Pólus Center Retains Popularity 25 Years After Opening

Retail

Some 25 years after opening, the number of people visiting Pólus Center 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, according to a press release sent to the Budapest Business Journal.

Pólus Center in Budapest was one of the first classic shopping centers to revolutionize the retail sector in Central and Eastern Europe. It is owned and operated by Hungary's leading real estate developer and investor CPI Hungary, whose parent company CPI PG has a portfolio worth EUR 20 billion and 3,636,000 sqm of leasable space. The success of the shopping center is based on the fact that in the 25 years since its opening, a large number of improvements, renovations and modernizations have been carried out, which have helped to attract new groups of visitors and the center now welcomes nearly 10 million visitors a year.

Higher Basket Value, 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," he adds.

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 labor 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% 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 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 centers 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 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, color and style advice. The classic movie theatre with its regular family programs as well as a diverse range of restaurants and cafés in the restaurant yard attract a large number of visitors. There is a clear increase in the demand for quality time and social programs," 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 a Competitive Advantage

While in previous years, the scarcity of supply in shopping centers 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 the company level, we have committed to reduce greenhouse gas emissions by 30% by 2030 and to switch to 100% renewable energy by 2024," adds Kendelényi.

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