JLL has just published its latest summary of the retail sector in Poland, which indicates that:

• Retail is well on the road to recovery with customers returning to brick-and-mortar shops. 2021 saw a marked rebound in the clothing and footwear sector.
• The popularity of online shopping, whose share in total sales volume exceeded 11% in November, is not showing any signs of waning.
• Retail chains are looking for ways to attract customers with new retail formats and strategies incorporating ESG.
• Fewer and fewer shopping centres are being developed - as much as 51% of the space currently under construction will be in retail parks.

Thanks to uninterrupted shopping centre activity in H2 2021 and a strong recovery in the Polish economy, the retail sector has experienced a significant rebound in business. Growth in November 2021 was 12% up on the previous year

Despite the return of customers to brick-and-mortar shops, their interest in online shopping remained high. The consolidation of online consumer growth seen during the lockdown period combined with promotions such as Black Friday underpinned e-commerce’s 11.4% share of total retail sales in November.

"The retail market in 2021 was mainly characterised by the shift of retail formats towards an omnichannel solution. Major companies’ new strategies focused on developing online and offline channels to work in tandem with each other. There has also been an increase in the flexibility of both landlords and retailers seeking to adapt their offerings as quickly as possible to new shopping habits and evolving customer expectations", comments Anna Wysocka Head of Retail Agency, JLL.  

Companies implementing new retail formats include Żabka, which launched its first self-service shop in Poznań under its new Żappka Store brand and is also developing its Żabka Nano concept. Cashierless shopping has already been introduced by other chains on the Polish market, but the scale of Żabka’s project and its technological advancement may contribute to the popularisation of this retail format.

"Another important phenomenon that has irreversibly changed retailing is the rise in customers’ environmental awareness. Today, the plans of most brands assume the inclusion of ESG-compliant activities. This manifests itself in a variety of ways, such as: introducing eco-friendly fashion collections, promoting activities and behaviours related to the closed-circle economy, promoting the re-use of products and creating special shopping platforms, such as the increasingly popular Vinted application. We can see campaigns that reflect ESG values from such well-known brands as IKEA, Zalando, H&M and 4F. It is also worth mentioning that ESG strategies are also increasingly important for real estate owners of retail space", adds Anna Wysocka, expert at JLL.

The popularity of smaller retail formats is increasing

In 2021, developers delivered 546,000 sqm of retail space, with retail parks (40%)[2] and stand-alone retail warehouses (29%) leading the way.

"The largest projects completed last year included IKEA in Szczecin (29,000 sqm of GLA), Mozaika in Kraków (25,400 sqm of GLA) and Galeria Andrychów (24,000 sqm of GLA). Poland’s total stock of modern retail space (formats above 2,000 sqm) now totals 16.4 million sqm of GLA", explains Joanna Tomczyk, Senior Research Analyst, JLL.

At the end of 2021, only about 420,000 sqm of leasable retail space was under construction, more than half of which were retail parks. Some of the largest retail projects currently under construction include three shopping centres, Karuzela in Kołobrzeg (30,000 sqm of GLA), Nowy Fort Wola in Warsaw (28,000 sqm of GLA) and phase 2 of ATUT Ruczaj in Kraków (25,000 sqm of GLA).

Retail parks and convenience centres on investors' radar

The concentration of capital in smaller formats means that, for another year, investment volumes remained below the 2015-2019 average of €2.2 billion.

"In 2021, the retail segment saw a transaction volume of nearly €1 billion, up more than 40% on 2020’s €704 million. Apart from the smaller formats, which are consistently popular with investors, there were also the first sales of large shopping centres since the outbreak of the pandemic. These primarily involved properties that allow higher returns to be generated by adding value or were opportunistic transactions in centres with high residual value. The largest transaction in 2021 was the sale of M1 Marki in Warsaw by Chariot Top Group to Redefine. Portfolio transactions in 2021 included the sale of Pradera Central European Fund’s three shopping centres (Pasaż Łódzki, Galeria nad Jeziorem and CH Osowa) and WP Carey’s purchase of a seven OBI DIY store portfolio", comments Agnieszka Kołat, Executive Director, Retail Investment, JLL.

JLL experts estimate yields for prime shopping centres in Poland at 5.25%. The prime cap rates for the best retail parks remain at around 6.80%, but the high level of interest and limited availability of core product may result in short term compression.