Jones Lang LaSalle presents its retail market report summarising Q1 and analysing key trends for the coming months of 2013. Set out below are the key findings from the research paper:
Supply. The first quarter of 2013 brought the completion of more than 54,000 sq m of new shopping centre space located in three new projects: Europa Centralna in Gliwice (shopping centre part of 27,000 sq m and additional retail park element of 40,000 sq m), Galeria Veneda in Łomża (16,200 sq m) and Galeria MM in Poznań (10,800 sq m).This was only a small taster of what will be seen on the market throughout the year. According to announcements of developers, more than 644,000 sq m of new space will be completed in 2013 (the highest volume since 2009), which, if delivered, will mean that the current year will, in terms of completed volume, be on par with the most fertile years in the history of the Polish shopping centre market. Total shopping centre stock is now estimated at almost 8,000,000 sq m, while the entire modern retail (including shopping centers, outlets, retail parks etc) stock in Poland hits 11,134,000 sq m.
Modern retail stock in Poland by format
Source: Jones Lang LaSalle, Q1 2013
In the end of Q1, more than 723,000 sq m was at the construction stage, the majority of which is scheduled for 2013. Interestingly, the previously underdeveloped eastern part of Poland is now catching up with over 21% (155,500 sq m) of volume under construction attributable to just two regions, namely Lubelskie and Podlaskie. Unlike the past two years, the market will now be seeing completions going forward in the largest Polish cities. Around 40% of the stock underway is located there.
Marta Augustyn, Associate Director, Retail Agency, Jones Lang LaSalle, comments: “A few key retails trends are particularly worth noticing. These include increased investment interest in railway stations located in the largest cities. These properties usually possess features such as prominent location, interesting architecture, high pedestrian foot fall, and are revamped to accommodate additional retail space. Also the outlet sector seems to be gathering pace. After the recent opening of Neinver’s Factory Annopol in Warsaw, the total stock of this sector is now more than 163,000 sq m spread across ten projects. Additional projects are in the pipeline in the cities of Białystok and Lublin, which confirms that Eastern Poland is steadily growing as a retail destination. A noticeable churn is also observed on some of the high streets. Although, this market segment is still relatively underdeveloped in Poland when compared to the rest of Europe, we do observe interest from some retailers, mostly from the luxury segments. For example, Louis Vuitton is planning to open its first Polish store in the vitkAc centre in Warsaw. Mainstream brands, such as H&M, locate their flagship locations in the high streets”.
Demand: Polish retail sales recorded a first y-o-y decrease in many years in December 2012, which was later repeated in the figures for February. Although macroeconomic forecasts remain positive for the whole 2013, the sentiment of the market participants is not so optimistic. Some retailers rationalize their sales chains, others focus on the largest cities. Some well performing tenants, however, are still significantly expanding their stores. Moreover, newcomers, both domestic and foreign, enter the market. The new Sinsay chain by LPP has proven successful outperforming some other brands from this portfolio soon after launching. Another noteworthy market entrant is Hollister by Abercrombie & Fitch, which opened their first store in Warsaw’s Galeria Mokotów. Tenants prefer units within the existing established centres, or those with short delivery times, rather than projects, that are expected to be ready within few years. There are, however, a few exceptions – the GTC’s Galeria Wilanów, Galeria Białołęka in Warsaw and Multi Development’s Forum Radunia in Gdańsk feature strong interest from potential tenants.
Vacancy rate: In January 2013, the average vacancy rate in eight largest agglomerations stood at 2.6%. The highest share of vacant units was observed in TriCity (4.0%) and the lowest in Łódź (1.8%). In cities with population between 200,000 and 400,000 the highest rate was registered in Radom (7.6%) and the lowest in Lublin (1.0%). On the back of the large under construction volume, the vacancy rate is expected to slightly increase during 2013.
Rents: Prime rents for a very well-located 100 sq m unit shop in leading shopping centres vary from city to city. Highest rents are asked in Warsaw (80-95 euro/sq m/month), followed by Wrocław (47-55 euro) and Katowice Agglomeration (42 – 50 euro). No fundamental changes in rental bands were registered during the Q1. However, the large influx of the new volume scheduled for this year may cause some downward pressure on rents in the underperforming assets. Rents in prime projects, unless located in small and saturated markets, should remain fairly stable.