretty and it’s always full of beautiful people,” said the mother of two, clutching an array of bags emblazoned with names of fashion brands. “They have many different activities for the kids, so we’re here all the time.”

Less-attractive malls haven’t survived the recession. A shopping center at the Stodulky neighborhood in the west of Prague closed last year after it failed to draw shoppers.

“Developers are learning the hard way,” DTZ’s Hartmanova said. “Everything happened too fast here and now it’s time to sober up.”

Source: Bloomberg -


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