POLAND Retail parks on the marchRetail & leisure
Over the last ten years the number of retail parks has doubled, increasing their share in total retail stock by 4 pp. In H1 2020, developers completed almost 148,000 sqm of modern retail space in large scale projects (greater than 5,000 sqm gla). Of this new supply, 67 pct came in the form of eight new retail parks and three extensions of existing centres. Almost 450,000 sqm gla is still under construction scheduled for completion in 2020 and 2021, with retail parks making up almost 26 pct of this volume, according to the authors of the report.
While the outbreak of the Covid-19 pandemic has clearly slowed down the construction activity in Poland, the smaller convenience centre market still remains healthy, with 130,000 sqm gla completed in H1. As a result, the supply of modern retail space in retail parks and convenience centres in Poland now totals 2.6 mln sqm, with the majority (54 pct) accounted for by regional parks. At the moment, app. 171,000 sqm of retail park and convenience centre space is in the construction stage, meaning that retail parks and convenience centres account for 34 pct of all the supply currently under construction. 18 of the 33 schemes under construction are small convenience centres. Only two regional retail parks are being developed: Karuzela Ełk (16,000 sqm gla) and Ptak Market in Rzgów (10,000 sqm in two phases). Around 40 pct of the new projects are being built in small towns (below 50,000 inhabitants).
The convenience centre niche developed as a response to both customers’ needs, which had moved towards quick everyday shopping, and the increasing saturation of the shopping centre market. This trend has been given a further boost by the pandemic. Under the lockdown, consumers turned to local options. Some have rediscovered their neighbourhoods and begun to appreciate small family-run businesses and local products. However, value retailers, such as Tedi, KiK and Dealz, are among those who have the largest number of stores in this asset class. Furthermore, these brands often start their national expansion from smaller cities.
Anna Wysocka, the head of the retail agency at JLL Poland
Retail parks and convenience centres attract tenants by offering lease costs significantly below those of shopping centres. Monthly rents that apply to units of app. 2,000 sqm in the best performing retail parks located in regional cities currently stand at EUR 8–12 per sqm with service charges at a very competitive EUR 1.5–2 per sqm.
Convenience centres play a dominant role in small towns, where they are often the only retail project in their particular markets, accounting for 63 pct of the retail park stock in towns of below 50,000 residents, while regional retail parks are found mostly in major agglomerations. Traditional retail parks are spread across all cities. However, 50 pct of their gla is in small towns and the second biggest share of the gla – almost 20 pct – complements the range of retail in major metropolitan areas.
Joanna Tomczyk, a senior analyst at JLL Poland
According to JLL and Trei Real Estate, it will take time for consumers to regain the feel-good factor needed to fully return to brick-and-mortar stores. The average footfall in shopping centres in July 2020 was 78 pct of the previous year’s level, according to the Retail Institute. But it is the smallest assets that are rebuilding their customer base fastest. With customers placing a premium on appropriate social distancing, large stores with limited common areas are more favoured as they are situated in more spacious environments, which are most frequently found in retail parks.
Small scale retail formats reacted quickly to the pandemic. Trei was one of three companies that represented the majority of retail park owners operating in Poland in talks with tenants. Since April, negotiations have been held with 38 chains and companies that together operate more than 900 stores in more than 200 locations across the country. During the lockdown, the clothing and sports industries were significantly impacted, while food and drugstores performed significantly better. Therefore, we have developed specific solutions, tailored to the individual financial condition of the relevant companies. Thanks to the negotiations we held, by the end of May, all our retail parks across the country have now reopened.
Jacek Wesołowski, the managing director of Trei Real Estate Poland