Despite the growing saturation on the commercial real estate market in Poland, in my opinion it still provides excellent opportunities. So I am looking forward to 2017! Master Management Group is currently constructing a large scale retail and entertainment complex in the Warsaw district of Bielany. Galeria Młociny, with a total GLA of 70,000 sqm and the opening scheduled for late 2018, is already over 50% leased and has attracted top global brands. This shows that retailers believe in our vision. We are convinced that today’s customers expect outstanding architecture and a distinctive offering with lots of leisure and sports facilities, green outdoor spaces and exciting destinations for foodies. We will provide all this and much more besides, so I expect 2017 will be a good year.
Poland has been a free market economy for nearly 30 years and in that time the retail landscape has been completely transformed. This is perhaps most apparent when it comes to the way we shop. Before 1989 there wasn’t a single shopping center in Poland whereas now there are close to 500, offering over 13 million sq. m of retail space and these numbers continue to grow each year – in 2016 463,000 sq. m of retail space was delivered to the market.
Despite dynamic growth this is still not enough for retailers who are eager to enter the Polish market and those wanting to expand the stores they already have. One reason is that, although some cities such as Poznań or Wrocław enjoy high saturation with modern retail space (ca. 764 sq. m and 817 sq. m per 1,000 inhabitants respectively), others such as Warsaw are still far behind, as indicated by the vacancy rate of just 1,6%, and half the per capita retail space of market leaders. At the same time disposable income in Warsaw is almost double the national average! Another reason is that many Polish towns lack high streets or shopping precincts of the kind we are used to in Europe. Warsaw, the capital, is a case in point, although hopefully that is slowly changing.
Retail chains want to increase their market penetration but often can’t as there is not enough projects suited to consumer’s evolving habits and expectations in Warsaw and smaller cities, where people are nonetheless hungry for the modern retail experience. Overall, the situation in Poland is extremely bullish. Occupancy rates in many smaller cities are at 100%, sales are increasing, footfall is rising y-o-y and there is a demand for shopping centres that are not only a place to shop but to enjoy yourself. People are increasingly going to malls to spend time with friends, sample different cuisines, enjoy cafes, restaurants, bars, see a movie, work out at the gym. A chain of fitness clubs in Poland recently conducted research which demonstrates that 85% of customers who came to the gym also shopped at the mall where the club is located. This shows that the retail and leisure and lifestyle component of a project fuel each other and drive sales.
Poland has seen numerous market debuts, with retail chains eager for a presence in a country with a relatively young population, a robust economy and growing wages. However, recently several established brands have left the Polish market or announced their intention to do so. I would not interpret this as a sign that Poland cannot absorb more retailers. Rather I would advise and caution chains that this is a competitive market with price-sensitive, savvy shoppers who know how to look for the best deals and value good service, so retailers need to prepare accordingly. Meanwhile shopping center investors and developers can count on success providing they are the dominant center in a given catchment area are easily accessible. In essence this comes down to an excellent location with good transport links, easy access by car and ample parking, while the tenant mix should make the centre a part of people’s everyday lives – a supermarket, a good fashion footprint, a drugstore, pharmacy, gym, food court, cinema and plenty of other services. With all this in place, Poland is still a land of opportunity.