Changing consumer behaviours reshape the retail landscape
According to the latest Trends Radar report from global real estate service firm Cushman & Wakefield, more than 50 percent of Polish consumers expect to live a different, more modest lifestyle in the future. This trend is already apparent when we look at falling retail sales which are likely to witness negative growth of around 5.0 percent in 2023. Paradoxically, a period of tighter consumer budgets presents a growth opportunity for some retail market players, not only for the value segment but also for producers of body care products and fashion brands. Meanwhile, sustainable concepts and solutions are set to gain in importance in the long term.
“Retail has had to reinvent itself at least several times over the last few years. The expansion of retail parks, the pandemic, the boom for online shopping, the strong customer demand for Home & Deco and DIY products, as well as the rise of the eco-trend have fundamentally reshaped the business strategies of many retail tenants, developers and landlords. And in the current environment of high inflation and mortgage costs and falling sales of flats, they can hardly pause to take a breath. This is yet another incentive to adapt to the challenging reality,” explains Ewa Derkatka-Chilewicz, Associate Director, Consulting & Research, Cushman & Wakefield.
Value brands (and not only them) are expanding
The rising cost of living crisis is temporarily changing the structure of consumer spending with less money spent on goods and services outside the basket of basic goods, i.e. on eating out or travelling.
“The squeeze on consumer spending is leading to the polarization of shopping behaviour, with brands targeting the less affluent becoming increasingly popular. This, in turn, is driving the growth of value retailers such as Action, Dealz, TEDi or Pepco, further accelerated by the expansion of retail parks. On the other hand, consumers purchasing premium products continue to spend big, reflected in retail space take-up,” comments Ewa Derkatka-Chilewicz.
For example, in 2022, Cushman & Wakefield, the sole commercialization agent and property manager for the Złote Tarasy shopping centre, acted on the negotiation of a lease with British cosmetics retailer LUSH, which opened its first Polish brick-and-mortar store in the complex in late February.
“Paradoxically, economic woes are likely to trigger the ‘lipstick effect’, with a rise in demand for high-end cosmetics or fashion accessories. What is behind this phenomenon is the desire to demonstrate your high standard of living and the fact that products within your reach, for instance, cosmetics, can be relatively easily used as a coping strategy to cheer yourself up,” adds Ada Budynek, Leasing Team Manager, Cushman & Wakefield.
“In addition, Złote Tarasy also saw Guess renew its lease, Levi’s relocate to a larger unit and Local Heroes open a new store in the retail complex, while Rossmann chose Złote Tarasy for its new flagship concept,” says Anna Oberc-Krzycka, Leasing Team Manager, Cushman & Wakefield.
“We have also seen substantial occupier activity in Galeria Bawełnianka in Bełchatów, for which we act as a leasing agent. Lease deals for retail space there have been recently signed by Carry, Dealz, Świat Książki, Apart, Vision Express, Media Expert and Hebe. Galeria Bawełnianka, which is scheduled to open on 26 April, will also be anchored by such retailers as LPP’s brands, CCC, Half Price, Tedi, Rossmann, Biedronka, Pepco, as well as American Bistro and many other restaurants. Meanwhile, LEGO, one of the world’s most iconic brands, signed leases for three more stores in Poland last year – in Posnania, Manufaktura in Łódź and Forum Gdansk. Our client currently operates six stores across Poland,” comments Ada Budynek.
Residential market slowdown vs retail
Without a doubt, DIY stores and furniture retailers maintained strong momentum during the pandemic and continued to post retail sales growth. However, after about a dozen busy months during which many Polish people adapted their homes to home office working, they too were in for a period of stability.
“The collapse in the housing market is likely to result in short-term fluctuations in retail sales reported by DIY retailers, albeit this is not expected to impact the long-term plans for growth and expansion of key market players. For example, a couple of days ago Black Red White opened another store in Poland – in Homepark Janki, where Dekoria established its presence in October last year,” says Michał Masztakowski, Leasing Team Manager, Cushman & Wakefield.
In addition, Castorama opened its new Smart stores in Augustów and Łomża in late 2022, while OBI is expected to gain a foothold in Szczecin’s Vendo Park, whose construction is about to commence soon; the latter also opened a store in Mysiadło near Piaseczno in the middle of last year. In early February, Leroy Merlin finalized its acquisition of a plot in Koszalin for its first store in the city.
“This is confirmation that retailers continue to search for land for stores in smaller cities which are benefiting from the rapidly growing retail park segment. In addition, retailers are also expanding into homeware segments to broaden their retail offer,” adds Michał Masztakowski.
Buying wisely
Although shopping centres cemented their strong position in the retail market last year, some will require remodelling, reformatting or repurposing in the long term. Faced with rising vacancy rates, some landlords are likely to become more willing to welcome value retailers and reposition their retail schemes accordingly.
“Alongside value brands, stores selling second-hand fashion appear to be a promising direction in building a tenant mix. No wonder, Polish consumers are becoming increasingly savvy and want to buy sustainably. This has been recognized by market-leading brands such as Levi’s and COS, which are opening stores with pre-owned fashion. Looking ahead, sustainable strategies are expected to be reflected in every aspect of operating a shopping centre,” concludes Ada Budynek.
