Retail still under development

After the delivery of nearly 135,000 sqm to the market over the last three months, the total stock of modern retail space at the end of Q3 2017 reached around 11.3 mln sqm, according to a report by Colliers International. “Over 2017, we’ve seen a growth in supply both in towns and cities with a large amount of retail space as well as in markets that do not have such high levels of saturation,” said Małgorzata Dziubińska an associate director for consulting and research at Cushman & Wakefield.

Almost 620,000 sqm of retail space is still under construction, of which 29 pct will be completed this year. The total supply over 2017 is estimated to be 350,000 sqm, according to Colliers International. The Retail Research Forum of the Polish Council of Shopping Centers, on the other hand, estimates that currently over 635,000 sqm is under construction, 16 pct of which comprises extensions of existing retail centres with over 470,000 sqm of retail space planned to be delivered in 2017 in 21 projects, more than three quarters of which is to be built in and around Poland’s largest cities. The largest projects currently being developed are Galeria Młociny in Warsaw, Wroclavia in Wrocław, Forum in Gdańsk, Serenada in Kraków and Galeria Libero in Katowice.

According to Colliers International, in Q3 2017, three new shopping centres and extensions of existing developments were completed, which accounted for 88.5 pct and 11.5 pct respectively of the quarter‘s supply. Galeria Północna in Warsaw (64,000 sqm) was the largest project opened over the period, which was followed by the first phase of Ikea Lublin (33,500 sqm) and Vivo! Krosno (21,200 sqm). “I’d like to point out that Galeria Północna is the first large-scale retail development to open in the capital since 2007. Currently, there’s around 690,000 sqm of retail space under construction, of which 270,000 sqm is scheduled to be opened this year in 2017. The largest retail schemes that we are expecting to open this year are Wroclavia in Wrocław (64,000 sqm) and Serenada in Kraków (42,000 sqm),” explained Małgorzata Dziubińska of Cushman & Wakefield.

The stock of modern retail space in Poland has now reached 11.44 mln sqm after the addition of 25,800 sqm to the market in five projects in H1, according to the latest Retail Research Forum report published by the Polish Council of Shopping Centers. The new projects included: the Kalinka retail park in Kalisz (3,400 sqm, developed by Antan), the Sulechów retail park (5,800 sqm, by Saller), and the Tarasy Grabiszyńskie shopping centre in Wrocław (8,500 sqm, by Womak). Two extension projects were completed in the period, both by Immochan: Auchan Hetmańska in Białystok (5,800 sqm), and Auchan Gdańsk (2,300 sqm).

Over 2016, The Polish Council of Shopping Centers claims that 457,000 sqm of new retail space was completed, 75 pct of which was completed in H2, representing 23 pct less space than was constructed in 2015. Across Poland in 2016, 19 retail centres were opened with a combined area of 367,000 sqm while 14 retail centres with a combined area of 90,000 sqm were extended. Last year, developers were active in both large cities and small towns. The largest centre to be completed was the Posnania shopping centre in Poznań with a leasable area of 100,000 sqm equivalent to 20 pct of the retail space delivered over the year. “2016 and 2017 alike are marked by a return of developers to the largest cities as well as the construction of large retail projects,” says Radosław Knap, the general director of the Polish Council of Shopping Centers. “The trend for extending and modernising existing malls is growing stronger and stronger. Centres completed around a dozen years ago in very good locations with well-established positions on the market are now being forced to adjust to the modern consumer, who now uses shopping centres for an ever broader range of services,” says Radosław Knap.

Coming in, going out

Several new retail chains debuted in Poland in Q3 2017. Some opened in Galeria Północna including Hamleys, and two brands from the Russian based Melon Group: Love Republic and Zarina. There were also new concepts such as sports store 4Faces of 4F, and children’s store Newbie by KappAhl. A highlight of the quarter was the opening of the first Victoria‘s Secret store with its full range of lingerie in Warsaw’s Arkadia centre. Nissa, a Romanian fashion brand, is another tenant that debuted in centre. However, over the period Springfield decided to withdraw from the Polish market.

“A number of upcoming debuts of retail chains in Poland are due to the forthcoming opening of Wroclavia shopping centre in Q4 this year. Spanish fashion brand Sfera, Ukrainian brand Goldi, and Blue Frog, a new food concept by AmRest are to open in Wrocław,” said Katarzyna Michnikowska, an associate director for research and consultancy at Colliers International.

Free and eager... to change

The average vacancy rate in shopping centres for the eighteen biggest Polish cities was 4.1 pct over the period, according to Colliers. The lowest vacancy rate among major retail markets was recorded in Warsaw at 2.6 pct whereas, the highest vacancy rate was in Katowice at 5.9 pct. Among the large cities (150,000-400,000 inhabitants), the highest rate of vacant retail space was in Radom at 10.9 pct and the lowest in Bielsko-Biała at 1.3 pct.

Technological innovation, as well as increasing competition from e-commerce and ever more demanding customers are forcing shopping centres to make changes in order to not only meet customer expectations, but also to stand out from the competition. A shopping centre’s success is now dependent upon an ever increasing number of factors and this creates challenges for both planned and existing centres, claim CBRE in the ‘Shopping Centre 4.0: Innovations in Shopping Centres’ report.

“Changes in consumer behaviour as well as the retail market’s maturity have affected the evolution of retail projects. Shopping centres pay great attention to innovation and to expanding their services and have thus become an important hub for social life with a combination of entertainment, culture, education, modern technology and leisure. This trend will grow stronger over the coming years and will be driven by the style and pace of life: the demands of consumers continue to grow and shopping centres have to adapt in order to meet the challenge,” claims Agata Czarnecka, an associate director in the research and consultancy department of CBRE and the author of the report.

Food now the new shoes

“Changes in lifestyle and leisure activities and rising consumer expectations are behind the growth of the Food & Beverage and entertainment sectors. Consumers are becoming increasingly interested in going out to explore new venues and foods. This indicates an opportunity for growth for both mainstream international chains and small-scale operators to enter the market with unique concepts that cater to local tastes,” said Anna Hofman, an associate in the retail agency at Cushman & Wakefield. “The outlook for Poland’s F&B sector is very optimistic and we expect this market segment to maintain the momentum in its growth over the coming years,” she added.

The investor radar

There were no purchases of shopping centres in prime retail locations in H1, a period dominated by transactions involving other formats (including retail parks and outlet centres). By the end of 2017 the total real estate transaction volume is expected to come to EUR 4.3–4.4 bln, app. 60 pct of which will result from retail transactions, says the Polish Council of Shopping Centers.

Meanwhile, the Polish retail market has been aging, with around 50 pct of the buildings now ten years’ old or older. Existing centres need to be modernised and renovated in order to compete against newly completed projects. Age is not the only driver of change with recreation and leisure as well as catering services growing in importance. In a survey conducted by CBRE, tenant mix turned out to be the second most important factor in Polish customers’ choice of shopping centres, with 67 pct of respondents stating it to be of importance.

Shopping on and off-line

Rising consumer expectations are forcing tenants to become ever more innovative, claims CBRE. New store concepts and formats are making shopping centres more flexible in their provision of tailor-made spaces to meet individual tenant requirements. Online special offers as well as pop-up and flagship stores are being used more and more to encourage customers to visit traditional real-world stores rather than just do their shopping online.

The need to fuse traditional retail with m-commerce (on mobile devices) and e-commerce has become one of the most pressing issues for landlords, property managers and tenants, says CBRE. In order to create a competitive advantage, innovative technologies are being used that are being quickly and effectively incorporated into everyday operations. Examples of such innovation include mobile apps to help find the shortest route to a given shopping centre or to send personalised advertising based on previous purchasing decisions, the consultancy claims.

Poles spending more

With an impressive 66 pct rise in retail sales per capita since 2004, Poland stands second to none in Europe. Over the past five years both the retail stock and the retail sales have been growing steadily with a cumulative increase of 20 pct, according to an analysis published by Cushman & Wakefield. Forecasts for the next decade predict a further 40 pct increase in retail spending per capita, which demonstrates the growing affluence of Polish society.

Stable growth in modern retail stock in Poland, including all formats and types of developments, is being driven by steadily increasing retail sales. Despite a slight slowdown recently, the retail supply is continuing with a stable annual rise of 3 pct, while retail spending has increased up to 6-7 pct over the last two years.

The way money is spent has also changed over the last years, with the ‘fashion & accessories’, ‘health & beauty’ and ‘leisure, culture & recreation’ segments taking a greater share compared to 2012. “The changing structure of consumer spending is following the patterns of more affluent countries. This provides huge potential for new retail developments, new formats, new concepts and operators as the market is reaching a new level of maturity. The 40 pct forecasted 40 pct rise in retail spending per capita over the next decade is expected to support further balanced development of the retail market in Poland,” said Kamila Wykrota, the head of consulting and research at Cushman & Wakefield.

In 2016, average retail spending per sqm of modern stock stood at EUR 8,150 per annum. When considering this the greatest potential for new retail developments can be seen in the Mazowieckie (Warsaw) and Małopolskie (Kraków) regions, followed by Świętokrzyskie (Kielce) and Warmińsko-Mazurskie (Olsztyn). In the Wielkopolskie region city of Poznań represents the largest share (70 pct) of the region’s retail stock, while accounting for only 24 pct of the region’s total population. Potential new retail development could be absorbed by smaller towns of the region.

The largest regional retail markets, e.g. Mazowieckie (Warsaw), Śląskie (Katowice), Dolnośląskie (Wrocław), Wielkopolskie (Poznań) and Pomorskie (Gdańsk) have benefited from the highest retail sales growth over the last five years.