Thanks to a diverse tenant mix and a wide range of services, Pólus Center has an extremely loyal visitor base: the number of people visiting the shopping centre each year is almost equal to the total population of the country, and the growth in tenant revenues this year has been so high that it exceeds the results of the last year before the pandemic, the same period in 2019.
The Pólus Center in Budapest was one of the first classic shopping centres to revolutionise the retail sector in Central and Eastern Europe. Pólus is owned and operated by Hungary's leading real estate developer and investor CPI Hungary Kft., whose parent company CPIPG has a portfolio worth €20 billion and 3,636,000 m2 of leasable space. The success of the shopping centre is based on the fact that in the 25 years since its opening, a large number of improvements, renovations and modernisations have been carried out, which have helped to attract new groups of visitors and the centre now welcomes nearly 10 million visitors a year.
Higher basket value and growing revenues
The Pólus Center's target audience consists mainly of families and young people living in the surrounding districts and agglomerations, who were not distanced from Pólus during and after the Covid epidemic, so the decline was less than for other players in the industry. "What we have seen is that customer habits have changed over the last two years. Visitors are much more focused, they are quick and efficient in getting the goods and services they want," says Gergely Kendelényi, retail asset manager at Pólus Center. "The number of visitors decreased by nearly 20% in the first year of the pandemic, mainly due to closures, but the average turnover of shops decreased less. As a result, the value of the shopping basket increased. By 2022, we were back to 2019 visitor numbers, and this year to date, we have seen a 24% increase in revenue for tenants compared to the pre-pandemic period."
These are encouraging figures for the entire domestic retail sector, even if inflation is constantly tightening the zipper of customers' wallets. But are the operators and tenants of Pólus Center-sized business centers experiencing a decline? "For the time being, we are seeing inflationary pressure more in tenant negotiations and contract renewals," says Kendelényi, "Unfortunately, retailers are already feeling the effects of rising purchase prices and labour costs, and are pricing in their future cost increases. Of course, this also has an inflationary effect, since the price of marketed products also shows an increase in costs. Fortunately, this has not yet reduced customer confidence."
Occupancy close to 100 percent even with a changing tenant mix
According to Kendelényi, Pólus Center has consistently achieved an occupancy rate of around 97% over the past three years, thanks to the fact that the retail sector has been a winner as well as a loser during and after the pandemic. Certain categories, such as services, sporting goods, house and home furnishings, drugstore, and technical goods, have clearly come out of the past years well and will be able to take over from less fortunate tenants in the future. This trend will continue to grow in the future, according to the expert, not only for centres such as Pólus but for the retail sector as a whole.
The changing tenant mix also means fresh blood and is likely to reflect customer demand, with new services, shops and product types being introduced to the satisfaction of visitors. In the Pólus Center, which traditionally has a high proportion of services, there is a further increase in demand: "There is a steady demand for beauty-related services and shops such as hairdressing, barber shops, nail salons, hair braiding, make-up, colour and style advice. The classic movie theatre with its regular family programmes as well as a diverse range of restaurants and cafés in the restaurant yard attracts a large number of visitors. There is a clear increase in the demand for quality time and social programmes," says the manager, adding that the shops and services of the Pólus Center are primarily family-oriented, while the operator is increasingly focusing on reaching and satisfying the needs of generations Y, Z and alpha, both in terms of communication and marketing campaigns.
Environmental awareness is a competitive advantage
While in previous years, the scarcity of supply in shopping centres may have uniformly increased the value of retail space for tenants, energy-efficient and environmentally conscious operation and long-term planning are now key issues, and have become a fundamental requirement, especially for international tenants. "We recognized at an early stage the need for environmental awareness, social responsibility and sustainability at the Group level, so keeping in mind and applying the ESG framework, which is fashionable among investors nowadays, can give us a significant competitive advantage on the market. In practical terms, this means a renewed cooling and heating system, reduced and conscious energy use and a high-capacity solar park for the Pole Center, the development of which has started and is expected to be completed by summer 2023. In addition, at company level, we have committed to reduce greenhouse gas emissions by 30% by 2030 and to switch to 100% renewable energy by 2024," adds Gergely Kendelényi.