Overall supply of modern retail space in Poland is around 13 million sq m with shopping centre supply making up 9.29 million sq m of this total. Other retail formats on the market include: retail parks – 1.45 million sq m, retail warehouses – 2.07 million sq m and outlet centres – 209,000 sq m.
"During Q1 2016, the retail market expanded by a modest 24,500 sq m, however the first three months of any year have never been known as a hectic period for new openings. One new project of 21,000 sq m - Galeria Glogovia in Głogów - was delivered to the market. In addition, one of the stages (3,500 sq m) of the extension of Atrium Promenada in Warsaw has also been completed", comments Anna Bartoszewicz-Wnuk, Head of Research and Consulting at JLL.
Nearly 665,000 sq m of new floor space in various retail formats is currently under construction. Shopping centres in key agglomerations account for the majority of this number.
"Whereas most of the projects delivered in smaller cities are tailor-made and sufficient for the size of a particular market, projects developed in larger cities are filling geographical gaps. In addition, retail assets also allocate an increasing share of GLA to leisure tenants, such as fitness clubs and restaurant areas. We also see that retail developers are becoming increasingly sensitive about the aesthetics and communal areas around their projects", says Edyta Potera, National Director, Retail Agency at JLL.
Competitive environments drive changes, particularly in those centres who are lower down the 'shopping pecking order'. As a result, renovations, remodelling and extensions of existing projects are on the rise.
"An increasing number of mixed-use developments, offering retail and service space in residential projects, office buildings or as a part of transportation hubs are making their mark on the market. This is particularly the case in the major cities, where new projects with a smaller retail component are emerging in post-industrial sites, harnessing the areas' historic context in order to create a stimulating shopping and leisure environment", comments Anna Bartoszewicz-Wnuk.
Demand – Polish brands continue expansion
In Q1 2016, retailers continued their stable, but selective, expansion throughout the country. This is best illustrated by new international retailers entering the market, for example the Lebanese chain Al Rifai and the first mono-brand American shoe store Skechers. At the same time, Uterqüe, the youngest brand from Spain's Inditex, is available on the Polish market, although currently operating online only. The market also welcomed the debut of Tallinder, a Polish fashion brand by the LPP Group.
"In addition, we have seen the Polish brands - e.g. CCC, Gino Rossi, Kazar, Solar, Wojas, TXM, and the LPP Group - further expanding into foreign markets. The typical directions for international expansion of Polish chains are the countries of the Persian Gulf and countries geographically close to Poland. This expansion is most pronounced with regards to LPP which is planning to launch the store of its brand Reserved on Oxford Street in London", says Edyta Potera.
Rent and vacancy rates
Prime rents, which refer to shop units of 100 sq m earmarked for fashion & accessories and located in the best-performing assets, are traditionally higher in Warsaw and are €130 / sq m / month. Rents in prime assets located in other cities seem to be holding at their previous levels.
At the end of 2015, the average retail vacancy rate in major agglomerations was 2.9%. Unsurprisingly, the highest share of unleased units is typically found in the most competitive markets, such as Poznań, where vacant units account for 5% of existing GLA. With a vacancy rate of 1.5%, Warsaw remains at the opposite end of the spectrum.
Agata Sekuła, International Director, Head of Retail Investment CEE, JLL: "In Q1 2016, the volume of retail investment transactions totaled around €130 million, and the largest deal concluded was the acquisition by Mayland of the Krokus shopping centre in Kraków. A number of new retail investment opportunities were brought to the market in Q1 2016 with portfolios and individual assets available for sale. Given the significant interest in the market expressed by investors, we expect an increase in retail investment transactions over the coming months".
The most important highlight of Q1 2016 was the announcement of Redefine Properties' signing of an agreement to acquire a 75% stake in Echo Investment's commercial platform in Poland. The deal is to be finalized by October 2016. JLL advised the vendor in this spectacular transaction.
In Q2 Ferio shopping centre in Konin was acquired by Union Investment (JLL advised the buyer).
Yields remain stable with the prime shopping centre yield for best in class product at 5.0%.