After a calm Q3, the Polish retail market is set to pick up momentum. In Q4 developers may deliver up to 276,000 sqm of modern shopping centre space. JLL has published its Q3 2016 report on Poland's retail market.
At the end of Q3 2016, modern retail stock in Poland totaled 13.11 million sqm with shopping centres accounting for 9.3 million sqm, retail parks and warehouses – 3.59 million sqm, and outlet centres – 0.21 million sqm. However, the last three months were modest in terms of new openings. The shopping centre market grew by only 7,500 sqm with the extension of Galeria Rynek in Tomaszów Lubelski. In addition, a retail park of 3,800 sqm was opened in Radomsko. Nonetheless, the situation is very likely to have changed by the end of the year.
“Q4 2016 will be intensive, especially when considering new openings. If everything goes according to developers’ plans, the market may grow by almost 276,000 sqm in new shopping centre space, with Poznań accounting for 99,000 sqm of this total, followed by Warsaw Agglomeration with 45,000 sqm,” says Agnieszka Tarajko – Bąk, Senior Consultant, Research and Consulting, JLL.
663,000 sqm of retail space is under construction across all formats. Shopping centres account for nearly 591,000 sqm. The largest scheme to be open in Q4 is Posnania in Poznań (99,000 sqm GLA). Spectacular projects currently under construction include Galeria Północna in Warsaw, Wroclavia in Wrocław and Forum Gdańsk – scheduled for delivery in 2017.
“Along with growing competition and openings of new retail projects adjusted to current market requirements, owners of some older schemes have decided to make significant changes. The number of shopping centres undergoing modernization, extension or redevelopment is growing. Increasingly, we can see the development of mixed-use projects combining different functions and formats: residential, office, hotel and retail – including, for example, hybrid outlet centres with an extensive range of sports amenities, restaurants and various forms of entertainment”, explains Anna Wysocka, Head of Retail Agency, JLL. An example of such hybrid object is the Metropolitan Outlet in Bydgoszcz.
“White spots for retail developments in Poland are shrinking and low density figures do not guarantee success. Different retail channels are gaining momentum - e-commerce, bio-bazaars, fashion fairs, mixed-use projects - and becoming more popular, therefore investors and developers, apart from the usual shopping proposition, need to offer additional experiences to attract customers”, comments Anna Wysocka.
Poland's retail market is still attractive to new market entrants. The largest number of debuts so far this year took place in Q3. New entries include: the Lego Store in Galeria Mokotów (Warsaw); Forever 21 and Steve Madden in Manufaktura (Łódź); Navigare in Plac Unii City Shopping (Warsaw); Tezenis in Poznań Plaza (Poznań); and Elena Miro on Piękna street (Warsaw). However, in Q3 Russian chain Kari and French brand Brice decided to close their stores in Poland.
“It is worth underlining that tenants thoroughly analyse all newly-developed objects and carefully launch their development plans. Some of them optimize their portfolios by deciding to close those locations that are unprofitable. Some retailers introduce new concepts of shops and continue to search for new locations. A good example of this is the development of, for example, H&M, CCC or LPP Group”, adds Anna Wysocka.
The highest prime rents, which refer to shop units of 100 sqm, earmarked for fashion & accessories and located in the best-performing assets, are recorded in Warsaw and are up to €130 / sqm / month. In other major agglomerations, monthly rents are between €45-€55 / sqm.
Retail investment market
Agata Sekuła, Head of Retail Investment CEE, JLL, comments: “In Q3 2016, total transacted volumes in Poland's retail sector amounted to approximately €370 million, mainly due to the purchase of Bonarka City Center by Rockcastle from TriGranit for €361 million. This is the biggest single retail asset transaction so far in 2016. The overall volume of retail investment transactions in 2016 to date totals approximately €1.39 billion. Given the preliminary sale agreements signed and advanced deals set to close in Q4, we believe that 2016's overall retail investment volumes will be similar to those of 2015 and will exceed €2 billion”, adds Agata Sekuła. Prime yields for best-in-class shopping centres in Poland remain stable at 5.0%.