Still flying high

Karuzela in Puławy, Mozaika in Krotoszyna and N-Park in Łany. These are just a few of the examples of retail parks that opened in the first few months of this year. Others are preparing to open and companies that specialise in this format are announcing more openings. “Over 2021, just like in the previous year, the interest from investors, developers and tenants continued unabated in retail parks and smaller convenience centres designed for quick everyday shopping,” reveals Paulina Brzeszkiewicz-Kuczyńska, the research and data manager at Avison Young. “Last year saw the biggest ever volume of retail park space coming onto the market, accounting for 40 pct of the total supply for the retail sector,” she adds. But is there still the room and need for such projects? As it turns out, there is. And small retail centres are continuing to boldly barge their way onto the market, undeterred by the pandemic or war in Ukraine.

Undiminished strength

Dorota Beltrani, the director of property management and leasing at Napollo Asset Management, however, admits that developing new retail projects in such an unstable economic environment is far from easy. “We are faced with supply risks and rising prices, which influence the overall profitability of projects. Additionally, the availability of land continues to shrink – and this determines whether a new project is started or an old one is extended,” she adds.

Artur Czuba, an associate director in the investment department of Avison Young, points out that over the last two years the retail park sector has exhibited superb resilience in a very perturbed market. It has gained a wider range of tenants and has enhanced it mix well beyond necessary goods. “The pandemic turned out to be a test of resilience for many of the larger and smaller retail centres and their tenants,” says Artur Czuba. Aneta Kulik, the head of leasing at DL Invest Group, points out that shoppers who were unable to shop in large malls during the lockdowns have been forced into adopting alternative approaches. “Many of these shoppers had never even used retail parks before, and it was only the pandemic that revealed to them the potential that smaller, more compact centres offer,” she explains. Retail parks have also managed to cope with the impact of the war in Ukraine, even though, as Artur Czuba points out, that the outbreak of the conflict has led to major structural changes on the building materials market that have pushed up prices that were already high due to Covid-induced disruptions to supply chains and delays in production. “The price shock due to all this has led in a short period of time to many developers’ long-term financial plans being disrupted, which puts their sales margins at direct risk,” he explains, while going on to point out that the situation is occasionally forcing developers to delay launching construction work due to fears of low profitability.

Somewhere to build

The rapid expansion of the retail park sector over the last few years has resulted in a significant increase in the saturation of such space in smaller towns and the suburbs of cities. As Artur Czuba of Avison Young points out, developers are still able to provide modern retail centres in places where even though a traditional large mall can’t be justified, tenants nevertheless still want to be. “This will lead to intense competition between companies fighting for suitable sites, even in small towns,” he admits. Aneta Kulik, however, makes the point that across Poland there are still many small- and medium-sized towns that do have no modern retail space. “Retail parks are ideal for filling this gap, since they are projects with few big costs that could increase the investment risk,” she explains. “It’s also of no little significance that such centres are superb at supplementing online retail, often being the final link in the supply chain for goods ordered online by customers,” adds Aneta Kulik.

What’s new?

New retail parks are continuing to open. In Łany near Wrocław, Napollo has just completed the development of its latest N-Park centre. “This year, we are also planning to open N-Parks in Puszczyna in June and in Gnieźno in the autumn. In 2023, work will also start on the extension of our centre in Wrocław and in Stara Iwiczna [on the southern outskirts of Warsaw], while more parks are in preparation in Ozorków, Sochaczew and Piotrków Trybunalski,” reveals Dorota Beltrani of Napollo. A new retail park was also opened in Puławy in April by Mitiska REIM and Karuzela Holding. Karuzela Puławy has been developed through the conversion of a former Tesco store. Its anchor tenant is Netto. DL Invest, meanwhile, has reopened a retail park in Knurów following extension work, while in Krotoszyn a Mozaika park has also opened its doors. New operators are also making their debuts in Poland. One of these is Smart Park, which is to open its first Polish retail parks this year in Mława and Działdowo in northern Poland. The brand has been created by Paweł Żerański, whose previous company, Żerański Development, operated on the residential market.

And what next?

“We expect that the trend for retail park development will continue to strengthen this year, with many retail centres currently being planned as retail parks for everyday shopping,” claims Paulina Brzeszkiewicz-Kuczyńska of Avison Young. “We are seeing a rapid rise in the supply of small parks and retail centres with areas of 2,000–5,000 sqm gla dedicated to everyday convenience shopping. This confirms how much this format has become much more attractive in Poland,” she adds, pointing out that the total stock of such space in Poland is now estimated at 2 mln sqm in more than 700 centres. “The rapid rise of this format in towns of 10,000–50,000 people allows chains that have not been present in such small locations until now to consider expanding into them,” reveals Paulina Brzeszkiewicz-Kuczyńska. When it comes to rents, Artur Czuba points out that the market has been reacting long-term to a noticeable rise in negotiated rents as well as the service charges in retail parks, which are beginning to be paid as a flat rate. “Despite all this, the rents in retail parks remain competitive when compared to traditional malls, while also attracting many tenants that are new to this format. The interest of developers that have been successful in other countries with more mature retail park markets but that haven’t yet entered Poland can also be clearly seen,” he claims, adding that one good omen for the further growth of the market is the growing range of goods provided and (especially) services offered in new projects with between 10,000–20,000 sqm for rent. “With the stabilisation of the market for building materials and their improved availability, developers should be able to maintain the tempo of their work on new projects, which eager investors are still waiting for – and these include both private investors and specialised funds,” predicts Artur Czuba. Avison Young’s director also believed that over the next few years centres with good tenant mixes, including those with a grocery operator and well-known brands, should have no problems in finding buyers. “If we compare our market to Western European countries, where retail parks are still being built, we can expect further development with many new projects,” concludes Artur Czuba.