The charm of the park

These are happy days for retail parks! According to CBRE, 140,000 sqm of retail space is to be developed in parks in Poland in 2019 alone, and up to 200,000 sqm could be built next year. This represents a 9 pct and 13 pct y-o-y increase respectively – two or three times more than the average growth of the entire retail market in Poland, which is currently around 4 pct per year. The growth is even clearer if we look exclusively at small and medium-sized parks (from 3,000 sqm to 10,000 sqm) – around 16–17 pct. JLL’s latest data show that eight parks ranging from 2,000 sqm to 5,000 sqm were opened in Q3, which added 25,000 sqm to the market. This is a lot considering that only around twice as much was completed across all other formats, including large centres. Why is the smallest centre segment so dynamic? Two words: market saturation. The barrel may be full of large stones, but there’s still plenty of room in it for gravel and sand. “There are 364 towns with populations of between 25,000 and 100,000 in Poland, and that’s not even counting those smaller than that. A retail park has been created or will be created in each of them. These are huge opportunities,” beams Magdalena Frątczak, the head of the sales department at CBRE.

Simple, cheap and close to home

What makes the smallest formats attractive? First of all, there’s the fact that they are closer to the customer – being situated in their actual neighbourhoods. These are formats that have been devised to meet local needs. They are more convenient – and the crucial word here is ‘convenience’, that option of being able to pop into a nearby shop rather than having to drive all the way to a shopping centre miles away. It’s also clear that a few more things are needed to make the experience comfortable – first of all, a large car park is necessary, where the customer can park without spending ages looking or waiting for a space, as well as easy access from the car park to the shops.

Gdańsk-based company Higasa Properties specialises in convenience parks of between 1,200 sqm and 5,000 sqm of leasable space. The typical list of brands present in such parks is fairly straightforward. However, three elements have to be in place: a grocery operator (e.g. Biedronka or Lidl), a drugstore (e.g. Rossmann or Hebe) and a discount household items and clothing store (such as Pepco, KiK, Action or Dealz). Why this kind of retail format? “Retail parks are the safest product at the moment from an investment point of view,” believes Michał Ciapka, a member of the board at Higasa Properties. Even in a recession, people have to eat, wash and dress themselves. They don’t need fancy things, but they will not stop buying the basic ones, even during an economic crisis. “A shopping mall with a tenant-mix reflecting higher aspirations will not necessarily be so recession-proof and, unfortunately, people will no longer feel the need to go to the cinema or eat something good. Centres with a large proportion of premium brands will as a result be the first to suffer,” emphasises Michał Ciapka. What should interest project investors is not only the relatively lower investment risk but also the attractive rates of return to be had from smaller formats. “In our country this ranges from 6 pct to 8.5 pct. That’s between 30 pct and 50 pct higher more than the rates you have across the western border,” says Michał Ciapka.

Dietmar Reindl, the operational director at Immofinanz, which already has almost 90 Stop Shop convenience parks across Central and Eastern Europe (in formats ranging from 3,000 sqm to 14,000 sqm), points out that not only Poland but the entire CEE region has significant potential for retail park development due to the lower saturation of retail space and the growing purchasing power of its citizens. “As a rule, the retail park format is very interesting for international chains due to their lower rents and service charges, their flexible layouts and the improved accessibility in smaller towns,” emphasises Dietmar Reindl.



Magdalena Frątczak, the head of the sales department at CBRE, believes that smaller towns in Poland still offer huge oportunities for retail parks

Unafraid of change

The impact of the Sunday shopping ban in Poland doesn’t seem to have been too drastic for retail parks, either. “Unlike city-centre malls, retail parks had their smallest turnover on Sundays, so the restriction on Sunday trading has not affected them as much. For the most part this turnover has shifted to other days of the week,” suggests Jacek Wesołowski, the CEO of Trei Real Estate Poland. Furthermore, with their separate entrances the stores and services allowed to open on Sundays can operate independently of the others. “For the customer, the convenience park fulfils a strictly defined utility function – it gives them the opportunity to use the gym, visit the restaurants or pop into the bakers, just like the high street does,” claims Jacek Wesołowski.

Nor have retail parks felt any major impact from the growth of online retail. According to Małgorzata Dziubińska, an associate director at Cushman & Wakefield, due to their convenience and the speed of the shopping they actually represent a form of competition for e-commerce, so their position is not under any particularly threat. “Since they have been relatively slow in taking to online shopping, towns with up to 100,000 residents for now will continue to provide excellent potential for the development of such brick-and-mortar parks,” believes Katarzyna Rzetecka, a board member and the director of the commercial investment division at Napollo. And instead of wilting under the onslaught of increased online sales, parks in smaller towns can actually cash in from it by becoming an outpost of internet retail. “Goods bought on the internet are often collected or returned to such parks. So the internet has actually become one of the driving forces behind the expansion of the segment,” adds Jacek Wesołowski.

The lower rents and service charges typical for such centres are also a significant factor. According to research by CBRE, monthly rents in retail parks range from EUR 8 to 16 per sqm, and the service fees from EUR 1.5 to 2 per sqm. This is, of course, much less than in a shopping centre, where you can pay EUR 20 in service fees alone in the best metropolitan locations, since such malls, unlike retail parks, contain a large proportion of common space. And, finally, as single-storey and rather uncomplicated structures, retail parks are obviously much easier, quicker and – more importantly – cheaper to build than malls.



“The internet has actually become one of the driving forces behind the expansion of the segment,” claims Jacek Wesołowski, the CEO of Trei Real Estate Poland

There’s also the downside

The fact that they are so easy to build is both a strength as well as a weakness. “Small parks are more exposed to the emergence of local rivals. They are very often built by local developers and investors, viewed sometimes as ‘local heroes’ who do not specialise in this type of project, but are simply looking to secure their or their family’s future in this way,” explains Monika Woźniak-Zawioła, the general director for Poland of Belgian retail park developer Equilis. All it can take is for another park of ​​several thousand metres to open nearby to make the first one less attractive. Therefore, the key thing is to decide on the size of the park and the right tenants in order to satisfy the local market enough and make it as difficult as possible for another park to open. The worst sin is to take a uniform approach, without adjusting the park’s characteristics to local conditions. “Because convenience centres are supposed to fulfil local needs, they have to correspond exact to the daily demand. This requires a personalised approach to the location, with the right mix: well-known chains, local producers and the services that are most sought after. When devising this mix, you should always factor in the purchasing power in a particular location,” adds Katarzyna Rzetecka.

One difficulty is the rather poor statistical data available for these locations, so investment decisions in this sector are often based more on intuition than on hard numbers. “Many of these small centres don’t have systems for calculating the turnover or footfall. This is one of the reasons for the limited liquidity of this product despite growing interest from investors. It is still an immature market,” admits Monika Woźniak-Zawioła.

Przemysław Dwojak

senior director and head of sales effectiveness and consumer insight, GfK Polonia

Weighing up the competition

The retail space market in Polish shopping centres is particularly saturated when you look at it from the angle of consumers’ purchasing power. The growing supply of retail parks means that more and more retail outlets are now battling it out to attract customers. Before a retail park is introduced to a town, there is a certain status quo regarding consumer spending. They tend to spend their money in stores of retail chains, non-associated retail, at the outdoor market and online. The emergence of a new retail park on a saturated market means that the consumer has to redirect their spending to these new stores, so this money is taken away from someone else. A common mistake made by investors on a market unsaturated by modern retail space is underestimating the importance of traditional local trade and the influence of larger towns or cities nearby. The factors that constitute the main risks and require the closest consideration on the part of the investor are mainly those related to the location. It is necessary to properly assess the competition and the specifics of the catchment area, the transport links, the synergies with existing grocery operators as well as other neighbouring shopping centres, and then, finally, to make sure the size of the building is consistent with the local potential.