Shopping trolleys fill up once again

Retail & leisure
There has been no let-up in the turbulence on the retail market over the last few years, but not everyone is feeling the pain due to these extraordinary conditions. Indeed, some retail formats have even picked up a new head of steam

Let’s start with a few numbers: In December 2022, there was around 15,700 sqm of retail space in Poland, which includes 410,000 sqm handed over in the last few months. The largest centre to open in Poland last year was Karuzela in Kołobrzeg (30,000 sqm), and the largest transaction in both Poland and the CEE region was the EUR 250 mln acquisition of Forum Gdańsk. According to a report by BNP Paribas Real Estate Poland, around 270,000 sqm was under construction that was to be completed before December 2024. The largest such developments include Koszalin Power Center (38,000 sqm), Karuzela in Biała Podlaska (28,000 sqm) and Vendo Park in Szczecin (24,000 sqm).

Hypermarkets show no fear

As can be seen, investors have mainly trained their sights on smaller centres. “Retail parks and shopping centres within inhabited areas of smaller towns that provide retail and restaurant services are still popular with local residents, since they meet all their basic needs in one place,” points out Magdalena Chruściel, the director of retail space at Colliers.

The supply of retail space also remains affected by the exit of British retail chain Tesco from Poland. New retail parks have been created by converting former Tesco hypermarkets, including Aniołów Park (Częstochowa, 17,500 sqm), Karuzela in Puławy (14,000 sqm) and Cuprum Park in Lubin (13,000 sqm). Leroy Merlin has opened in a former Tesco centre in Warsaw, while in Szczecin a Tesco store has been converted into a spacious warehouse. The remaining hypermarkets have not been shaken from their positions, particularly in a world of rising prices. Large chains do not always appear alone in free standing buildings on the edge of cities, but they are often long-term tenants of retail parks and centres. (For example, in the past year Kaufland replaced E.Leclerc in Pasaż Świętokrzyski in Kielce and Carrefour opened its first store in Gorzów Wielkopolski in the Nova Park centre there.)

“Consumers today are extremely price-sensitive, but large chains are not afraid of this because they are creating buyer groups that allow them to maintain competitive pricing on their shelves. Each one of these retailers has found a place in Poland, so we shouldn’t be seeing any big changes on this market in the near future. The exit of Tesco from Poland was due to its financial situation and the difficulties it faced not only in Poland but around the world,” argues Magdalena Frątczak, the head of retail at CBRE. Hypermarkets are also showing the necessary flexibility to meet customer preferences and as a result they are competitive with smaller and more modern formats.

“Following the changes in consumer attitudes allows us to react effectively and in advance to their needs, which is why hypermarkets continue to change. We are of the opinion that the market is big enough for every format and each one has its own proponents. A large area hypermarket means however a very large and well-displayed range of goods that meets differing needs as well as seasonal promotions that are changed a number of times a month. A wide range of goods also allows for savings. At the same time, broadly speaking, this sales model is undergoing continuous transformation, so its range is being widened as well as the way it is delivered,” points out Hanna Bernatowicz, the director of communications at Auchan.

There is also a good reason for why we are often hearing of modernisations, renovations and expansion for existing retail centres. One major such development is the reconstruction of Auchan in Piaseczno on Warsaw’s southern outskirts, which in 1996 was the first store of the chain to open in Poland. According to BNP Paribas Real Estate Poland, properties of ten years or more in age account for almost half of the available stock. Even though such centres are still fulfilling their roles and still look good, they sometimes do not meet the standards required by ESG policies.

The need to be green

Adapting to the present sustainability requirements remains a challenge for managers and investors, but at the same time it is beginning to be an absolute requirement. This has been caused not only by the growing awareness of the environment but also by the increasing costs of running older buildings. “Rising prices can increase the importance of energy efficiency and speed up the introduction of innovative ESG solutions. One example of this is the installation of solar panels to power a building. Rebuilds and centre renovations are also expected to limit energy usage and reduce carbon dioxide emissions,” says Magdalena Frątczak of CBRE.

Sukcesja in Łódź is also about to undergo a major transformation, which – says the owner – is going to feature an abundance of greenery and will be used for new purposes. The changes to the centre are to cost as much as PLN 50 mln. As Magdalena Frątczak points out, shopping centres often have many advantages stemming from their loyal customer base. Investors are reluctant to abandon their potential, so they will often decide to renovate and extend them, especially when such work reduces running costs. Hanna Bernatowicz of Auchan provides examples of what can be done to keep up with sustainability trends and also reduce costs: “It is worthwhile upgrading the food cooling systems and CFCs for CO2, which helps reduce the carbon footprint. All the cooling equipment in our centres can be closed with glass doors. We also have EC fans and LED lighting. Heat recovery technology from the cooling units is used to heat water. LED lighting systems with automated dimmers that depend on the time of day and the external natural light are also useful, not only within the store but in the car parks, store rooms and delivery areas.”

The integration of logistics and retail is also important to the climate. Last year’s heatwave in China had a disastrous effect on some factories and the drought in Europe limited river transport on the Rhine, which flows through Germany and the Netherlands. It is therefore hard not to agree with the opinion that carbon neutrality and combating a climate catastrophe should be required and applied from above. Moreover, it has to cover every sector of the market and not just particular real estate properties and types.

Mixed-use with character

Not every building can be redeemed in this way. When the decision to make drastic changes is taken, investors can allow themselves to think bigger with their plans. In Kraków, Galeria Plaza has been demolished and Strabag Real Estate wants to replace it with a mixed-use complex built in compliance with sustainable development as part of the closed economy. The work is planned for 2023–2025. Last year, the PZO factory in Warsaw was handed over and work began on the Drucianka Campus. Work is also underway on Fuzja in Łódź as well as the Gdańsk Docks project. According to BNP Paribas Real Estate Poland, investors and developers are often taking the decision to develop their own placemaking projects. The needs of the local community in such cases comes to the fore, and for them not only is the ability to go shopping locally important, but also being able to interact with somewhere that has a specific character that references the history or the identity of the city. It also has to be friendly to both people and the environment. Wojciech Wojtowicz, an analyst in the consultancy and market research department at Colliers, reveals that in 2022, although most of the supply was accounted for by retail parks, mixed-use centres had not lost any of their importance and more than one shopping centre is to undergo a transformation in 2023. “Mixed-use centres that are undergoing renovations include Supersam in Katowice and Renoma in Wrocław, where on completion the area is to be increased as well as the office component. The two largest traditional shopping centres to be handed over next year are Bawełnianka in Bełchatów and Fort Wola in Warsaw,” points out Wojciech Wojtowicz.

E-commerce no longer so hot

Two years ago it was difficult to avoid shopping online, even if you only did so sporadically. The restrictions on traditional retail and the health and safety fears convinced (or maybe forced) many people to order purchases to their door through some online platform. New shopping apps were popping up like mushrooms after the rain and many consumers were tempted to stay at home, even by the time they could pop out to the local discount store without fear. According to the 2022 figures, the e-commerce boom has begun to slow down. “The pandemic restrictions sped up changes in customer behaviour in regard to online shopping, especially when it came to ordering fresh groceries, which we had previously treated with distrust. We prefer to choose goods ourselves in the store than to leave it to someone else. This situation has now changed and far more people appreciate the ease and the time saved that online shopping provides, so it will be hard to give this up. Many people regularly renew their online shopping basket orders, just adding or taking away individual items,” explains Magdalena Frątczak. At the same time, she also adds that despite there now being more ways to shop online, many consumers are beginning to return to supermarkets, discount stores and shopping centres. “Online retail is currently maintaining a steady market share. Many people have returned to their habits from before the pandemic and will regularly visit brick-and-mortar stores, hypermarkets and retail parks. These provide not only shopping opportunities but also other services, including entertainment. In this regard, brick-and-mortar retail has a huge advantage over online retail,” insists Magdalena Frątczak.

According to Statistics Poland, the growth in the market share of online retail was between 8.4 pct in July and 11.9 pct in November 2022. The Omnibus directive, which came into effect for both goods and digital sales, regulated information about the price of goods and changed the rules on warranties and customer guarantees. Parcel lockers also saw steady growth – and not only in big cities. InPost leads the sector with 20,000 machines, followed by Allegro with 3,000. At the same time, consumers are beginning to also turn their attention to other emerging technologies. For e-commerce this will not only ensure an efficient flow of goods, but also make deliveries and returns less damaging to the environment. Undoubtedly, with the growing awareness of the environment, this factor will be a priority not only for consumers but also for service suppliers.