Colliers has prepared a report that comprehensively analyzes the role of mixed-use projects in Polish cities – in terms of investment, architecture, and city-forming functions.
Real estate complexes combining multiple functions, i.e. mixed-use, are gaining more and more importance in the eyes of developers, investors and, above all, the public, satisfying the need for locality and enabling the fulfillment of daily needs close to home. According to the latest report titled “How to understand mixed-use?”, prepared by advisory firm Colliers, while nearly 90% of such facilities are currently located in cities, in the next phase, investors’ attention is expected to shift to suburban projects as well.
As part of the research, Colliers experts identified and analyzed more than 60 mixed-use complexes in Poland at various stages of development – 18 of them (28%) have been completed in whole or in part, 10% are under construction, and 60% are at the planning or concept stage, which clearly shows the recent increased interest of developers in this type of investment. All the more so because, in the face of a dynamically changing macroeconomic situation, this group of assets is more resistant than others to shocks and economic fluctuations.
The most in Warsaw
In terms of the number and area of mixed-use properties, the Warsaw agglomeration is the dominant market. It is home to seven mixed-use facilities, fully or partially put into operation, including Fabryka Norblina, Browary Warszawskie, and Centrum Praskie Koneser, and their usable area accounts for as much as 50% of the area of all such complexes in Poland. Just behind the capital is Łódź with five projects, including OFF Piotrkowska, which is gradually being expanded and is one of the country’s first mixed-use complexes. Warsaw is also the leader in terms of the number of planned projects (about 20), whereas for regional cities, the Tri-City agglomeration leads the way (11 projects).
“Mixed-use projects play an extremely important role in the development of both large metropolitan areas and smaller centres. By diversifying their functions, they provide a vibrant urban fabric that is attractive to residents and more sustainable. We anticipate that after the emergence of large lifestyle complexes in city centres, attention will shift to more local projects based outside the inner city or in suburban locations. Taking the Warsaw agglomeration market as an example, we can see that mixed-use complexes located mainly outside the city centre, such as Wilanów Park, or Bohema and Drucianka Campus in Praga Północ district, and projects in suburban areas, such as New City Gate in Piaseczno, are being built or planned,” says Agnieszka Winkler, Associate Director, Strategic Advisory, Colliers.
Many functions, many users
The proximity of a variety of functions in one facility allows users to easily and quickly satisfy many of their daily needs in one place. Thus, mixed-use developments fit into the concept of a 15-minute city. In 44% of Polish mixed‑use complexes there are three functions in total, both commercial and complementary. The primary function is usually office (nine complexes) or residential (eight complexes); in one of the projects this role is fulfilled by a hotel function. Each of the analyzed complexes includes a retail and service function. Given the growing popularity of PRS among investors, it can be expected that in the future there will also be no shortage of those willing to locate apartments for institutional rental (as part of the residential function) in mixed-use projects.
“The synergy between the functions of the mixed-use complex, while taking into account the interests and needs of different user groups, determines the future operation of the facility. It can affect it both positively, such as ensuring that the potential of the location is fully leveraged, and negatively – limiting the possibilities of using the space. In a nutshell, proper arrangement of the various functions can help ensure efficient use of land and planning of social and technical infrastructure,” explains Marta Machus-Burek, Senior Partner, Board Vice President, Strategic Advisory, Retail Agency, Colliers.
Such complexes also serve as places to connect the local community through periodic events and to build the “green” potential of cities, for example by incorporating green elements and areas into the infrastructure, such as urban meadows, green facades, or rain gardens.
“Today, an essential element of a successful mixed-use project that is attractive to its target audiences is “place-making” in cooperation with the local community. This process is based on the idea that the main goal of designing friendly spaces is to best respond to the diverse needs of users by strengthening the connection between people and the place they use. Elements of place-making include creating open, outdoor spaces with greenery, or tailoring the offer – e.g. retail, service, catering – to the needs of different user groups,” adds Agnieszka Winkler.
Tenants of retail and service units in mixed-use complexes
One of the most important elements affecting the attractiveness of the project – in synergy with the others – is the retail and service offer of the facility. It makes the public space more attractive and can encourage users to visit the site. It comes in the form of individual units accessible directly from the street level (e.g. in Browary Warszawskie), a shopping passage (e.g. in Centrum Praskie Koneser) or a multi-level shopping centre (e.g. EC Powiśle).
Among the tenants of retail and service units in mixed-use complexes, representatives of the catering industry prevail – 44%. Such units come in the form of independent restaurants and food outlets and as a collection of concepts in one space, a so-called food hall, which often has a name and a recognizable brand. The second pillar – more than 30% – is a broadly defined convenience offer (everyday shopping and services), consisting of services (including beauty salons, medical offerings), multimedia (e.g. bookstores, stationery stores), food offerings (grocery stores and supermarkets) and health and beauty (including drugstores, perfumeries, pharmacies). About 7% of the retail and service offerings are entertainment and leisure, including various types of fitness clubs, museums or galleries.
“Certainly, what contributes to the success of a mixed-use project is tailoring its offerings to the type of location and characteristics of the catchment zone. This also determines its profile and positioning. After all, complexes that play a lifestyle role and aim to attract customers from the outside have different characteristics, while those aimed at local residents, where retail and convenience offerings predominate, have different ones. Regardless of these factors, we have noticed that more than 80% of retail and service tenants in mixed-use complexes are among local chains and unique concepts,” says Wojciech Wojtowicz, Analyst, Research and Consultancy Services, Colliers.
New on the old
Mixed-use is also part of the trend towards sustainable construction and shaping urban spaces by modernizing the existing urban fabric, bringing it back to life and adding new value. It turns out that more than 70% of existing and under-construction mixed-use complexes are developments that combine the revitalization of historical buildings (often in post-industrial space) with new development, i.e. brownfield developments. These include, for example, the Monopolis complex operating in the area of the former Lódź Spirits Factory “Polmos”. Investors in such buildings build their identity by emphasizing the heritage and characteristics of the place, although they often also face higher implementation costs or additional requirements from the conservation authority. The undoubted advantage of these complexes is their location in urban centres, with limited land availability. The market is also not lacking in mixed-use complexes consisting solely of new developments as well as projects involving the redevelopment of existing commercial buildings.
“Mixed-use projects have already confirmed that, as a growing asset category, they deliver economic and social value to various stakeholder groups including investors, users or cities, while maintaining a positive impact on the environment in the medium and long term investment perspective. Looking at the success of the projects already completed and the quality they bring to the urban fabric, as well as the economic, social or regulatory changes currently taking place, we can be sure that there will be more and more projects of this type, although they may still pose some challenges for investors,” concludes Marta Machus-Burek.
