Research

Many challenges and changes in the modern retail sector

03 lutego 2020

In 2019, the leasable space in the modern retail market in Poland grew by 410,000 sqm, exceeding the 15 million sqm threshold as of the end of December. With each passing year, the volume of new supply is consequently diminishing, while the development of the sector is stimulated by changes in existing schemes, especially those of the older generation. Modernisations and extensions, the introduction of new tenants and the addition of more F&B facilities and entertainment elements are the trends that will dominate the brick-and-mortar retail segment in the coming years, according to experts from BNP Paribas Real Estate Poland.

The lowest volume of new supply in over two decades, that was delivered in 2019, once again confirms the entry of the Polish market into the maturity phase. It is becoming increasingly difficult for developers to find 'white spots' on the commercial map of the country. Development opportunities, although also increasingly limited, can still be found in the largest urban agglomerations, where the purchasing power of the population is growing the most dynamically, and the new emerging residential centres are creating locations for retail and services. Also small towns, where the existing modern retail offer has been very limited, are perceived by investors as an opportunity for development. Hence the high popularity of property development projects in the segment of small "convenience" centres and retail parks, 13 of which were opened last year. Moreover, landlords of small, local assets of the size under 5,000 sqm increasingly often decide to expand them seeing their development potential. This trend is fostered by the rapid development of discount chains offering not only food products, but also those with a multi-branch and fashion product-mix.

Discount stores win not only because of the low prices of the offered goods, but also because of the comprehensive offer addressed to the entire family. Their unflagging popularity clearly shows that customers expect them to be more and more often available not only in retail parks or city streets but also in shopping centres. To meet these expectations, discount chains adapt to the requirements of the gallery, which in turn often increases the standard of the stores themselves

Anna Pływacz, Associate Director, Retail Leasing, BNP Paribas Real Estate Poland

Last year, the shopping centre segment grew by about 170,000 sqm, of which almost half was Galeria Młociny (76,000 sqm GLA) in Warsaw. It is worth noting that it is the last such a large project to open in the next few years. The second largest shopping centre opened last year in Poland is Stara Ujeżdżalnia (28,500 sqm) located right next to the town square in Jarosław. At the turn of winter and spring 2019, the Katowice conurbation market, second largest after Warsaw, was enriched with the second outlet centre – Silesia Outlet, which was opened in Gliwice in the vicinity of the Auchan shopping complex, which has operated for years. The scheme is conveniently located at one of the important junctions of the A4 motorway.

Together with the growing affluence of Polish consumers, the segment of standalone retail warehouses operating in the “home&garden” sector is developing rapidly. In 2019 they accounted for almost 35% of the new supply. 12 new such destinations and two extensions of pre-existing stores were opened, and developers appreciate the potential of smaller markets such as Pabianice, Nowy Targ or Ciechanów.

By the end of December 2019, there were approximately 430,000 sqm of leasable space under construction across all modern retail formats. According to BNP Paribas Real Estate Poland experts, the space in the pipeline for 2020 may slightly exceed 300,000 sqm. The size of the largest projects currently under development does not exceed 30,000 sqm and the vast majority are shopping centres and retail parks with their size between 5,000 and 10,000 sqm, developed in cities with less than 100,000 residents, such as Premium Park in Strzelce Opolskie, Pasaż Warmiński in Lidzbark Warmiński, Vendo Park in Jawor or Galeria Odyseja in Brzesko. The largest project currently under construction is the shopping and entertainment centre Color Park in Nowy Targ.

Over 60% of the space currently under construction will be delivered in cities with a population of up to 100,000. High saturation rates of modern retail space in large cities motivate developers to look for new opportunities to develop their projects in small towns. This is fostered by the demand of tenants, who see the growing purchasing power of Polish consumers and decide to roll out on ever smaller markets. This trend will determine the directions of retail development in Poland for at least the next few years

Patrycja Dzikowska, Head of Research and Consultancy, BNP Paribas Real Estate Poland

In the course of 2019, over 20 new brands and retail and entertainment concepts were launched in Poland, such as Fabiana Filippi, WeekDay, Monki, Carrefour Bio, Corneliani, Gagliardi, La'Mona, Mayoral, Teilor, Columbia Sportswear, My Shoes, Sloggi, TEPFactor, Under Armour, LG Brand Store, Lloyd and, of course, Hermes which chose the prestigious space in Hotel Europejski in Krakowskie Przedmieście Street in Warsaw for its first boutique in Poland. The most important début of 2020 will be the long-awaited opening of Primark in Galeria Młociny in Warsaw. There are other luxury brands in line to join Hermes.

Despite the ban on Sunday trading, the good condition of the modern retail sector in Poland and the positive prospects for the domestic market are conducive to the development of many retail chains, especially those that have learned to take advantage of opportunities offered by using modern technologies and various sales channels in their line of business. However, the regulations restricting trade on Sundays, together with the growing popularity of e-commerce, have clearly resulted in an increase in differences in the condition of retail schemes. While the most modern, market-leading shopping centres enjoy increasing footfall and growing turnover, lower class assets, often operating in regions with very strong competition, are facing a declining interest on the part of both visitors and tenants. Thus, rents in the top shopping centres are stable or even rising slightly, while in lower class destinations they are under clear pressure from tenants. Currently, prime rents in Warsaw reach the level of 120-140€ / sqm / month, while in the remaining major urban agglomerations they are between 40€ and 60€ / sqm / month.