- In 2017, new retail supply totalled 422,000 sq m, representing a 3% y-o-y increase;
- More than 40% of new supply was delivered across shopping centres sized over 40,000 sq m, most of which in large cities;
- The development pipeline now stands at more than 500,000 sq m, of which nearly 80% is scheduled for delivery in 2018;
- F&B and leisure components are also expanding in shopping centres which are turning from retail-only schemes into leisure destinations;
- A major task that owners and managers of shopping centres have to face is to combine traditional retailing with e-commerce and m-commerce;
- Key challenges for the retail sector in 2018: the commercial property tax, omnichannel and the Sunday trading ban.
In 2017, twenty new retail schemes were opened in Poland: ten shopping centres providing 280,100 sq m of leasable space, three retail parks with a total area of 20,700 sq m and seven standalone retail warehouses offering 78,700 sq m. Extensions comprised six shopping centres, two retail parks and one outlet centre, which provided 42,500 sq m of leasable space, accounting for 10% of last year’s total supply. Poland has 426 shopping centres that continue to dominate the market and provide 10.47 million sq m of leasable space, making up 73% of the country’s total retail stock. Distribution of space by retail format in Poland is typical of CEE emerging markets. By contrast, in Western Europe retail parks have a much bigger market share and this retail segment is also likely to expand in Poland in upcoming years.
Lucyna Śliż, Associate Director, Retail Agency, Cushman & Wakefield, said: “With retail spending showing an increase of up to 6-7% over the last two years and Polish people becoming increasingly aware consumers, the structure of expenditure is beginning to follow the patterns of more affluent countries. This is demonstrated by the number and profiles of brands entering the Polish market.”
Of all the regional retail markets, Poland’s largest cities with over 400,000 inhabitants are currently benefiting the most from their economic and purchasing potential. In 2017, Warsaw saw the opening of Galeria Północna, which added 64,000 sq m to the city’s retail stock. Schemes in the pipeline include Galeria Młociny (67,000 sq m) and Towarowa 22 Shopping Centre (currently at the planning stage). Cities below 100,000 inhabitants are still untapped markets which are likely to witness growing developer activity in upcoming years.
In addition to new developments, the Polish retail market is also expanding through upgrading and redevelopments, particularly of schemes aged over ten years. This is due to growing market competition and a need to align with customer expectations, which has led to new outlet centre openings, including Outlet Graffica (Rzeszów) and Metropolitan Outlet (Bydgoszcz).
The retail development pipeline now stands at more than 500,000 sq m, of which nearly 80% is scheduled for delivery in 2018. The largest concentration of developer activity is in cities with over 400,000 inhabitants in which more than 300,000 sq m of retail space is to be opened in 2018.
In addition to new retail schemes delivered to the market, new brands are also expanding into Poland. In 2017, thirty four retailers entered the Polish market, including Newbie, Hamleys, BeFree, Zarina, Love Republic, Sfera, and Victoria’s Secret, which opened its first full-format store. Despite the new openings and redevelopments, the average vacancy rate remained largely unchanged at 4% at year-end 2017.
Report author Małgorzata Dziubińska, Associate Director, Consulting and Research, Cushman & Wakefield, said: „Polish businesses are recording strong performance, amid growing retail sales and very high industrial output. The year 2017 ended with a thriving economy. Consumer spending is driven by the low jobless rate, rising wages and the governmental “500+” Program. In the tight labour market, an upward pressure on wages is expected, which is likely to push inflation up due to strong economic growth and unfavourable demographic trends. Low unemployment and rising wages are working to the advantage of employees who currently enjoy the upper hand on the labour market. For the national economy, however, this means shortages of labour, particularly high-skilled labour.”
Another notable trend is the growing ownership consolidation by the largest market players. Paweł Partyka, Associate, Capital Markets, Cushman & Wakefield, said: “Greater ownership concentration on the retail market may result in a lower supply of investment products in the short term, but it is unlikely to have a major impact on the liquidity of the Polish investment market in the long-term run. It may, however, narrow the bargaining power gap between shopping centre tenants and landlords.”
There is a growing divergence in rents. While prime rents remain flat or are edging up at first-rate schemes, those in secondary shopping centres are coming under a downward pressure.
Anna Oberc, Associate Director, Retail Agency, Cushman & Wakefield, said: “The Polish retail market has lately become tenant-led due to very large volumes of retail space coming on stream in recent years. Turnover-based leases are becoming increasingly common with first-time tenants demanding from some landlords additional incentives such as rent-free periods and store fit-out contributions. Only first-rate shopping centres do not have to struggle with these issues – due to a large number of tenants seeking to gain a foothold at such schemes.”
The retail sector is facing other challenges too. The partial Sunday trading ban introduced in 2018 is expected to impact on consumer behaviour, leading to a shift in shopping habits and an extension of store opening hours on weekdays and Saturdays. The new regulations are likely to affect, in particular, F&B operators within shopping centre food-courts and outlet centres which generate 80% of their footfall and turnover at weekends. This may, however, lead a revival of high street locations and an improved alignment of shopping centre offers with new circumstances.
Ada Budynek, Consultant, Retail Agency, Cushman & Wakefield, said: “Sundays account for 20% of fashion stores’ weekly turnover, which cannot be wholly spread over the remaining days of the week. Retailers may choose to scale down expansion plans and carry on optimizing their store chains.”