• Poland’s retail market is seeing incremental growth despite unforeseen challenges which have arisen over recent years. Challenging market conditions persisted in the first months of 2023, however, improvements in a number of indicators are expected in the short to medium term.
• Despite the challenging environment, 2022 ended with a relatively good result for new retail supply in Poland with total space delivered across all formats amounting to nearly 500,000 sqm, which exceeded the five-year average. Another 103,000 sqm was delivered to the market in Q1 2023.
• In the first quarter of 2023, as in the previous three years, the most attractive segment was retail parks. The first three months of 2023 saw new supply in this format reach nearly 67,000 sqm, accounting for 65 percent of the retail sector’s total output during the period.

New demand in the first quarter of 2023

At the beginning of this year, new retail parks were built in small towns, medium-sized cities and the largest agglomerations across Poland. The focus of developers was on cities with a population of less than 50,000, where five projects delivered nearly 40,000 sqm of new retail space in Q1 2023. In total, more than 103,000 sqm was delivered in the first quarter across all segments in the domestic market,.

”In the first quarter of 2023, the supply of shopping centres was boosted by two new openings in Warsaw - the 22,000 sqm (GLA) Fort Wola, which reopened extensive redevelopment and the expansion of the Atrium Promenada  – by an additional 12,600 sqm GLA (in total, the facility offers 63,000 sqm GLA). On the other hand, we are also seeing projects withdrawn from the market, which illustrates the changes taking place in the sector. One recent example is Arkady Wroclawskie, which is scheduled to close by the end of 2024. In this case, the most likely scenario involves conversion into a residential or office building,” summarizes Dagmara Filipiak, Retail Agency Lead JLL.

This year’s first quarter was relatively modest in terms of new convenience centres and freestanding retail openings, with total stock expanding by just 2,000 sqm. However, this is a temporary slowdown, as these segments had about 25,000 sqm GLA under construction.

Retail sector conditions

The Polish retail market continues to be driven by shoppers visiting brick-and-mortar units, although the growth of e-commerce is having an equally significant impact on the sector as a whole. We are seeing more and more points of commonality between the two forms of sales, such as the click-and-collect offer and new openings of regular retail locations by retailers previously only present online - e.g. CentrumRowerowe.pl.

”Physical expansion is primarily being pursued by rapidly growing discounters. One example is Dealz, which recently announced plans to double the number of stores in Poland, with 340 units to be open by the end of 2023. Another example is the Woolworth chain, which opened its first store in May 2023,” says Maciej Kotowski, Director Research & Consulting, JLL.

Equally dynamic expansion is also planned by grocery chains like Netto and Dino, which are steadily increasing their presence on the Polish retail map. In addition, some chains, such as Aldi, are considering introducing e-commerce offerings. On the other hand, leading players like Biedronka continue to develop small formats dedicated to convenient daily shopping, illustrating the potential that companies see in convenience projects. One of the leading representatives of this segment, Żabka, is also continuing its rapid growth, introducing new formats such as automatic self-service stores (Nano) and a drive-thru concept (Żabka Drive).

From the investors' perspective

”Total investment volume of retail real estate was around €134 million for the first quarter of this year, which was equivalent to 20% of the result from the same period last year. It should be noted, however, that the results seen a year ago were driven largely by joint venture transactions completed by EPP. These involved 20 shopping centres, two parks and three office projects with a total value of around €600 million. In Q1 2023, the retail market saw eight transactions involving 11 sites,” concludes Maciej Kotowski.

 ”The largest transaction in the first three months of 2023 was G City’s sale of the 28,000 sqm. (GLA) Atrium Pier shopping centre in Szczecin. This purchase proves that well-established convenience retail centres are consistently sought after by investors. Another significant transaction in Q1 2023 was the purchase of the Europa Centralna shopping centre and park in Gliwice, with an area of 67,000 sqm. GLA by Mitiska REIM. Also worth mentioning, was the sale of the free-standing Multikino in Warsaw's Ursynów district, with a long-term plan to redevelop and change the land's use function,"  adds Agnieszka Kołat, Head of Retail Investment, JLL.

The remainder of Q1 2023’s investment volume was in retail parks and the convenience segment. Castelake and Invel Real Estate sold JWG Invest, a portfolio of four convenience projects with a total area of 15,000 sqm GLA (Stara Cegielnia in Szczecin, Galeria Kosmos in Koszalin, OK Centrum in Strzegom and OK Centrum in Walbrzych). The total purchase price was around €10 million.