Increased market competition calls for a quick response

Transcription

1 (f) GLA (sq m) PROPERTY TIMES Increased market competition calls for a quick response Poland, Retail, H August 2016 Contents Retail stock 2 H supply 2 Development pipeline 4 Demand 5 Vacancies and rents 5 Definitions 7 In H1 2016, total modern retail stock in Poland stood at million sq m. The share of shopping centres and retail parks located in smaller cities below 100,000 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 such as Bydgoszcz and Toruń. New retail space supply in H 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 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) Author 600 Patrycja Dzikowska Associate Director Consulting & Research patrycja.dzikowska@cushwake.com Contacts Kamila Wykrota MRICS Head of Consulting & Research kamila.wykrota@cushwake.com 0 over 400, , , ,000 cushmanwakefield.com PROPERTY TIMES 1

2 Retail stock At the end of H Poland s total retail stock reached 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. The key trends in the Polish shopping centre market include the continuously growing share of retail schemes in the smallest cities below 100,000 in Poland s total stock. At the end of H 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 in the total retail stock rose from barely 9% five years ago to 25% at the end of H Such locations benefit from the rapid growth of the format of strip malls that enable retail operators to attain smaller city. Small shopping centres or retail parks are also being developed in smaller towns below 50,000, 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. 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). H supply New retail space supply in H totalled only 121,000 sq m, of which 56% came on stream in cities below 100,000. The remaining 53,500 sq m was delivered in the major agglomerations and regional cities with 200, ,000. No new space was added to the modern retail stock in cities with 100, ,000. Figure 2 Retail stock by format 18%, H Figure 3 Distribution of the shopping centre stock Table 1 Major retail developments opened in H Scheme City GLA (sq m) Developer Galeria Glogovia Głogów Saller Polbau Galeria Karuzela Września JB Development Leszno Park Leszno Blackstone Galeria Avangarda 8%1% 5% 7% 7% 13% 11% 76% 11% 68% 12% 17% 12% 60% 17% 16% 13% 54% I poł below 100,000 73% Shopping centre Stand-alone retail warehouse Retail park Factory outlet 100, , , ,000 major agglomerations Bartoszyce City Nieruchomości cushmanwakefield.com PROPERTY TIMES 2

3 Shopping centres accounted for half of the new retail supply in H 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. 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 H 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. 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. Figure 4 New supply H distribution by size of the city Figure 5 New supply H by format and type of development 36% 41% Figure 6 15% 8% 23% 23% 21% 33% over 400, , ,000 below 50,000 Shopping centres - new Shopping centres - extension Retail warehousing - new Retail parks - extension Retail stock under construction distribution by size of the market Around 40% of the current development pipeline is expected to be completed in cities below 100,000, including Tomaszów Mazowiecki, Mielec, Jarocin and Zakopane, where new shopping centres and retail parks will be added to the market. 9% 1% 12% major agglomerations ,000 The remaining retail space under construction (a bare 3%) will be delivered through extensions of existing retail schemes in regional cities with 200, , % ,000 below 50,000 cushmanwakefield.com PROPERTY TIMES 3

4 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. 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. 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. 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 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. Figure 7 Extensions in the annual supply Table 2 Major openings planned for H Scheme City GLA (sq m) Developer Posnania Poznań Apsys Metropolia Gdańsk PB Górski Galeria Wołomin Galeria Aviator Figure 8 Wołomin/Warsaw Agglom Rockcastle/ Acteeum Group Mielec Rank Progress Shopping centres saturation in the largest cities (sq m GLA per 1,000 ) (f) extensions (GLA sq m) % of total annual supply Shopping centre density - currently 2017 (f) Shopping centre density - including stock under construction 30% 25% 20% 15% 10% 5% 0% cushmanwakefield.com PROPERTY TIMES 4

5 Poznań Łódź Kraków Upper Silesia Aggl. Wrocław Tri-City Szczecin Warsaw Major agglomerations - average Radom Bydgoszcz Białystok Częstochowa Kielce Toruń Lublin Cities ,000 - Average Rzeszów Bielsko - Biała Olsztyn Cities ,000 - Average Poland, Retail, H 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. Demand and newcomers 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. 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. 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. Vacancies and rents Vacancy rates The vacancy rate in the largest Polish cities above 200,000 rose slightly to more than 3% compared with yearend Figure 9 Vacancy rates in cities above 150,000 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% New market entrants in H 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. Vacancy rate - H Vacancy rate - H1 2016, 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 cushmanwakefield.com PROPERTY TIMES 5

6 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 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 By contrast, Bydgoszcz s vacancy levels rose from 6% at year-end 2015 to nearly 8% at the end of H 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 /sq m/month for a prime unit in Warsaw s bestin-class shopping centres. Other major shopping centres in the capital city command EUR /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. 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 , Euro/ sq m/ month cushmanwakefield.com PROPERTY TIMES 6

7 Definitions Modern retail stock Retail schemes exceeding 5,000 sq m of gross leasable area (GLA), delivered or refurbished after Prime rent Shopping centre Retail warehouse The highest rent per square metre per month for a prime fashion store of approx. 100 sq m in firstclass shopping centres. A modern centrally-managed retail facility with a GLA over 5,000 sq m and more than ten stores. 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 and, since June 2016, for three cities with 150, ,000 : Lublin, Bielsko-Biała and Rzeszów. cushmanwakefield.com PROPERTY TIMES 7

8 EMEA John Forrester Chief Executive +44 (0) Office Agency Richard Aboo Consulting & Research Kamila Wykrota Valuation Mark Freeman Poland Charles Taylor Head of Poland Retail Agency Renata Kusznierska Asset Services Christopher Rasiewicz Occupier Services Ian Scattergood Poland Alan Colquhoun Chair Industrial & Logistics Agency Tom Listowski Capital Markets James Chapman Project Management & Consultancy Andrew Frizell Disclaimer This report should not be relied upon as a basis for entering into transactions without seeking specific, qualified, professional advice. Whilst facts have been rigorously checked, Cushman & Wakefield can take no responsibility for any damage or loss suffered as a result of any inadvertent inaccuracy within this report. Information contained herein should not, in whole or part, be published, reproduced or referred to without prior approval. Any such reproduction should be credited to Cushman & Wakefield Cushman & Wakefield LLP. All rights reserved. To see a full list of all our publications please go to cushmanwakefield.com or download the Research App Cushman & Wakefield Metropolitan Plac Piłsudskiego 1 Warsaw, phone fax info@cushwake.com Cushman & Wakefield Lumen Złota 59 Warsaw, phone fax info@cushwake.com cushmanwakefield.com