Small cities and retail parks dominate Polish market
According to DTZ’s latest report – Property Times, Polish Retail Market in 2014, modern retail market in Poland increased by 466,000 sqm of new space in 28 new facilities and eight expansions of already existing properties. As of the end of 2014, the total supply of modern retail space in Poland reached 12.7 million sqm. The largest number of new retail schemes has been built in cities with a population of less than 100,000. At the moment, more than 780,000 sqm of retail space is under construction, to be completed in 2015 and 2016.
The market was visibly dominated by smaller facilities. As much as 22 of the new retail projects are investments under 20,000 sqm of space for lease. As of the end of 2014, the total supply of retail space exceeded 12.7 million sqm of GLA, of which 73 percent of the total supply being shopping and shopping-entertainment centres (9.3 million sqm).
Shopping centre is still the dominating format, encompassing 67 percent of the newly constructed space. However, in the last two years retail parks have become visibly more popular, reaching a 24 percent share of the new supply, as compared to 20 percent in 2013 and an average of 7-8 percent in the previous years. Due to a high annual supply of over 110,000 sqm, the total supply of retail parks in Poland exceeded 1 million sqm at the end of 2014.
Thanks to the constant development of the retail park format, retail chains of operators such as CCC, Jysk, Media Expert, Deichmann, Pepco, Rossmann, RTV Euro AGD, Neonet, KiK or Martes Sport have dynamically expanded, especially in smaller cities.
In 2014, the supply of space located in factory outlets increased by over 22,000 sq m. For the first time in history, factory outlets were built in cities with population less than 400,000. City Outlet (12,500 sqm) opened in Lublin, while Outlet Białystok (ca. 10,000 sqm) emerged as a result of rebuilding and changing both the format and function of Galeria Podlaska in Białystok.
Only slightly more than 10 percent of the new space delivered in 2014 was located in Poland’s eight largest cities. The largest number of new commercial facilities (211,000 sqm translating into 45 percent) has been built in cities with population less than 100,000. The largest shopping centres include Galeria Siedlce, Galeria Bursztynowa in Ostrołęka, Vivo! Piła, Centrum Galardia in Starachowice and Brama Mazur in Ełk. Over 32 percent of new supply located in smaller cities are retail parks. Ten such facilities were constructed and most of them have an average leasing space of ca. 5,000 sqm.
At the moment, more than 780,000 sqm of retail space is under construction, to be completed in 2015-2016. In spite of the high level of density rates the developers’ interest in large cities and agglomerations is evident. Over 44 percent of supply under construction is located in eight major cities and a further 26 percent is located in cities with populations between 200 and 400 thousand inhabitants. The largest ongoing retail investments in Poland at the moment are the Posnania centre in Poznań, Zielone Arkady in Bydgoszcz, and Tarasy Zamkowe in Lublin.
The pace of new retailers’ entries in 2014 was slower than in 2013, partly because of the lack of high quality vacant space in prime properties in Warsaw, which is traditionally the preferred location for the first store in Poland. Approximately 35 new retailers started their operations in 2014, in comparison to over 50 recorded in 2013. New retailers include NEO (an Adidas brand), Desigual (first regular outlets, previously only present in discount outlets), CityFiT (fitness clubs, UK), Leopark (children’s entertainment centres, Ukraine), Undiz (new clothing chain, an Etam brand, France), Devred 1902 (men’s clothes, France), Imaginarium (toys and children’s accessories, Spain), English Home (home accessories, UK), or Lidia Kalita (a new fashion brand from a popular Polish designer).
Average vacancy rates in shopping centres for the eight largest cities remain at the healthy level of under 4 percent. The lowest vacancy rates have been noted in Warsaw and Wrocław.
Most of recently completed shopping centres and retail parks were leased at 90 percent and higher upon opening, which confirms investors’ more cautious approach to new projects being carefully planned and tailored to the local market requirements.
In 2014, rents for retail space in the best shopping centres remained stable, at about €90-100 monthly per square meter in Warsaw, and €43-55 per sqm in other large cities.
“In 2014, the largest number of new retail facilities were built in small cities, with population less than 100,000. However, 70 percent of retail space under construction is being built in cities of over 200,000 inhabitants, which suggests that the investors are regaining their interest in larger cities,” commented Ewa Derlatka-Chilewicz, Associate Director, Consulting & Research at DTZ. “As the market matures, the owners of the shopping centres face new challenges and risks. Growing competition and changes in the consumers’ behaviour, such as the ever-increasing demands for an aesthetic appearance of the facilities, require the older buildings to be adapted to the new environment. As a result, more and more shopping centres need to be expanded, redeveloped or remodelled, in order to retain the customers, both as shoppers and as users of the entertainment services provided.”