Key findings:

• Nearly 90,000 sqm of new retail space was delivered to the market in Q2 2020, largely across small retail parks and shopping centres.
• Half of the retail development pipeline is scheduled for delivery on smaller city markets.
• Tenants expect temporary rent discounts of around 20% for units in shopping centres.
• Shopping centre footfall currently accounts for approximately 80% of last year’s footfall.
• Share of online sales down from 9.1% in May to 7.7% in June.

Supply                                                                           

Nearly 90,000 sqm of retail space came on stream across all formats in Q2 2020. In H1 2020, new supply totalled 165,000 sqm, of which nearly 40% was delivered through openings in cities below 100,000 inhabitants. Newly built schemes were sized under 20,000 sqm as the retail market has reached maturity and saturation.

More than 420,000 sqm of retail space is currently under construction and scheduled for delivery in 2020-2021. The largest projects underway include the mixed-use complex Fabryka Norblina in Warsaw, the Karuzela shopping centre in Kołobrzeg, and the Color Park shopping centre in Nowy Targ. Half of the development pipeline will be delivered in smaller cities with a population below 100,000.

“We will continue to see smaller convenience centres and small retail parks being added to the existing retail stock. The average size of all projects under construction is 12,000 sqm. The pandemic is also likely to accelerate decisions to remodel, upgrade or repurpose shopping centres that were underperforming before its outbreak,” says Katarzyna Lipka, Head of Consulting & Research, Cushman & Wakefield.

Rents

Prime shopping centre rents held firm before the pandemic, with a slight upward trend. Warsaw retained the top spot with prime rents for a 100 sqm unit in its best-in-class shopping centres at €120-130/sqm/month. Rents stood at €40-52/sqm/month for similar units in other major cities.

“Due to the outbreak of the pandemic, many shopping centre tenants renegotiated lease conditions, showing more caution in the execution of long-term leases. Signs have started to emerge that tenants expect temporary rent discounts (until the end of 2020) of around 20% for units in shopping centres, which will require a lease renewal for another 12-18 months on average,” says Małgorzata Dziubińska, Associate Director, Cushman & Wakefield.

Shopping centre footfall

The data from the Polish Council of Shopping Centres (PRCH) shows that footfall in shopping centres which were reopened on 4 May has been rising steadily ever since, accounting for 80-87% of last year’s footfall in the 13-19 July week. According to the PRCH Turnover Index, retail sales were down in May 2020 by 33% year-on-year in large shopping centres (sized 40,000-plus sqm) and by 26% in smaller retail schemes. The steepest year-on-year falls in turnover were reported in entertainment (-97%) and services (-86%).

Online sales

Ever since shopping centres were reopened in May, the share of online sales in total retail sales has been falling steadily - it stood at 7.7% in June compared with 9.1% a month earlier and 5-6% before the pandemic. Falls were reported, among others, by retailers in the following categories: “textiles, fashion and footwear” (down to 19.5% from 26.8% a month earlier), “press, books and other sales in specialized stores” (down to 21.8% from 25.2%), and “furniture, electronics and household goods” (down to 14.1% from 15.6%).

Meanwhile, total retail sales were down in June 2020 by 1.3% year-on-year, but up by 8.4% compared to May 2020.