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News Release

Warsaw

City’s high streets transform and new retail clusters emerge, Warsaw shopping centre market still with potential to grow

Foreign retailers interest, refurbishment of the city centre and changing shopping patterns drive the development of the high streets in Warsaw


Warsaw, 19th April, 2013 – Jones Lang LaSalle has published Warsaw High Street & Shopping Centre Report. Its key element is the complex analysis of the current situation and the prospects for development of Warsaw’s key high streets - Nowy Świat, Marszałkowska, Mokotowska, Chmielna, Plac Trzech Krzyży and its adjacent area. The Warsaw report is the first in a series of analyses covering high streets in the key Polish agglomerations.

Patricia Lannoije, Head of Research & Consulting, Jones Lang LaSalle, says: “The dominance of shopping centres in Warsaw and the rest of the country, is a reflection of the shopping habits of Polish consumers, who tend to prefer covered schemes to exposed streets and are used to being able to choose from a wide spectrum of brands all found 'under one roof' – in a shopping centre. Although this tendency will continue, we observe a resurgence in the popularity of high street destinations among Varsovians, which is supported by a growing influx of tourists. A new generation of customer is looking for new ways of spending time out, new shopping experiences and unique places which high streets definitely are”.

Development factors: When compared to other European countries, such as UK, Italy, France, Spain, Germany, or even the Czech Republic and Hungary, Poland has patchy retail thoroughfares, but with definite growth potential. Over the last decade, Warsaw’s high street landscape has undergone a transformation. A number of old assets  have been refurbished or re-developed (Dom Dochodowy o Trzech Frontach; a couple of tenements along Nowy Świat and a small department store Mysia3) and new developments have emerged (vitkAc department store – home to a number of luxury brands, Holland Park and Chmielna 25 (under construction). High street retailing is shared by five key locations - Nowy Świat St, Marszałkowska St, Chmielna St, Plac Trzech Krzyży, Mokotowska St. and the area nearby.

A number of streets have been revitalized, which has contributed to the increased attractiveness of high streets among an increasing number of brands that want to operate flagship stores there. Another key factor of development is that limited shopping centre supply is forcing retailers to see the opportunities that the high street has to offer. It is seen as an additional sales and distribution channel and a marketing tool, raising both brand awareness and prestige. Moreover, luxury high-end brands in particular have a preference for high street locations over regular shopping centres, reflecting the strategy they employ on their home markets. As a result, Warsaw’s high street locations have been increasingly attracting interest from potential retailers and also – institutional investors.

Agnieszka Kołat, Associate Director, CEE Retail Capital Markets, Jones Lang LaSalle comments: “Recently we have observed increased core investors’ demand for prime high street opportunities. Earlier this investment market segment was non-existent, mainly driven by lack of institutional quality products available for acquisition. Interest in this segment has existed since the beginning of the market, however high street retail as such has only recently started to develop more intensely with top brands securing the best high street locations in Warsaw and other major Polish cities. Furthermore, certain core funds have at the moment a requirement to buy smaller volume products e.g. up to €80 million, which is impossible to find in the prime shopping centre sector”.

Demand and vacancy rate: Two retail categories dominate the high street retail landscape in Warsaw, namely gastronomy, and clothing, footwear and accessories, both accounting for nearly 30% each of the total number of unit shops on all Warsaw high streets. A positive tendency is the falling number of banks and financial institutions opening along high street locations. The vacancy rate is currently at 6% (29 units).

Future growth opportunities and challenges: The opening of the central section of the second metro line planned for 2014/ 2015 will further bolster high street retailing on Nowy Świat Street and may additionally contribute to the beginning of a new high street section along Świętokrzyska Street. This may then lead to the evolution of a vibrant retail cluster formed by Marszałkowska, Świętokrzyska, Nowy Świat and Chmielna streets. Opportunities for retailers arise with a number of new projects planned to be delivered in the next  couple of, including developments, refurbishments or re-developments of existing buildings along Świętokrzyska, Nowy Świat, Chmielna, Krucza / Jerozolimskie, Marszałkowska streets and Plac Trzech Krzyży. Additionally, potential still lies in old neglected tenements located along Chmielna, Mokotowska and Nowy Świat streets.
Anna Wysocka, Head of Retail Agency, Jones Lang LaSalle, summarises: “Warsaw high streets are increasing in importance and attracting the attention of tenants including prestigious fashion brands. Recently, new shops have been opened by COS, Food&Joy, Gucci, Giorgio Armani, YSL and Lanvin, while Louis Vuitton announced its plans to open a boutique in the vitkAc department store. However, there are still some major challenges that retailers may face when planning to open a store on Warsaw high street. These include: a limited supply of retail space which is of an appropriate size and meets the standards of international chains, unclear ownership status, time consuming administrative procedures related to heritage conservation, limited availability of parking spaces or a need for capital investment to up-grade the unit and its frontage. However, an insufficient supply of retail space in shopping centres as well as the fact that high street sales complement rather than threaten brand’s offer in already existing stores, encourage retailers to open boutiques in such locations. This, along with customers’ changing habits, including the search for new forms of spending free time and doing shopping, will be a vital driver of Warsaw high streets’ further development”.
Warsaw Shopping Centre Market
Supply: The retail landscape in Poland’s capital city is dominated by shopping centres offering more than 1 million sq m of GLA in 34 retail assets in the Warsaw agglomeration . Although the volume of current stock is the highest in Poland, Warsaw features an undersupply reflected in the low vacancy rate (approximately 2%), high retailer demand for prime locations and one of the lowest density ratios (428 sq m /1,000 inhabitants) among major agglomerations. These factors, combined with a domestic powerhouse economy and growing affluence of the city’s inhabitants, provide scope for further expansion. By the end of 2013, the Warsaw retail market will grow by 40,500 sq m. In 2014, one project -Sky Fashion (17,000 sq m) is planned to go ahead. A large pool of projects is scheduled for 2015 and onwards, including Galeria Wilanów (77,000 sq m), Galeria Białołęka (60,000 sq m), Galeria Nova (Auchan Piaseczno, extension of 43,000 sq m), Atrium Promenada (extension of 20,000 sq m) and Tesco Kabaty (extension of 30,500 sq).
Demand: Warsaw’s shopping centres continue to perform strongly. The leading schemes (Złote Tarasy, Arkadia, Galeria Mokotów) are the first ports of call for many international retailers. The most notable newcomers in the last six months include: Michael Kors and Hollister in Galeria Mokotów, Guess and Simone Perele in Złote Tarasy, Camper in Arkadia, Sinsay in Atrium Reduta, and American NYX Cosmetics in Blue City. In the remainder of the year, new foreign chains, for example Gerard Darel, and new domestic brands such as Mon Amie! by Pawo, are expected to enter the market.

Prime Rents: Prime shopping centre rents  stand at €80 to €95 / sq m / month and are expected to increase reaching €100 in 2015, due to the upcoming re-commercialisation of key retail assets.