SWEDEN SWEDEN DENMARK CZECH REP. CZECH REP. AUSTRIA AUSTRIA CROATIA CROATIA ITALY TURKEY GREECE PORTUGAL TURKEY GREECE PORTUGAL

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1 UNITED KINGDOM FRANCE BELGIUM NETHERLANDS GERMANY POLAND RUSSIA LITHUANIA LATVIA CZECH REP. SLOVAKIA AUSTRIA SWITZERLAND HUNGARY CROATIA ROMANIA BULGARIA UKRAINE RUSSIA TURKEY GREECE PORTUGAL SPAIN ITALY DENMARK SWEDEN ESTONIA NORWAY FINLAND IRELAND SERBIA ALBANIA BELARUS MONTENEGRO UNITED KINGDOM FRANCE BELGIUM NETHERLANDS GERMANY POLAND RUSSIA LITHUANIA LATVIA CZECH REP. SLOVAKIA AUSTRIA SWITZERLAND HUNGARY CROATIA ROMANIA BULGARIA UKRAINE RUSSIA TURKEY GREECE PORTUGAL SPAIN ITALY DENMARK SWEDEN ESTONIA NORWAY FINLAND IRELAND SERBIA ALBANIA BELARUS MONTENEGRO

2 BELAR LATV LITHUANIA RUSSIA ANY POLAND CZECH REP. UKRAINE SLOVAKIA AUSTRIA HUNGARY CROATIA ROMANIA

3 Where to invest in POLAND? MAP OF RETAIL GAPS Part 3 SOUTH-WESTERN POLAND

4 Colliers International Research and Consultancy Services Research and Consultancy Services at Colliers International undertakes research and advisory services for Clients in the area of Polish real estate market in particular; office, retail, industrial and hotel. Our knowledge is supported by years of experience and devised analytical methods, which support our Clients in the decision-making processes, identifying opportunities and threats and possible scenarios resulting from the changing market conditions. Services provided by the Department include economic analysis and market studies of the real estate market with respect to future market trends, feasibility study, competition analysis, investment strategies, analysis of the location, etc. Our database includes the most current information on the real estate market in Poland, and our close cooperation with Colliers agency departments allows for a better understanding of individual needs of our Customers. 2 COLLIERS INTERNATIONAL

5 Dear Sirs, It is my great pleasure to introduce the next part of Research and Consultancy Services Department report WHERE TO INVEST IN POLAND? MAP OF RETAIL GAPS. The publication identifies potential investment opportunities on the Polish retail market in small cities. This report is released in six parts, which are published on the quarterly basis - the third part focuses on the South-western Poland (Dolnośląskie & Opolskie voivodships). I hope you will find this publication interesting, informative and useful in making your business decisions. If you would like to receive the previous parts of the report or you need more detailed information about investment opportunities on the retail market in Poland, or any other publication prepared by our department, please contact us on: or dominika.jedrak@colliers.com We hope you will enjoy reading it. Best Regards, Dominika Jędrak Director Research and Consultancy Services COLLIERS INTERNATIONAL 3

6 South-Western Poland Voivodships DOLNOLĄSKIE OPOLSKIE 4 COLLIERS INTERNATIONAL

7 Introduction The aim of the report WHERE TO INVEST IN POLAND? MAP OF RETAIL GAPS is to identify potential investment opportunities on the Polish retail market in smaller cities. Retail markets in major Polish agglomerations are already quite well recognised and developed (although this does not necessarily mean that they are saturated in terms of retail space), whereas smaller cities can carry a significant, yet undiscovered potential and therefore it is worth to take a closer look at them. The purpose of this report is to investigate and identify these retail gaps. The report will be released in six parts and will be published on a quarterly basis. Each part of the report will be dedicated to a separate Polish region: 1. CENTRAL REGION 2. SOUTHERN REGION 3. SOUTH-WESTERN REGION (PART 3) > > Dolnośląskie > > Opolskie 4. NORTHERN REGION 5. NORTH-WESTERN REGION 6. EASTERN REGION The report provides an overview of retail markets in cities with populations between thousand inhabitants. Cities are analysed in terms of both existing and planned modern retail supply, as well as economic indicators, such as unemployment rate and purchasing power. Based on the results of this analysis the map of retail gaps is created. The map defines new trade routes, which cover the cities with high potential due to the combination of limited supply of modern retail space and favourable economic parameters. Such potential gaps represent an interesting alternative to larger cities, which are already relatively well served in terms of existing retail space. Smaller cities can present an interesting option for investors who wish to gain exposure in new and prospective locations. The map of new trade routes may become the first step in identifying locations which offer real opportunities for successful development. COLLIERS INTERNATIONAL 5

8 WHERE TO INVEST SOUTH-WESTERN POLAND Retail Markets in Small Cities Retail markets in small cities differ significantly from each other, both in terms of their degree of development as well as local circumstances, and it can, therefore be quite difficult to compare them and obtain conclusive results. However, there are certain key elements that determine the success of a planned investment in a particular location, such as local authorities attitude and infrastructure development. These can be important factors that may facilitate the investment process, or, on the contrary make it almost impossible. Identifying a particular location requires detailed analysis of local conditions, both in terms of existing and future competition, as well as socio-economic situation, planned infrastructure investment etc. Compared to large agglomerations, where retail markets have been developing pretty steadily, in smaller cities the situation is slightly different. In the majority of cities over 30 thousand inhabitants there are already local as well as chain supermarkets; DIY stores with building materials, home and garden articles; furniture stores and small department stores, mostly with local tenants. What distinguishes retail markets in particular cities is the presence in some of them of a modern retail shopping centre, which has delivered new quality and offers new retail experience to consumers on the local market. Investors looking for new opportunities in smaller cities make their decisions based on many factors, such as socio-economic situation, existing and planned competition or the distance from a larger urban agglomeration. Therefore, not all cities of similar size will be similarly assessed in terms of investment potential. The picture of any given retail market changes significantly with the opening of a modern retail shopping centre, which is able to attract bigger, well known retail chains. The analysis of retail space in the following part of this report consists mainly of modern schemes with min. 5,000 m 2 GLA, which represents a scale of development with the potential to attract significant custom and impact on a market. DEFINITIONS* Shopping centre a retail property that is planned, built and managed as a single entity, comprising units and communal areas, with a minimum gross leasable area (GLA) of 5,000 m 2, and a minimum of 10 retail units. Retail park also known as a power centre, is consistently designed, planned and managed scheme that comprises mainly medium- and large-scale specialist retailers ( big boxes or power stores ). Factory outlet centre is a consistently designed, planned and managed scheme with separate store units, where manufacturers and retailers sell merchandise at discounted prices that may be surplus stock, prior-season or slow selling. Purchasing power total amount of goods and services which residents of particular area can buy within a year. Purchasing power for retail trade total value of goods which residents of particular area can buy within a year in shops. Purchasing power index per capita the index presents the relation of purchasing power for retail trade of the population of the given region to the average purchasing power in Poland. * based on ICSC and GfK Polonia 6 COLLIERS INTERNATIONAL

9 WHERE TO INVEST SOUTH-WESTERN POLAND Retail Markets in Dolnośląskie and Opolskie Voivodships Being close to the border both Dolnośląskie and Opolskie voivodships, there may be a positive impact on retail potential of analysed cities. Zgorzelec is a very good example, its shopping centres are also visited by German clients. The majority of analysed cities are smaller urban areas with thousand of inhabitants, in which retail parks can be especially successful. Lubin is a unique city, with very high purchasing power of its inhabitants (higher than 30% of the average for Poland). There is big shopping centre Cuprum Arena located with prestigious tenants as well as specialised home & design shopping centre Indomo, which can be considered as unusual in similar-sized cities. Bielawa and Dzierżoniów are neighbouring cities and therefore they are analysed as one urban area. In the majority of analysed cities there is still potential for new retail schemes tailored to local needs. Nysa has the highest retail potential, as at the moment there is no modern shopping centre. Świdnica, Jelenia Góra and Kędzierzyn-Koźle have been identified as cities with the highest investment risk due to existing and planned retail supply, as well as the variety of available retail offer, especially in the first two of these cities. Planned Galeria Podium in Oława. COLLIERS INTERNATIONAL 7

10 WHERE TO INVEST SOUTH-WESTERN POLAND Dolnośląskie Voivodship LOCATION STATES BORDERING POPULATION AREA CAPITAL South-western Poland, bordered by three voivodships: Lubuskie to the North Wielkopolskie to the North Opolskie to the East Germany Czech Republic 2.87 mln 19,947 sq. km. Wrocław Głogów Lubin Bolesławiec Zgorzelec Oleśnica WROCŁAW Jelenia Góra Oława Świdnica Dzierżoniów Bielawa DOLNOŚLĄSKIE Selected statistical data. (Table 1.) Population Unemployment rate (%) Purchasing power index per inhabitant ** Poland 38,200, Dolnośląskie Voivodship 2,875, Wrocław 624, Jelenia Góra 83, Lubin 74, * Głogów 68, * Świdnica 59, * Bolesławiec 40, * Oleśnica 37, * Dzierżoniów 34, * Zgorzelec 31, * Oława 31, * Bielawa 30, * * The data at poviat level ** Purchasing power in selected cities in relation to the average in voivodship Source: Colliers International Poland based on data from Central Statistical Office 8 COLLIERS INTERNATIONAL

11 WHERE TO INVEST SOUTH-WESTERN POLAND Modern retail space in cities with population between 30 and 100 thousand inhabitants in Dolnośląskie Voivodship: > > 10 cities with population between 30 and 100 thousand inhabitants. > > At the end of the first half of 2012 modern shopping centres with min. 5,000 m 2 GLA were present in five cities. > > The majority of modern retail space is located in Lubin (74,500 m 2 ), Zgorzelec (54,400 m 2 ) and Jelenia Góra (44,600 m 2 ). > > In Lubin there is one big shopping centre Cuprum Arena, two smaller retail schemes based on big hypermarkets Real and Tesco, as well as spiecialised home & design shopping centre Indomo. > > Modern retail stock in Zgorzelec is concentrated within four shopping centres, which are Real, Galeria Słowiańska, Park Handlowy Eden and Zgorzelec Plaza. > > In Jelenia Góra there are three shopping centres located: Galeria Sudecka, Tesco and Pasaż Grodzki. Modern retail space. (Table 2.) City Modern retail space (min. 5,000 m 2 GLA) Jelenia Góra 44,600 Lubin 74,500 Existing retail schemes Galeria Sudecka (2000), Tesco (2000), Pasaż Grodzki (2010) Real (1997), Tesco (2001), Cuprum Arena (2009), Indomo (2009) Głogów 13,000 Galeria Głogów (2007) Świdnica 36,000 Zgorzelec 54,400 Source: Colliers International Poland Tesco (2004), Multi Park (2008), Galeria Świdnicka (2012) Real (2000), Galeria Słowiańska (2006), PH Eden (2008), Zgorzelec Plaza (2010) > > Shopping centres are also located in Świdnica (Galeria Świdnicka, Multi Park, Tesco) and Głogów (Galeria Głogów). > > In analysed cities there are also a number of smaller retail schemes (less than 5,000 m 2 GLA), which can be considered as modern space, including Galeria Oławska in Oława and Galeria Bielawska in Bielawa. COLLIERS INTERNATIONAL 9

12 WHERE TO INVEST SOUTH-WESTERN POLAND Modern retail schemes under construction and planned: > > Developers plan other shopping centres in Jelenia Góra, Lubin, Głogów and Oława, as well as first modern retail schemes in Bolesławiec, Oleśnica and Dzierżoniów. > > The first phase of Galeria Górska is under construction in Jelenia Góra (at the moment shell and core stage) and will be delivered to the market in the second half of Shopping centre is also planned by TK Development. According to plans the construction should start in 2013 and be completed in > > Other retail schemes are planned in Lubin, namely small retail park Lubin Park (approx. 3,000 m 2 ) and shopping gallery in the town square, however the delivery dates are not specified yet. > > Similar situation occurs in Głogów, in which shopping centre as well as small retail park (4,600 m 2 ) are planned. > > Two schemes of different retail formats are planned in Oława: shopping centre Podium (Orapa Investments) and retail park (Eyemaxx Real Estate). Both schemes should be delivered to the market in > > Orapa Investments is also planning to build first modern shopping centre in Oleśnica, however there are no details about this investment yet. > > Modern retail space will be also delivered in Bolesławiec in mixed-use project Bolesławiec City Center (office & retail space). The total area of the building will amount to approx. 10,000 m 2, 4,600 m 2 of which will be retail space. The scheme is already under construction and should be completed in Q > > The first shopping centre Galeria Dzierżoniów (5,000 m 2 ) is planned for delivery in Dzierżoniów in the second half of Dolnośląskie - Existing and planned retail supply (m 2 ) Existing modern retail space Planned retail space Source: Colliers International Poland Modern retail space, under construction and planned (Table 3.) City Main planned retail schemes Status Jelenia Góra Area (m 2 GLA) Planned completion Galeria Górska UC 20,000 Q (I phase) Centrum Handlowe planned 24, Lubin Galeria Rynek planned 8,000 n/a Głogów Centrum Handlowe planned 23, Bolesławiec Bolesławiec City Center UC 4,600 tq Oleśnica Galeria Oleśnica planned 10,000 n/a Dzierżoniów Galeria Dzierżoniów planned 5,000 H Oława Source: Colliers International Poland Galeria Podium planned 12,500 H Park Handlowy planned 6, / COLLIERS INTERNATIONAL

13 WHERE TO INVEST SOUTH-WESTERN POLAND Opolskie Voivodship LOCATION Southern Poland, bordered by four voivodships: Dolnośląskie to the West Wielkopolskie to the North Łódzkie to the North Brzeg STATES BORDERING POPULATION AREA CAPITAL MAIN CITIES Śląskie to the East Czech Republic 1.03 mln 9,412 sq. km. Opole Opole, Kędzierzyn-Koźle Nysa OPOLE Kędzierzyn-Koźle OPOLSKIE Selected statistical data (Table 4.) Population Unemployment rate (%) Purchasing power index per inhabitant ** Poland 38,200, Opolskie Voivodship 1,026, Opole 121, Kędzierzyn-Koźle 64, * Nysa 46, * Brzeg 37, * * The data at poviat level ** Purchasing power in selected cities in relation to the average in voivodship Source: Colliers International Poland based on data from Central Statistical Office COLLIERS INTERNATIONAL 11

14 WHERE TO INVEST SOUTH-WESTERN POLAND Modern retail space in cities with population between 30 and 100 thousand inhabitants in Opolskie Voivodship: > > 3 cities with population between 30 and 100 thousand inhabitants Kędzierzyn-Koźle, Nysa and Brzeg. > > In analysed cities there are no modern retail schemes with min. 5,000 m 2 GLA. Modern retail supply in Opolskie Voivodship is located only in Opole. > > There are smaller shopping centres located in analysed cities, as Galeria Piast in Brzeg, as well as supermarkets and DIY shops. Modern retail schemes under construction and planned: > > In analysed cities at the end of the first half of 2012 there were two retail schemes under construction shopping centre Odrzańskie Ogrody in Kędzierzyn-Koźle and multifunctional project in Brzeg, which combines small shopping gallery (Galeria Brzeg) and hotel. Both schemes should be delivered to the market in September /October > > There is also one retail scheme planned in Nysa shopping centre Arabella, however no further details of the project are known. Opolskie - planned retail supply (m 2 ) Source: Colliers International Poland Planned retail space Modern retail space under construction and planned (Table 5.) City Main planned retail schemes Status Kędzierzyn Koźle Area (m 2 GLA) Planned completion Odrzańskie Ogrody UC 22,000 Q Nysa Arabella planned 10,000 n/a Brzeg Galeria Brzeg UC 2,600 Q Source: Colliers International Poland 12 COLLIERS INTERNATIONAL

15 WHERE TO INVEST SOUTH-WESTERN POLAND Summary Based on the analysis carried out, covering the analysis of modern retail space and socio-economic factors, investment potential of surveyed cities has been identified. The data is presented in the following tables. The potential resulting from socio-economic factors (Table 6. and Table 7.) has been identified on the basis of the evaluation of unemployment rate and purchasing power ( + favourable situation; - unfavourable situation) and presented with appropriate indicators: - high - neutral - low DOLNOŚLĄSKIE Investment potential resulting from socio-economic factors (Table 6.) City Unemployment rate * Purchasing power ** Jelenia Góra + + Lubin + + Głogów - + Świdnica - + Bolesławiec - + Oleśnica - - Dzierżoniów - - OPOLSKIE Investment potential resulting from socio-economic factors (Table 7.) City Potential Unemployment rate * Purchasing power ** Potential Kędzierzyn- Koźle - + Nysa - + Brzeg - + * Unemployment rate: + lower than Polish average; - higher than Polish average ** Purchasing power: + higher than the average for voivodship; - lower than the average for voivodship Source: Colliers International Poland Zgorzelec - + Oława + - Bielawa - - * Unemployment rate: + lower than Polish average; - higher than Polish average ** Purchasing power: + higher than the average for voivodship; - lower than the average for voivodship Source: Colliers International Poland COLLIERS INTERNATIONAL 13

16 WHERE TO INVEST SOUTH-WESTERN POLAND The analysis of retail markets (including existing and planned schemes) in the cities with population between 30 and 100 thousand inhabitants and results obtained from the analysis of socio-economic situation led to identifying the investment potential of analysed cities. The results are presented by appropriate colours (Table 8. and Table 9.), which correspond with cities designation on the map. - high investment potential, low investment risk - medium potential and risk - limited potential, higher risk DOLNOŚLĄSKIE Investment potential resulting from the development of retail market and socio-economic factors see Table 6. (Table 8.) City Jelenia Góra Lubin Głogów Świdnica Investment potential OPOLSKIE Investment potential resulting from the development of retail market and socio-economic factors see Table 7. (Table 9.) City Kędzierzyn-Koźle Nysa Brzeg Source: Colliers International Poland Investment potential Bolesławiec Oleśnica Dzierżoniów & Bielawa* Zgorzelec Oława * neighbouring cities forming one urban area Source: Colliers International Poland 14 COLLIERS INTERNATIONAL

17 WHERE TO INVEST CENTRAL POLAND Map of retail gaps in Poland MAP OF RETAIL GAPS IN POLAND The map of retail gaps in Poland identifies the investment potential of smaller cities in particular voivodships and sets new trade routes. Three trade routes were indicated: blue, red and black, which point out existing opportunities and the level of investment risk. Established colours of trade routes correspond with the degree of difficulty of tourist trails. Blue indicates low difficulty level, which in business terms translates into high potential and relatively low investment risk. The red route from the investment point of view presents slightly lower potential of a particular retail market and higher risk, while black indicates the highest difficulty level and cities assigned to this route are considered as very risky for investors at the moment (however, in longer term the situation in these cities may change). Głogów Lubin City City - high investment potential, low investment risk - medium potential and risk Zgorzelec Bolesławiec Jelenia Góra Świdnica WROCŁAW Oława Oleśnica Brzeg City - limited potential, higher risk Dzierżoniów & Bielawa OPOLE Nysa Kędzierzyn -Koźle The data in the report represents the situation at the end of the first half of This publication does not cover all aspects of the subject it deals with. This publication is not designed to provide legal advice or investment consultancy and therefore it cannot be considered as a basis for business decisions. COLLIERS INTERNATIONAL 15

18 Where to invest in POLAND? MAP OF RETAIL GAPS podlaskie mazowieckie dolnośląskie opolskie łódzkie śląskie świętokrzyskie lubelskie PUBLISHED REPORTS: Part 1 Central Poland Part 2 Southern Poland Part 3 South-Western Poland małopolskie podkarpackie COMING REPORT: Part 4 Eastern Poland to be published in SEPTEMBER 2012