Increased market competition calls for a quick response

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PROPERTY TIMES
Increased market competition
calls for a quick response
Poland, Retail, H1 2016
August 2016
Contents
Retail stock
2
H1 2016 supply
2
Development pipeline
4
Demand
5
Vacancies and rents
5
Definitions
7

In H1 2016, total modern retail stock in Poland stood at 13.53 million sq m.

The share of shopping centres and retail parks located in smaller cities below
100,000 inhabitants in Poland’s total retail stock continues to rise.

Having gained an established position on the retail map of the largest Polish
agglomerations, outlet centres are expanding in regional cities with 200,000–
400,000 inhabitants such as Bydgoszcz and Toruń.

New retail space supply in H1 2016 totalled only 121,000 sq m, half of which
was delivered in shopping centres.

There is currently 690,000 sq m of retail space under construction scheduled to
be completed by year-end 2017. More than half of this development pipeline will
be delivered onto the markets of the largest Polish agglomerations through
openings of new large-scale shopping centres.

Vacancy rates in the largest cities remain flat at around 3% with prime locations
benefiting from particularly low vacancies. By contrast, intense competition
following high supply volumes in some markets has pushed vacancy rates up in
older schemes.

Prime rents have also remained stable. Traditionally, the highest rents are in
Warsaw’s prime shopping centres, followed by the capital city’s other leading
shopping malls and retail schemes in regional cities.
Figure 1
New modern retail supply by size of the city (‘000 sq m)
1 000
200
over 400,000 inhabitants
100 - 200,000 inhabitants
2015
Source: Cushman & Wakefield
cushmanwakefield.com
PROPERTY TIMES
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2016(f)
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
0
1997
Kamila Wykrota MRICS
Head of Consulting & Research
+48 22 820 20 20
[email protected]
400
1996
Contacts
600
1995
Patrycja Dzikowska
Associate Director
Consulting & Research
+48 602 452 549
[email protected]
1994
Author
GLA (sq m)
800
Retail stock
Figure 2
At the end of H1 2016 Poland’s total retail stock reached 13.53
million sq m, of which 73% was in 409 shopping centres
providing 9.83 million sq m of floorspace. With 2.43 million sq
m and an 18% market share the 255 existing standalone retail
warehouses were the second largest retail sector. Retail park
space (63 schemes) topped 1 million sq m, accounting for
7.5% of the country’s total stock, whilst the 13 operating outlet
centres totalled 218,000 sq m, making up the remaining 1.5%
of the modern retail stock.
Retail stock by format
8% 1%
Shopping centre
18%
Stand-alone
retail warehouse
Retail park
73%
The key trends in the Polish shopping centre market include
the continuously growing share of retail schemes in the
smallest cities below 100,000 inhabitants in Poland’s total
stock. At the end of H1 2016 shopping centres in such cities
accounted for around 17% of the stock, significantly above the
7% ten years earlier or 12% five years ago. A similar trend is
seen in the segment of retail parks. The share of retail parks
located in cities below 100,000 inhabitants in the total retail
stock rose from barely 9% five years ago to 25% at the end of
H1 2016. Such locations benefit from the rapid growth of the
format of strip malls that enable retail operators to attain
smaller city inhabitants. Small shopping centres or retail parks
are also being developed in smaller towns below 50,000
inhabitants, including Kwidzyn, Bartoszyce, Myślenice and
Nowy Tomyśl.
Given the retail development pipeline, these market trends are
expected to continue with a special focus on mini retail parks. It
should be borne in mind, however, that small markets have a
limited capacity of to absorb new supply and there is quite a
limited number of retailers willing to take a higher risk in less
stable small markets. Being aware of the challenges of
attaining customers in smaller markets, experienced retail
operators tend to develop new store concepts in terms of size,
fit-out and retail offering to adapt their business model to new
market conditions.
Having gained an established position on the retail map of the
largest Polish agglomerations, the outlet centre sector is
expanding into regional cities with 200,000–400,000
inhabitants. Outlet centres are already present on the markets
of Lublin and Białystok, whilst the development pipeline
contains such schemes in Bydgoszcz (Metropolitan Outlet) and
Toruń (Outlet Toruń).
H1 2016 supply
New retail space supply in H1 2016 totalled only 121,000 sq m,
of which 56% came on stream in cities below 100,000
inhabitants. The remaining 53,500 sq m was delivered in the
major agglomerations and regional cities with 200,000–
400,000 inhabitants. No new space was added to the modern
retail stock in cities with 100,000–200,000 inhabitants.
Factory outlet
Source: Cushman & Wakefield, H1 2016
Figure 3
Distribution of the shopping centre stock
5%
7%
11%
7%
12%
17%
13%
17%
16%
11%
12%
13%
76%
2000
68%
2005
60%
54%
I poł. 2016
2010
below 100,000 inhabitants
100 ,000 - 200,000 inhabitants
200,000 - 400,000 inhabitants
major agglomerations
Table 1
Major retail developments opened in H1 2016
GLA
(sq m)
Scheme
City
Developer
Galeria Glogovia
Głogów
21 500
Saller Polbau
Galeria Karuzela
Września
12 000
JB Development
Leszno Park
Leszno
6 500
Blackstone
Galeria
Avangarda
Bartoszyce
6 000
City
Nieruchomości
PROPERTY TIMES
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Shopping centres accounted for half of the new retail supply in
H1 2016. This included the openings of three new retail
schemes, Galeria Glogovia in Głogów, the Karuzela shopping
centre in Września and Galeria Avangarda in Bartoszyce, all in
cities below 100,000 inhabitants. The completions also
included the next phases of extensions of existing shopping
centres (Atrium Promenada in Warsaw and Auchan in Gdańsk)
or an addition of retail park components (Leroy Merlin in the
retail park near Galeria Sudecka in Jelenia Góra and a retail
park forming part of the retail complex Galeria Leszno in
Leszno).
A DIY store Leroy Merlin was opened, thus extending the
Futura retail park in Wrocław.
44,000 sq m was added to the Polish sector of standalone
retail warehouses, accounting for 36% of the total retail supply.
These included the openings of four standalone facilities: two
DIY stores (Castorama in Radom and Leroy Merlin in Konin), a
big-box furniture warehouse Agata Meble in Częstochowa, and
a cash & carry retail warehouse of Selgros in Warsaw.
No new retail space was delivered in the sector of outlet
centres in H1 2016.
The first half of 2016 also recorded the first ever closing of a
shopping centre, the Sosnowiec Centre in Sosnowiec, which
was an old generation retail scheme with a hypermarket as a
dominant tenant and a mini service mall. The further operation
of the shopping centre proved unsustainable following the
withdrawal of the hypermarket operator. Although retail
facilities are unlikely to be closed down or fully reinvented on a
massive scale, some older secondary schemes failing to
respond to modern market challenges may face an uncertain
future.
Figure 4
New supply H1 2016 – distribution by size of the city
15%
23%
over 400,000
inhabitants
200 - 400,000
inhabitants
50 - 100,000
inhabitants
21%
41%
below 50,000
inhabitants
Figure 5
New supply H1 2016 by format and type of development
8%
Shopping centres new
33%
Shopping centres extension
36%
Retail warehousing new
23%
Retail parks extension
Development pipeline
The retail development pipeline for 2016 and 2017 now stands
at approximately 690,000 sq m, 57% of which will be delivered
onto the markets of the largest Polish agglomerations,
predominantly through openings of large shopping centres,
including Posnania in Poznań, Galeria Północna in Warsaw,
Wroclavia in Wrocław and Forum Gdańsk in Gdańsk.
Around 40% of the current development pipeline is expected to
be completed in cities below 100,000 inhabitants, including
Tomaszów Mazowiecki, Mielec, Jarocin and Zakopane, where
new shopping centres and retail parks will be added to the
market.
Figure 6
Retail stock under construction – distribution by size of
the market
12%
major
agglomerations
9%
200 - 400,000
inhabitants
1%
The remaining retail space under construction (a bare 3%) will
be delivered through extensions of existing retail schemes in
regional cities with 200,000–400,000 inhabitants.
50 - 100,000
inhabitants
78%
below 50,000
inhabitants
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Regarding retail pipeline developments, shopping centres will
continue to dominate the market with an 89% market share,
whilst 8% of space currently in the pipeline will be delivered in
the retail park sector.
Further growth is also anticipated in the sector of outlet centres
with some schemes already under construction in regional
cities with 200,000–400,000 inhabitants. These include the
redevelopment of the Carrefour Glinki regular shopping centre
into Metropolitan Outlet in Bydgoszcz and Outlet Toruń in
Toruń, which is at an advanced preparation stage and is to
constitute the first part of a larger retail complex in the western
section of the city.
Figure 7
Extensions in the annual supply
160000
30%
140000
25%
120000
20%
100000
80000
15%
60000
10%
40000
5%
20000
0
0%
2010
Overall, extensions and redevelopments have had a significant
share in the total retail supply in shopping centres, retail parks
and outlet centres over the last few years. Extensions
accounted for nearly 30% of the shopping centre supply in
2015 and are expected to make up around 25% and around
15% of the new space coming onto the market in 2016 and in
2017, respectively.
2011
2012
2013
2014
2015
2016
(f)
2017
(f)
extensions (GLA sq m)
% of total annual supply
Table 2
Extensions include both established retail schemes in the
largest Polish cities such as Galaxy in Szczecin, Atrium
Promenada and Centrum Janki in Warsaw, and small-scale
retail facilities in small local markets such as Era Park in
Radomsko and Galeria Mrówka in Ciechanów, which already
have a strong presence in their respective markets attracting
both tenant interest and high footfalls.
Another major trend has been the focus on extending and
upgrading the retail offer of in-line stores neighbouring on
hypermarkets by operators such as Carrefour (Morena
Gdańsk) and Immochan with its Auchan hypermarkets
(recently in Gdańsk and Białystok). This trend is particularly
important given the changing shopping habits and customers
moving away from doing shopping in large food stores that
have ceased to be the key magnet attracting customers to
shopping centres.
Development pipeline for 2016
Half of the current development pipeline (363,000 sq m) is
scheduled to be delivered onto the market still by the end of
2016.
The largest scheme planned for 2016 is Apsys’s 99,000 sq m
Posnania complex, being another shopping and leisure centre
in Poznań, the city among leading Polish markets in terms of
retail space saturation. Interestingly enough, Posnania will be
another shopping centre located in the central area of Poznań
having to compete for customers with Stary Browar, Galeria
Malta and the recent delivery to the local market - Poznań City
Center.
Another retail scheme to open this year is Galeria Metropolia, a
new 34,000 sq m shopping centre constructed by local
developer PB Górski in a prime location in Gdańsk-Wrzeszcz,
near a station of the Fast Municipal Railway (SKM) and in
close vicinity to Galeria Bałtycka.
Major openings planned for H2 2016
Scheme
City
GLA
(sq m)
Developer
Posnania
Poznań
99 000
Apsys
Metropolia
Gdańsk
34 000
PB Górski
Galeria
Wołomin
Wołomin/Warsaw
Agglom.
25 000
Rockcastle/
Acteeum Group
Galeria
Aviator
Mielec
25 000
Rank Progress
Figure 8
Shopping centres saturation in the largest cities
(sq m GLA per 1,000 inhabitants)
900
800
700
600
500
400
300
200
100
0
Shopping centre density - currently
Shopping centre density - including stock under construction
PROPERTY TIMES
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Several small and midsize retail schemes are also scheduled
to open in smaller cities by year-end 2016, frequently being the
first modern retail facilities in their respective markets, including
Galeria Wołomin in Wołomin near Warsaw, Galeria Aviator in
Mielec and Galeria Tomaszów in Tomaszów Mazowiecki.
retailers are scrutinising their portfolios and optimising the
number of stores.
The Polish retail market is expected to remain healthy on the
back of the country’s strong macroeconomic fundamentals.
The continued growth in retail sales (+6.5% year-on-year
increase in June 2016) and the falling unemployment (down to
8.8% in June 2016) have led to good market performance.
Demand and newcomers
Retailers with a long-standing presence in Poland are also
developing new concepts. The LPP Group, for instance, has
added a new premium fashion brand Tallinder to its portfolio,
carefully selecting appropriate locations for its offer and price
profile. Carrefour is developing the concept of a premium
supermarket branded Market. Following the success of the first
Market store in Warsaw’s Białołęka district, it opened another
supermarket in the Galeria Podkowa shopping centre in
Podkowa Leśna near Warsaw, replacing the former food
operator Marcpol, which is closing down its stores due to
financial straits.
With the growing retail market in smaller cities some operators
are adapting their formats to new market requirements,
including the consumer electronics retailer Media Markt, which
is developing the concept of around 2,000 sq m stores.
Retailers also benefit from the rapid growth of small retail parks
by expanding their footprint into smaller cities. The leading
sectors include health and beauty, consumer electronics and
household appliances, low-end fashion and footwear, and
home accessories.
New market entrants in H1 2016 included Skechers, NYX
Cosmetics, U.S. Polo Assn., and the kids fashion brand Kanz
from Germany, among others.
More emblematic brands are expected to enter the Polish
market in H2 2016, including H&M’s & Other Stories and the
Swiss homeware retailer MaxiBazar, which is to open its first
store in Nowy Dwór Mazowiecki in September. The US fashion
brand Forever 21 is also preparing to start operations in
Poland.
Vacancies and rents
Vacancy rates
The vacancy rate in the largest Polish cities above 200,000
inhabitants rose slightly to more than 3% compared with yearend 2015.
Figure 9
Vacancy rates in cities above 150,000 inhabitants
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Poznań
Łódź
Kraków
Upper Silesia Aggl.
Wrocław
Tri-City
Szczecin
Warsaw
Major agglomerations - average
Radom
Bydgoszcz
Białystok
Częstochowa
Kielce
Toruń
Lublin
Cities 200-400,000 - Average
Rzeszów
Bielsko - Biała
Olsztyn
Cities 150 - 200,000 - Average
Tenants believe the Polish market represents strong future
growth prospects, but they do tend make a clear distinction
between individual locations. They continue to focus on
established retail schemes offering high footfalls and
satisfactory revenues, both in the largest agglomerations and
smaller cities. Particularly in the latter locations, new schemes
with uncertain prospects are clearly less favoured than
refurbished shopping centres with a strong market position.
Vacancy rate - H2 2015
Vacancy rate - H1 2016
Source: Cushman & Wakefield, PRRF
Another brand intending to expand into Poland is the wellknown UK retailer of toys Hamleys, which announced its plan
to open a store in Warsaw in subsequent years.
On the other hand, retail concepts are quickly put to the test by
the market and changing customer tastes. The French retailers
Celio and Brice have closed down their stores, whilst other
PROPERTY TIMES
5
The average vacancy rate in the pool of the eight major
agglomerations has remained flat at around 3%. Of the core
Polish cities, Warsaw has had the lowest vacancy below 2%
for the past few years. Vacancy rates in other agglomerations
stand at around 2% in the relatively stable Szczecin market
and at around 4%–6% in Poznań and Łódź, the two cities with
the strongest market competition. However, large retail
schemes in the pipeline in cities such as Poznań, Wrocław and
Gdańsk will push vacancies up, the first signs of which are
already showing up.
The average vacancy for regional cities with 200,000–400,000
inhabitants rose from 4% at year-end 2015 to around 5%. The
lowest was in Lublin and Toruń at around 2%–3%. Toruń
recorded a significant drop in vacancies from more than 5% to
around 3% following the gradual leasing of the retail space in
the new part of the Atrium Copernicus shopping centre
delivered in 2015. By contrast, Bydgoszcz’s vacancy levels
rose from 6% at year-end 2015 to nearly 8% at the end of H1
2016 as a result of more intense market competition. The
opening of the large-scale Zielone Arkady shopping centre,
which provided 51,000 sq m in late 2015, affected negatively
the occupancy levels in the city’s secondary schemes.
Białystok also saw its vacancy rate rise with the highest rate
recorded in its very competitive sector of outlet centres.
Radom’s vacancy rate soared to 9% after Nomi had vacated a
large store in the Echo shopping centre as a result of if its
winding-up.
Older generation retail schemes, usually shopping centres
anchored by large hypermarkets, have seen vacancy rates
rising for some time due to the growing popularity of more
modern schemes with an extended non-food offer. Some new
shopping centres are also being opened despite not being fully
let. Due to the currently intense competition on the vast
majority of markets and retailers’ cautious approach to new
retail schemes, the leasing process has become much longer,
requiring more effort and financial outlays from owners than
earlier. Today, only the best shopping centres are almost fully
let when they open. Vacancy rates are also rising in retail
facilities with a strong market position, now being at risk from
new intense competition.
Prime rents
Prime shopping centre rents remain flat, the highest standing
at EUR 130–140/sq m/month for a prime unit in Warsaw’s bestin-class shopping centres. Other major shopping centres in the
capital city command EUR 80–110/sq m/month.
Prime rents stand at EUR 45–55/sq m/month in other key
agglomerations and at EUR 33–40/sq m/month in regional
cities with 200,000–400,000 inhabitants.
Diversification of rental rates between prime and secondary
retail schemes is expected to continue as a result of the
increasing market competition and the planned high supply
levels. Rents in secondary schemes and in projects under
construction remain under strong downward pressure with
tenants seeking fit-out contributions and rent-free periods at
the start of the lease.
Base rent is only one of financial components of lease
packages which include a number of incentives and financial
contributions, particularly for prestigious anchor tenants.
Turnover-based rents and step-up rents involving gradual
increases throughout the life of the lease are also becoming a
more common practice on the leasing market.
Service charges and marketing expenses constitute additional
costs.
Figure 10
Prime shopping centre rents (EUR / sq m / month)
Warsaw
Tri-City
Łódź
Poznań
Wrocław
Katowice
Kraków
Szczecin
Cities 200 - 400,000
30
50
70
90
110
130
150
Euro/ sq m/ month
PROPERTY TIMES
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Definitions
Modern retail stock
Retail schemes exceeding 5,000 sq m of gross leasable area (GLA), delivered or refurbished after
1990.
Prime rent
The highest rent per square metre per month for a prime fashion store of approx. 100 sq m in firstclass shopping centres.
Shopping centre
A modern centrally-managed retail facility with a GLA over 5,000 sq m and more than ten stores.
Retail warehouse
A large-scale, stand-alone retail facility usually anchored by DIY, furniture, electronics, cash & carry,
and sports operators.
Retail park
A retail facility with a few dominating large-space anchor tenants and smaller tenants; at least two bigbox operators.
Outlet centre
Vacancy rate
A store or a complex of stores offering end-of-line fashion items at discount prices.
The volume of vacant space is monitored in the segment of shopping centres, outlet centres and retail
parks for all cities above 200,000 inhabitants and, since June 2016, for three cities with 150,000–
200,000 inhabitants: Lublin, Bielsko-Biała and Rzeszów.
PROPERTY TIMES
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Increased market competition calls for a quick response

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