The name’s park: RETAIL park

Retail parks and convenience stores have always been rather looked down upon, especially when compared to other retail facilities. For some time they were regarded as a particularly poor and backward relation of the latest generation of shopping centres. Large developers were not interested in such small-scale centres with small catchment areas and would refer to them derisively (in Polish) as chicken coops. Investors were equally unenthralled, but the chickens have now come home to roost – and it is they who are laying all the golden eggs.

Anna Wysocka, the retail leasing director at JLL in Poland, points out that the market has undergone quite an evolution over the last two decades. “The first retail parks appeared at the beginning of the 90s in large cities and were situated next to shopping galleries. Usually they were less than 10,000 sqm gla and completed the range on offer in the shopping centre with household goods, sports, electronics and furniture stores,” she explains. She goes on add that with the expansion in the 2010s of traditional retail parks (between 5,000 sqm and 9,999 sqm gla), smaller formats also expanded, including convenience centres (2,000–4,999 sqm gla). “The shopping centre market is already almost completely saturated and older centres are being renovated one-by-one – often following the strong trend for conversion to mixed-use. As a result, smaller centres now find themselves on the crest of a wave,” she claims. Anna Wysocka puts the total stock of retail parks at around 2.9 mln sqm gla. This includes both traditional and regional centres as well as convenience centres laid out in a retail park format with no common areas and separate entrances for each store. “Regional centres make up half of this space, but each year their share decreases and is taken up by smaller retail buildings,” she adds. The first half of the year saw several convenience centre and retail park openings, which added 103,000 sqm gla to the market. “Interestingly enough, there is still over twice that amount of space under construction and we are seeing much more interest from traditional developers in retail parks – particularly in smaller towns,” reveals JLL’s director.

As long as there’s no mall next door

In the ‘Retail Parks and Convenience Centres in Poland’ report recently published by JLL and Trei, it is estimated that the total supply of retail space will come to around 0.5 mln sqm gla this year, of which retail parks will account for around 40 pct (about 209,000 sqm). This would be the highest figure ever for new retail park deliveries. Grzegorz Mroczek, the vice-president of Cream Property Advisors, believes that there is huge interest in the sector from both investors and consumers. “For around the last five years the trend has been for the construction of more retail parks, which is a format that has proven its worth in many countries,” he says, adding that the market for retail parks has been hotting up considerably and that during the pandemic it turned out to be the only available sales channel apart from the internet. “It seems this format is quite resilient to market disruption and it’s also been benefiting from the convenience store trend. Moreover, it’s now becoming a very fashionable investment product,” he points out.

According to Anna Wysocka, retail parks and convenience centres are still concentrated around cities (46 pct) and towns of fewer than 50,000 people (29 pct). But around 67 pct of the space under construction (237,500 sqm) is in towns with populations of less than 50,000, while only 8 pct is being built around the largest cities. “The scale of the buildings under construction reflects how developers are exploiting the untapped potential by concentrating on towns of 10,000–15,000 people,” she explains. However, Jacek Wesołowski, the managing director of Trei Real Estate Poland, believes that the split between small towns and larger cities is more even. “Where they are located is entirely dependent on whether there is a city-scale mall nearby,” he insists, adding that: “As a developer, we try to avoid competing for tenants and footfall with large shopping centres. To see why, all you need to do is compare the rent levels.” He then points out that a few years ago the rent levels in malls stood at around EUR 30 per sqm, but due to the growing competition with retail parks these had to be reduced to about EUR 16 per sqm, whereas in retail parks the rate was around EUR 9 mln. “I’m sure that if rents were still like this we would be able to build parks right next to malls, since it would be cheaper for the tenants in the retail park – but then the malls started lowering their rents to around the same level as retail parks, so we can’t build parks in the centre of town. We’ve been concentrating on the outskirts of urban centres, such as in Górna in Łódź and Psie Pole in Wrocław, where you can do a quick shop in the Vendo Park near where you live. On the other hand, in smaller towns of 15,000–20,000 people, such as Zielonka and Kobyłka just outside Warsaw, there aren’t any malls, so we can extend our retail range by bringing new stores into these towns,” explains Jacek Wesołowski.

Reeling in investors

Retail investment is also currently (if not exclusively) focused on retail parks. According to Grzegorz Mroczek of CREAM Property Advisors, the retail market is still in a state of disarray, even though customers have started returning to malls where they have a much wider range of stores than in retail parks and so can fulfil more particular shopping needs. “Retail parks are both a hot investment and a hot topic for everyone,” he insists. Magdalena Kowalewska, the country manager for operations Poland at Immofinanz, also makes the point that retail parks have been strengthened by the pandemic as customers rediscover centres that close are close to home as well as convenient and safe for doing their most important household shopping. This has encouraged developers and investors (including those with no previous experience of retail) to make bolder moves into the sector. One such example is DOR Group, which has commissioned CREAM to convert and commercialise a former Tesco store in Częstochowa into a retail park. A new form of business plan has also emerged: firstly, an investor buys a site, then a retail park project is planned and commercialised, and later, when the design of the project has already been drawn up, it is sold on to a company that specialises in retail park development. One company that has recently done this is TUF. Moreover, according to figures from LBC Invest, last year twenty real estate transactions were completed for retail parks and convenience stores, making up 70 pct of all retail sector acquisitions. “For investors, the most sought-after assets were centres offered as part of an investment portfolio,” claims Agata Karolina Lasota, the managing director of LBC Invest.

New tenants and the environment

For many years, most retail parks have had a somewhat similar appearance and their design and planning haven’t changed much. Jacek Wesołowski of Trei, however, can see that tenants’ needs are changing. “This has been clear to see in the centres we built a long time ago in Nysa and Mińsk Mazowiecki, where the stores that lease space from us have since taken up more space,” he reveals. Above all, these spatial changes are due to changing trends in sales and store arrangement. The types of tenant are also changing. Previously, the mix used to be dominated by discount stores, but now it’s being enriched by grocery operators and additional services. According to Magdalena Kowalewska of Immofinanz, many tenants who would previously have only operated in malls have now changed their strategy in the face of the pandemic and have started leasing space in retail parks – such as in Immofinanz’s Stop Shop retail park network. “LPP opened three of their brands with us in Siedlce: House, Cropp and Sinsay, making the range offered by our retail park in this town much more attractive,” she says.

According to Jacek Wesołowski, Trei is now considering signing leases with restaurants, thus bringing a totally new segment into retail parks. “Small format DIY stores, including Castorama and Jula, are also appearing in retail parks. Not so long ago, a health centre opened in our Vendo Park in Łódź. Such changes clearly meet the needs of local people,” he states. The Komfort chain of home interior stores, for one, has been expanding its presence in retail parks. Another change is in the approach to the environment. “With our Stop Shops, we are focusing more on using sustainable building materials, reducing energy consumption, and creating green areas around our centres,” claims Magdalena Kowalewska. She gives as an example a pilot programme to install solar panels on the roofs of Immofinanz’s retail parks.

The development of smaller projects, not in city centres but on the outskirts of towns and cities, is also being driven by the expansion of the residential market. “Putting these uses together could be beneficial for both sectors, since retail parks work very well near new residential estates by creating attractive destinations. This is all part of the growing ‘15-minute city’ trend,” insists Anna Wysocka of JLL. This is certainly why Immofinanz is thinking of enlarging its Stop Shop centres by building apartments above the stores. The first such project is being piloted in Austria, where the development work will soon start, once all the permits have been obtained. “It’s a new idea to extend the services with an environmentally-friendly residential construction at a reasonable price,” explains Magdalena Kowalewska.

The best is yet to come

The golden age of retail parks is now upon us and, according to those in the market, it’s not about to end at any time soon. “The list of potential tenants interested in smaller formats is continuing to grow. I’m not just talking about those stores that are leaving larger malls and looking for an alternative with us. We’re also seeing new tenants we never expected to see. The same trend has been seen in Western Europe, where medical clinics have begun opening in retail parks,” explains Jacek Wesołowski of Trei. Anna Wysocka of JLL is in no doubt that retail parks and convenience centres will continue to grow in popularity over the next 2 to 3 years. “Of course, just as in any other key segment people are carefully analysing what the business climate will be like over the long term,” she says, while adding a note of caution: “Even the most popular of segments can become saturated or suddenly face new commercialisation challenges as a result of tenants’ policies not to cannibalise their existing outlets.”