JLL summarizes 2016 on Poland's retail market

Advisory firm JLL summarizes the most important events and trends on Poland's retail market for 2016.

“Over the year the retail market grew by 470,000 sq m of modern space, of which 336,000 sq m was delivered in the shape of 14 shopping centres. Interestingly, the new shopping centre supply completed in 2016 was split between the biggest agglomerations (65%) and the cities of below 75,000 inhabitants (35%). Within the next two years the focus of developers on the biggest markets will be even more pronounced. In 2017, the shopping centre market is likely to grow by up to 400,000 sq m of new space, out of which major agglomerations will account for the majority of this overall volume”, comments Agnieszka Tarajko-Bąk, Senior Research Analyst, Research and Consulting, JLL.

The biggest shopping centres delivered to market in 2016

Source: JLL, Q4 2016

Numerous cities gained their first shopping centres in 2016: Grodzisk Mazowiecki, Legionowo, Mielec, Nowy Dwór Mazowiecki, Sandomierz, Tomaszów Mazowiecki, Wołomin and Zambrów.

As a result of 2016 openings, shopping centre density now stands at 248 sq m / 1,000 inhabitants, which is above the European average of 206 sq m, but still below the average for Western European countries (264 sq m). It should be noted, however, that these statistics take into account only shopping centre space and not retail space located on high streets, which plays a significant role in Western Europe.

“Total retail stock in Poland currently stands at 13.4 million sq m. There are 406 shopping centres, which account for more than 9.5 million sq m. The remaining formats are retail parks and warehouses, with 3.6 million sq m of space, and outlet centres, with 0.21 million sq m”, says Agnieszka Tarajko – Bąk.

The biggest shopping centres in advanced development phases

Source: JLL, Q4 2016

“The retail market in Poland is becoming more competitive. There are still a number of investment opportunities, although the key factors for success are market know-how and recognition of customers’ needs; as well as the ability to look ahead and create new development opportunities. Interesting and unique shopping & entertainment projects, such as Hala Koszyki, Soho Factory and Koneser, are today predominantly found in the capital city, although other cities have some locations to be proud of as well (e.g. Off Piotrkowska in Łódź). Such projects regenerate the urban fabric and introduce new qualities to public space. We also see an increasing trend of extending culinary, recreational and entertainment locations, which is naturally a reflection of growing demand for these kinds of amenities. It is happening in both new and existing retail assets, such as Posnania in Poznań as well as Galeria Mokotów and Arkadia in Warsaw”, comments Edyta Potera, National Director, Retail Agency, JLL.

Once entertainment units occupied approximately 5-7% of shopping centre space, now this ratio has increased to approximately 10-15% with a number exceeding 20%.

“We expect further development of the smaller formats, such as convenience centres and retail parks. Increased interest in the outlet centre format is also noticeable. Developers are actively searching for such opportunities in cities such as Bydgoszcz, Toruń, Kraków, Rzeszów and Gliwice”, adds Edyta Potera.

Demand and rents

Last year 17 new international brands made their debut on the Polish market. Major fashion debuts of 2016 included the American brand Forever 21 (in Manufaktura, Łódź), Uterqüe (from Spain) and & Other Stories (from Sweden) in Galeria Mokotów, Warsaw. At the same time, we have seen some market exits, i.e. American Eagle, Mothercare or Burberry. Also, Marks & Spencer have decided to close all of their stores across the country.

Prime shopping centre rents, which refer to shop units of 100 sq m earmarked for fashion & accessories and located in the best-performing assets in a given city, remain, as per normal, the highest in Warsaw (up to €130 / sq m / month)

Retail investment market

Agnieszka Kołat, National Director, Retail Investment CEE, JLL, says: “The overall volume of retail investment transactions closed in 2016 amounted to approximately €1.96 billion, which is the third best annual result in the history of the Polish market. The biggest investment transaction concluded last year was the sale of 75% stake in Echo Investment’s commercial real estate platform in Poland, including retail objects such as Galeria Amber in Kalisz, Galaxy and Outlet Park in Szczecin, Galeria Echo in Kielce, Galeria Olimpia and CH Echo in Bełchatów, Pasaż Grunwaldzki in Wrocław, Galeria Sudecka in Jelenia Góra as well as Galeria Veneda in Łomża and CH Echo in Przemyśl –to Redefine. The biggest single asset transaction was the sale of Bonarka City Center in Kraków by TPG to Rockcastle for €361 million. Investors from South Africa, such as Redefine, Rockcastle and Prime Kapital, were the most active on the retail investment market throughout 2016”.

Prime yields for best-in-class shopping centres in Poland remain stable at 5.0%, and prime retail parks are expected to trade at approximately 7.0%.