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News Release

Warsaw

Supply gap in Eastern Poland and smaller cities is closing

Warsaw, 9 April 2014 – International advisory company, JLL, presents its report summarising Q1 and analysing key trends on Poland’s retail market.


Warsaw, 9 April 2014 – International advisory company, JLL, presents its report summarising Q1 and analysing key trends on Poland’s retail market.
 
Supply – 3 shopping centres opened in Q1
3 shopping centres (Atrium Felicity in Lublin, Galeria Amber in Kalisz and Galeria Siedlce in Siedlce) opened in Q1 2014. The total shopping centre stock grew by 140,500 sq m and now stands at 8,6 million sq m of GLA. This brings the shopping centre density in Poland up to 224 sq m / 1,000 inhabitants, above the European average of 191 sq m / 1,000 citizens. Other retail formats on the market include: retail parks (1.3 million sq m), retail warehouses (1.87 million sq m) and outlet centres (163,000 sq m).

Construction activity remains reasonably high, with nearly 550,000 sq m of new floor space of various types expected to be delivered to the market. Shopping centres account for most of the pipeline supply (87%), followed by retail parks (11%) and one outlet centre. 20 shopping centres are at the construction stage, including Sukcesja in Łódź (45,000 sq m), Galeria Warmińska in Olsztyn (41,500 sq m) and Tarasy Zamkowe in Lublin (38,000 sq m), and another 8 centres undergo extensions. In general, the growth in retail supply will be most pronounced in the eastern, north-eastern and central (łódzkie region) parts of Poland, and in towns with less than 100,000 residents. With regards to the size of future projects, medium and small schemes will very much dominate future openings (98%).
Anna Wysocka, Head of Retail Agency Poland, JLL, commented: “The Polish retail market develops in a more balanced way as the previously less active locations expand their retail offer. Convenience-based schemes, both shopping centres and retail parks, are arriving in smaller markets with development opportunities. 42% of shopping centre and 87% of retail park stock is currently being constructed in cities of below 100,000 residents”.
 
However, looking at the amount of retail space under construction, the sector seems less busy than the office and industrial markets, with 1,1 million sq m and over 700,000 sq m space respectively at construction stages

Demand – Polish brands continue foreign expansion
Positive macroeconomic forecasts such as falling unemployment, rising retail sales and growing GDP have established a fairly optimistic sentiment among retail market players. It is best evidenced with new retailers entering the market, e.g. German chain NEO selling sports fashion, Leopark from Ukraine as well as Original Marines and Sports Direct. At the same time, some retailers have decided to optimize their portfolio or even withdraw from the Polish market (e.g. Charles Voegele, Marrionaud, Jackpot & Cottonfield). This creates opportunities for new market entrants and for property managers to refresh the offer of their assets.
“We observe Polish companies, including well-known and popular brands from LPP's portfolio, CCC, Top Secret or Coccodrillo, expanding outside of Poland. The typical direction for international expansion of the Polish chains are: Czech Republic, Slovakia, Russia and Hungary”,Anna Wysocka added.
Nevertheless, the approach from retailers towards new openings has not changed fundamentally yet. All potential locations are still carefully examined and the decision making process takes time. Prime assets continue to attract most retailer demand, while landlords of centres perceived as secondary or those located in very competitive markets are facing downward pressures on rents.
Vacancy rate and prime rents remain stable
The average retail vacancy rate in major agglomerations was 3.2%, at the end of 2013, up by 0.6 percentage points when compared to a year earlier. According to JLL, prime rents will remain stable in the short to mid-tem.
The highest prime rents for a prominently located 100 sq m unit shop from the fashion category in leading shopping centres are led by Warsaw (85 – 100 euro/sq m/month), Wrocław (47-55 euro/sq m/month), Łódź (50-55 euro/sq m/month) and the Katowice Agglomeration (42-55 euro/sq m/month).
Retail investment market
The overall investment market sentiment is positive in the retail sector. In Q1 2014 Poznań City Center developed by TriGranit Development, and owned by TriGranit Development, Europa Capital and Polish State Railways, was sold to a consortium set up by Resolution and ECE Fund.

Agnieszka Kołat, Associate Director, Retail Investment CEE, JLL, said: “We expect that 2014 will see the total retail investment volume at a level similar or exceeding 2013 result of around 1.4 billion euro”.