The COVID-19 pandemic dominated the retail market in 2020 in Poland and globally. The fashion industry and the entertainment and food and drink segment were the ones to feel the greatest impact of the repeated lockdowns and health restrictions introduced.
Over the past few years, Poland’s modern retail market has reached a stage of maturity, with the pace at which new supply is being delivered to the market slowing down visibly, and the market is now stimulated by qualitative, rather than quantitative changes. As recently as the start of 2020, the forecasts for the health of the retail property market were optimistic despite the snowballing changes in consumer behaviour, the rise in importance of the e-commerce sector and the consumers’ increasing tendency to shop at small local convenience centres. Following the onset of the COVID-19 pandemic, shopping centre landlords and tenants, both those operating within the entertainment sector and other segments of the market, as opposed to devising plans for further growth, were forced to fight for survival under the uncertain market conditions brought on by the restrictions introduced repeatedly with regard to their operations in the time of the stringent health measures. The Polish Council of Shopping Centres (PRCH) estimates that losses in turnover resulting from the three lockdowns implemented in respect of retail facilities across Poland will come to approx. PLN 30 billion. The spring lockdown resulted in a drop in turnover amounting to more than PLN 17.5 billion. The November shopping centre closures brought about approx. PLN 8 billion of losses in turnover, where the successive restrictions introduced with regard to retail operations on 28 December 2020 will create a gap in turnover of more than PLN 4 billion. The entertainment sector remained closed, or was permitted to operate to a very limited extent, even when retail facilities were in operation, and it is now set to suffer the greatest losses.
2020 saw the volume of retail space increase by approx. a mere 330 000 sqm. For several quarters now the fastest pace of growth has been recorded in cities with a population of up to 100 000 residents. More than 50% of last year’s new supply was delivered to retail markets of this size, usually in the shape of small retail parks and convenience centres. Facilities of this type, playing the role of local retail centres, continue to record dynamic growth, where a combination of a number of favourable factors contributed to the result. Recent experience shows that it is the convenience facilities that serve local communities, with an extensive “everyday shopping” offering, located close to home and providing a greater sense of security due to their smaller size, that are best able to cope with the current challenges of social restrictions. As far as 2020 is concerned, this sector proved itself to be the definite dominating force on the retail market.
Approx. only 24% of the new supply was delivered to the markets in the largest agglomerations. There were no retail facilities with the leasable area exceeding the 25 000 sqm mark completed last year. As far as shopping centres are concerned, the largest openings of 2020 included Galeria Wiślanka in Żory (20 000 sqm) and Dekada in Nysa (19 000 sqm).
As at the end of December 2020, there were approx. 352 000 sqm of retail space under construction and to be completed by the end of 2021. In the longer term, we expect an even greater reduction in the volume of new supply as the COVID-19 pandemic has resulted in the suspension of decisions on a large number of planned projects, which will cause significant delays in their implementation.
The majority, i.e. 67%, of the volume of space currently under development will be delivered in cities with a population of up to 100 000 residents. The high share of the retail park format in the total figure, i.e. approx. 34% of all the space under construction at the moment, is worth mentioning here. Small schemes, with the leasable area of 5 000-10 000 sqm, located in cities with a population of up to 100 000 residents, are the dominating format here. Facilities of this type generate lower construction and operating costs, thus they continue to attract a steady interest from tenants. Approx. only 13% of the space currently under development will be delivered to the markets in the largest cities with a population of in excess of 400 000 residents.
The COVID-19 pandemic and the resultant restrictions imposed on the traditional retail sector accelerated the growth of the e-commerce sector in Poland. According to a number of different estimates, 2020 saw the value of online sales increase by 25-50%, which means a pace of growth that has not been seen for several years. As per the data provided by the Central Statistical Office of Poland (GUS) the share of e-commerce sales in the total retail figure during the first lockdown introduced in April 2020 stood at a record-breaking 11.9%. In the following months, due to the easing of restrictions and the opening of traditional retail facilities, the share gradually stabilized to come down to 6-7% during the summer period. The successive restrictions imposed on shopping centres in November contributed to a repeated increase in the share of e-commerce in total retail sales, this time to 11.4%. This result was achieved not only as a result of the restricted operations of the traditional retail facilities, but also due to the snowballing changes in consumer behaviour occurring on the Polish market. The growing group of consumers from the older generation who would have done their shopping online for the first time during the COVID-19 pandemic is particularly worthy of mention here, as is the increasing popularity of shopping for groceries online. The dynamically increasing share of e-commerce in the total retail figure and the opportunities afforded by the omnichannel model as regards continued operations in the time of stringent pandemic restrictions prompted many retail chains to invest more in online sales technologies. In the coming years, we expect this trend to intensify, in particularly in the context of the expected entry onto the Polish market of global shopping platforms such as Amazon and Alibaba.
Despite the fact that the current pandemic market reality means that there is more talk of closures than openings with regard to retail locations, 2020 saw the entry onto the Polish market of several new brands, which represents an important driving force for the future growth of Poland’s retail sector. The opening of the Primark store in Warsaw's Galeria Młociny was the most spectacular and long-awaited debut. This was followed by the launch of Urban Outfitters in Elektrownia Powiśle, with further openings at other leading shopping centres being announced by this retail giant.
What lies in store for the retail sector in 2021?
The fundamental changes taking place within Poland’s modern retail sector may accelerate even further. The changes in consumer behaviour come accompanied by the focus on the localness of life, a trend detected by numerous tenants that up until now would have opened their stores in shopping centres. The future will bring more investment in small retail parks and convenience centres meeting the everyday shopping needs of consumers. Tenants offering low-cost options will experience further undiminished growth. In turn, the sectors most affected by the COVID-19 pandemic, i.e. food and drink and entertainment and leisure, will be looking for new operation models. We will also see an increasing tendency to replace old retail formats, where the formula has now run its course, with new solutions combining several different functions. Moreover, modern technologies and their implementation in the operations of retail chains, which may sway the result as regards the operator’s ability to assume the best position in the fight for consumers’ wallets in the time of structural changes, will also be of great importance
Fabrice Paumelle, Head of Retail CEE, BNP Paribas Real Estate Poland
