According to a Cushman & Wakefield report, the retail real estate sector saw the continued expansion of retail parks in 2022, accounting for 70% of new supply delivered to the market. Despite many challenges related to inflation and general economic uncertainty, 14 new brands made their debut in Poland during the year. However, the next few months may experience a downturn in consumer sentiment, with lower retail sales, and in turn, reduced turnover for retail tenants.
"2022 saw many challenges for consumers. The rising inflation rate had a detrimental effect on Poles' disposable income and often forced them to revise their shopping plans. Although overall retail sales grew by 5% year-on-year, the second half of the year was marked by a slowdown in spending. This trend looks set to continue into 2023 with retail sales dropping by up to 5%", explains Katarzyna Lipka, Head of Research and Consultancy, Cushman & Wakefield.
Changes in sales levels vary by product category. Last year, the largest year-on-year increases in retail sales were experienced by textile, apparel, and footwear (22%), followed by pharmaceutical, cosmetics and orthopaedic equipment stores (12%). Car dealers, on the other hand, experienced the largest declines, down 9.6%.
E-commerce's share of retail sales in 2022 fluctuated by around 10%. The retail categories with the highest e-commerce share were fashion, multimedia (which includes newspapers, magazines, books, and speciality store sales), furniture, as well as electronics and home appliances.
Supply – retail parks dominate
In total, 400,000 sqm of modern retail space was delivered to the market in 2022, nearly 95,000 sqm less than in 2021. The new supply delivered across all formats included 33 new developments, 12 expansions and five redevelopments, which were built in place of closed Tesco shopping centres. However, only one facility – a Tesco shopping centre in Warsaw – was closed last year.
"Last year further reinforced the popularity of convenient and fast shopping. This was also reflected in the new space that was delivered to the market. 2022 was again dominated by small retail parks, which claimed a 70 per cent share of new supply. New retail warehouses were also very popular among developers, accounting for a quarter of new space. As a result, total retail space in Poland at the end of 2022 exceeded 15.9 million sqm", comments Ewa Derlatka-Chilewicz, retail expert, Cushman & Wakefield.
As in the previous year, the fourth quarter was the busiest period for new openings, with more than 37% of supply hitting the market between October and December. For the first time since 2019, the eight largest agglomerations accounted for the largest amount of space (32%, or more than 126,000 sqm), with the Kraków market coming out on top, mainly thanks to the opening of two Atut retail parks.
Demand – new brands enter Poland
Fourteen new Polish and international brands made their Polish debut in 2022, nine fewer than in the previous year. Brands that opened their first stores in Poland in 2022 included Haribo, Uniqlo, Lovisa, Mnogoknig, Sportano, Snipes and DM drugstores.
However, eight chains decided to cease their operations or filed for bankruptcy. Stores such as Orsay, Uterque, BookBook, Go Sport, Sfera and Hollister are no longer on the Polish retail market.
Retail tenants facing challenges
Interestingly, worsening consumer sentiment hasn’t so far had an adverse effect on the number of customers at retail facilities. Footfall in shopping centres and retail parks in December 2022 reached a monthly average of nearly 510,000 people per retail facility. This is more than 5% higher than in 2019, despite an increasingly competitive market, which has seen nearly 800,000 sqm added to retail stock over the last three years.
"Particularly good Q4 results were recorded by large shopping centres, which were visited by 5% more customers than in pre-pandemic 2019. Cumulative footfall figures for 2022 were 4% up on 2019 and as much as 24% up on 2021", comments Paulina Bauer, Head of Retail, Asset Management, Cushman & Wakefield.
The average nominal turnover of tenants in modern shopping centres in November 2022 was 1046 PLN net per sqm of space. Although mall turnover data shows an 11% rise in nominal sales for November 2022 compared to 2019, real turnover was 6% lower than in November 2019 when inflation is taken into account.
Unfortunately, falls in Poles’ disposable income and deteriorating market sentiment will negatively affect shopping plans and thus the turnover of tenants in retail facilities. The structure of spending will also change – the amount of money spent on goods and services outside the basket of basic goods, such as furniture, consumer electronics, eating out, travel and sports memberships will decrease – adds Paulina Bauer.
Rental dynamics in the retail park segment are driven by solid tenant demand
In the fourth quarter of 2022, rents for units on main shopping streets fell by 5% year-on-year, while rents for prime units in the shopping center sector were unchanged. However, rents in retail parks recorded a 9% year-on-year increase. As stipulated in lease agreements, rents will be indexed in early 2023 (by the CPI index for PLN-denominated contracts and the HICP index for EUR-denominated contracts), resulting in a one-time 8-10% increase in EUR-denominated rental charges.
