Widening polarisation on the retail market in Poland

Real estate advisory firm Cresa has prepared its latest report “Retail Occupier Economics 2019” on the condition of the Polish retail market in recent years. Tenants and other retail market players will find there data about Poland’s retail stock, space saturation, and the purchasing potential of the largest conurbations, as well as information on planned supply, brands entering the Polish market, and new projects and extensions completed last year.

“The report is our cyclical publication. From the current perspective, last year was a stable period for the Polish retail market, which performed well despite the ban on Sunday trading. Key challenges in the coming days and weeks will be to find a solution to safeguard the interests of tenants and landlords, restore financial liquidity, preserve jobs, and increase government support. In addition, retailers are increasingly calling for a temporary suspension of the Sunday trading ban to mitigate the consequences of the current crisis,” says Szymon Łukasik, Head of Retail at Cresa Poland.

“Tenants and developers will undoubtedly review their plans due to the economic slowdown caused by the COVID-19 epidemic. There will be delays in delivery of new retail space to the market and its commercialization. The value of the e-commerce market will certainly increase. However, all retail market players wish for a quick return to normal functioning and a trajectory of stable growth wherever possible,” says report author Magdalena Sadal, Head of Retail Research & Advisory, Cresa Poland.

28 new retail schemes were delivered to the Polish market in 2019, totalling 406,000 sqm of GLA. This brought Poland’s total retail stock to more than 15 million sqm of GLA. Galeria Młociny (76,000 sqm GLA) was the largest retail scheme opened in 2019. The largest extensions were completed in Morski Park Handlowy and Centrum Janki, which saw 16,500 sqm and 11,960 sqm added to the floorspace, bringing their GLAs up to 58,000 sqm and 94,000 sqm, respectively.

“New retail space was added across all retail formats following the opening of new shopping centres, retail parks and outlet centers as well as the extensions of existing schemes. It is worth noting that almost a third of last year's supply came on stream in newly-opened DIY and furniture warehouses,” says Magdalena Sadal.

Poland’s retail space saturation rate averaged 397 sqm per 1,000 inhabitants at the end of 2019, up by 11 sqm, and that for shopping centres stood at 283 sqm per 1,000 population (up by 3 sqm). Among the largest conurbations, Warsaw, Szczecin and Krakow continue to have a high purchasing potential.

Cities with 50,000–100,000 inhabitants and towns below 50,000 continue to see rapid growth in retail space. In 2019, they accounted for 19.0% of Poland’s total retail stock and in 2020 their market share is expected to top 20%, which will represent more than fourfold increase in the last two decades.

“Despite the strongest retail space growth, cities below 100,000 inhabitants posted much lower saturation rates in 2019. Towns below 50,000 inhabitants are expected to account for approximately 33% of the development pipeline for 2020 and 2021. The development pipeline is likely to be reviewed or delayed given the current economic downturn,” says Magdalena Sadal.

Demand for retail space has been stable. Last year saw 31 new brands and concepts establish on the Polish market. In total, nearly 150 new brands entered and 29 left Poland in the last five years. This is confirmation of the appeal of the Polish retail market, which still has a big potential, particularly in the fashion sector.

“2019 saw widening polarisation on the leasing market. Prime shopping centres maintained their strength while secondary retail schemes were forced to offer more flexibility in lease strategies and rental rates. Warsaw’s retail market is increasingly outdistancing other core Polish cities in terms of prime rental rates. Although rents continue to hold firm, the rental gap is widening. In 2011-2012, rents in Warsaw were twice as high as those in other cities, but the rental gap has nearly trebled in the last three years,” says Szymon Łukasik.

According to the Polish Retail Research Forum’s survey of shopping centres in the 18 largest cities accounting for 60% of the nation’s total retail stock, Poland’s vacancy rate was stable and averaged 3.9% at the end of 2019. The shopping centre vacancy rate edged up by 0.3 pp compared to where it was in H1 2019. This growth was driven by Tesco downsizing its hypermarkets and the closure of its hypermarket in the Europa Centralna shopping centre. Another contributory factor was the exit of Leroy Merlin from Krakow’s Bonarka City Center and the continuing vacancy at the store formerly occupied by Praktiker in Częstochowa.