The outlook for Poland’s retail real estate market

The retail real estate market in Poland is still a promising one. It is not weakened by rapid legal and tax changes, or slowed down by the growing saturation of retail space. The market expected a significant decline in investment moods due to changes in legal and tax regulations that were announced over a year ago. It turns out, however, that investors’ interest in the Polish commercial real estate market is not weakening. Last year, investors spent EUR 1.9 billion in the shopping center segment, similar to the 2016 figure. The largest transactions of last year include the Pradera fund’s purchase of Ikea centers for EUR 900 million and the purchase of Magnolia Park by the Unilmmo fund, a transaction valued at approximately EUR 380 million.

Investors’ interest in the Polish market is not expected to wane in the near future, despite recently passed regulations that are unfavorable for the industry, such as limiting trade on Sundays or the new tax on commercial real estate. The macroeconomic indicators remain high: economic growth is at 4.6 percent. And retail sales – a very important indicator for this market – are also increasing, which encourages more investment.

The total of more 350,000 square meters of new commercial space completed in 2017 suggests the market is in good condition. All of the new space is in the broadly understood category of shopping centers, including retail parks and outlets. Areas around the largest agglomerations are still developing the fastest. It is worth mentioning such spectacular openings as Wroclavia in Wrocław, Galeria Północna in Warsaw or Serenada in Kraków.

However, it is also worth paying attention to investors’ growing interest in cities with fewer than 100,000 inhabitants, observed in previous years. Some 26 percent of newly created space is located in these cities.

One of the most important trends in the commercial real estate market is the reconstruction and revitalization of existing facilities, conducted more frequently and on a larger scale than ever. In 2017, nearly 50,000 square meters of commissioned commercial space was the result of modernization. This phenomenon is largely explained by the need to adapt shopping facilities to customers’ changing needs and expectations.

Especially prominent are changes in the food and beverage zones – their offer and structure – which forces the owners to reconstruct food courts. The Arkadia shopping center in Warsaw is a great example: the owners expanded the center by 2,000 square meters and commissioned a very modern catering zone. Other examples include the ongoing and planned extensions of the shopping complexes in the Atrium European Real Estate portfolio.

It is estimated that the supply of new space commissioned in 2018 will be at a similar level as last year – a sum of more than 300,000 square meters of new gross leasable area (GLA). The largest openings planned in 2018 include: Galeria Młociny in Warsaw (70,000 square meters GLA), Forum Gdańsk (62,000 square meters GLA) and Katowice’s Libero (42,000 square meters GLA).

The effects of development on the commercial real estate market and good macroeconomic indicators are reflected in the traffic at Polish shopping centers. Almost 400,000 people visit an average shopping center per month in Poland, according to data collected at the end of 2017 by the Polish Council of Shopping Centres (PRCH) for the PRCH Footfall Trends Index. It should be noted that this indicator remained at a similar level as in 2016, after recording large declines recorded in 2013-2015 (360,000 visitors per month).

It is certainly not going to be an easy year for the commercial real estate sector. It will have to adjust to new regulations, mainly the limit of trade on Sundays (and a total ban in the following years) and the introduction of a new tax on commercial real estate. Facility owners are already searching for the most optimal solutions. However, this should not significantly affect the industry’s further development, especially not the area of new investments or the level of interest among customers.
Comment by Anna Zachara-Widła, Research Projects Coordinator, Polish Council of Shopping Centres