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News Release

Warsaw

Poland's retail market continues to grow

Development of shopping centres and outlets in Eastern Poland and smaller cities, and the consolidation in the food sector are one of the key trends on the retail market after Q3


​International advisory company, JLL, presents its report summarising Q3 2014 and analysing key trends on Poland's retail market.

Retail supply

340,000 sq m of new retail supply was delivered to the market in Q1 – Q3 2014, including 265,000 sq m in the shopping centre sector. Q3 alone saw 75,100 sq m of new retail space, including 64,000 sq m of new shopping centre space in two new assets, along with one extension, come onto the market. Both new projects are located in the Warmińsko-Mazurskie Voivodeship, in cities smaller than 200,000 inhabitants. These are: Galeria Warmińska (41,000 sq m) in Olsztyn, which is the largest single retail asset in the entire voivodeship, and Brama Mazur (17,250 sq m) - a pioneer retail scheme in Ełk. In addition, two retail parks opened in Q3 - one of 5,700 sq m in Nowa Sól; and another in Kętrzyn named STOP.SHOP. (5,400 sq m).

A further 814,500 sq m of retail stock is currently under construction, including shopping centres, retail parks and outlet centres. Shopping centres account for more than 700,000 sq m in 32 projects, which include nine centres that are being extended. Approximately 80,000 sq m of new floor space in shopping centres is expected to hit the market this year (total of ca. 345,000 sq m in 2014), with over 480,000 sq m to be completed in 2015. In addition, 12 retail parks, with approximately 70,000 sq m of space, are being developed, with the majority of them in cities of below 200,000 inhabitants.

The outlet centre sector is also expanding. Two new outlet centres are developed by ADV Por Property Investment (a new player in this sector), and will become the first outlet centres for the cities of Lublin and Białystok in Eastern Poland. In addition, a Factory Ursus outlet in Warsaw is being extended by while another centre in Białystok may soon be opened in place of Galeria Podlaska.

Total retail supply in Poland stands at 12.2 million sq m of GLA, including 8.76 million sq m of shopping centre stock in 376 projects. At present, the shopping centre density in Poland stands at 227 sq m / 1,000 inhabitants and will increase to 245 sq m after the completion of the stock currently in construction stages. This exceeds the European average of 196 sq m; however, it is still lower than Western European average of 260 sq m.

Demand

Newcomers in Q3 were mostly fashion retailers: three French brands (Devred 1902, Sinequanone and Undiz); an Italian chain, Eye Sport, and Fullah Sugah from Greece. The health & beauty sector was  further enhanced by the opening of Kiehl's Since 1851 from the USA. Another chain from this sector, Kiko Milano, will open soon in Arkadia. The first direct Apple Shop in Poland has just opened in Media Markt Okęcie/ Warsaw. Wrangler and Lee, so far inseparable, have recently opened two monobrand stores in Arkadia in Warsaw.

Marta Augustyn, Associate Director, Retail Agency, JLL, commented: "Retail chains in Poland are believed to be in good condition and the country remains an attractive market for further expansion. The last three months have become busy for both new market entrants and those already present on the market. Brands already present on the market are actively, albeit selectively, expanding. All potential locations are still carefully examined. Unsurprisingly, prime assets located in the main metropolitan areas  attract most retailer demand. Landlords of centres which are perceived as secondary by market stakeholders, or those located in very competitive markets, are facing downward pressures on rents and high expectations from tenants with regard to fit-out contributions".

The interesting trend is the consolidation of the food sector. As a consequence of Real's takeover by Auchan, the number of active large food store operators in Poland has gone down from five to four. Additionally, chains are adjusting to market needs by either introducing new formats or limiting floor space.

Rents and vacancy rate

Warsaw features the highest prime shopping centre rents (peaking at € 105/ sq m /month). Prime rents refer to a prominently located 100 sq m unit shop from the fashion and accessories category in leading shopping centres. JLL anticipates prime rents in Warsaw and the remaining markets to remain stable in the short to mid-term.

At the end of H1 2014, the average shopping centre vacancy rate in major agglomerations stood at 2.8%, down by 0.4 percentage points  when compared to the end of 2013.

Investment Market

Adam Kiernicki, Senior Financial Analyst, JLL, said: "The total volume of retail transactions concluded in Poland to date is estimated at €410 million, with approximately €50 million in Q3. The most notable retail transaction in Q3 2014 was the acquisition of Galeria Piła by Immofinanz from Rank Progress, while the biggest transaction this year is still the acquisition of Poznań City Center by a consortium of Resolution and ECE Fund from TriGranit, Europa Capital and PKP. We expect increasing retail investment activity in Q4 illustrated by a preliminary sale agreement recently signed by Atrium European Real Estate to acquire Focus Mall in Bydgoszcz from Aviva Investors for approximately €122 million. In addition, a number of other transactions in the retail sector are at advanced stages with a likely closing by the end of 2014".