According to the latest research publication by international real estate advisor Savills, retail developers are re-directing their interest to the largest cities (above 300,000 inhabitants), where ca. 47 percent of 793,000 sqm retail space is currently under construction.
The report highlights positive economic indicators for the coming years in Poland, however it also indicates that retail sales growth (3.5 percent in 2015) will be lower than the growth of retail stock (5.5 percent in 2015), which in turn may lead to an increase in average vacancy rate and a drop in turnover and footfall. This effect will be observed mostly in older, not well managed buildings, whereas in the best and most popular centres, the impact will be minimal or even none.
According to Savills data, the majority of the new brands that entered Poland in 2014 let units of ca. 100 – 200 sqm in Warsaw’s shopping centres (Neo, Undiz, Kiko Milano, Twin-Set and others), with only a few of new-comers launching their stores in other cities (Sinequanone and Eye-Sport in Olsztyn and Leopark in Cracow). The number of new anchor tenants was very limited.
Jarosław Tutaj, Head of Retail Agency at Savills, said: “Warsaw and the best projects will continue to be number one on new comers’ wish lists. This is due to the fact that the list of pipeline projects in the biggest cities is comparatively limited, and the majority of existing assets are fully let, meaning some brands might struggle to find suitable accommodation to fulfil the majority of their requirements.”
Savills experts project a further increase in the supply of convenience centre type retail projects, but also point out an increasing activity of developers in the mixed-use sector of projects developed both in the capital (e.g. Norblin and Royal Wilanów by Capital Park, Koneser by BBI Development, Hala Koszyki by Griffin Real Estate and Bohema planned by Okam) and (on a smaller scale) in other cities (e.g. Lubicz Brewery in Krakow and Ovo in Wroclaw).
The volume of investment transactions in the retail sector amounted to only €566 million in 2014 although Savills experts expect the volume to double during 2015 due to greater availability of assets on the market. Prime yields were stable in 2014 at ca. 5.75 percent for the best shopping centres in Warsaw, 6.00 percent for dominant shopping centres in major regional cities and 7.25-7.50 percent in smaller cities. Savills expects prime yields to harden in the next 12 months.