Empik in Cepelia, Decathlon City in the International Business Center, Bulgari, Luca, Carhartt and Le Szapo. Do the leases signed in Warsaw in recent months herald a high street revival in Warsaw and beyond? High shopping centre density rates and shrinking retail availability appear to bode well for it.
In addition, experts of global real estate services firm Cushman & Wakefield note that the Polish retail market is now going through a very interesting period of growth, with many tenants increasingly focusing on location diversification as new retail concepts and formats are emerging. This means that there is a real chance of a revival of high street retail.
According to data from Cushman & Wakefield, at the end of 2023, the average shopping centre density in Poland was 272 sq m per 1,000 inhabitants and was higher than in Germany, Spain, Italy, Hungary and Romania. Such a high density rate has naturally dampened developers’ appetite for building shopping centres which now account for only 18% of the total retail development pipeline. While development activity in this sector remains muted, retail availability is also shrinking. Although the average shopping centre vacancy rate had been on an upward trajectory since 2020 and reached 5.3% in 2021, it began to edge down after the pandemic turmoil, falling to 3.5% at the end of 2023, notes Cushman & Wakefield.
"Shopping centre statistics point to both the high maturity of the Polish retail market and tenants’ unwavering interest in this retail format. No wonder - Polish people enjoy visiting shopping centres, appreciate their variety and like to shop in them. A recent survey carried out by Cushman & Wakefield has found that 33% of Polish consumers go to a shopping centre at least once a week and around 60% are attracted to shopping centres by their entertainment offer. At the same time, many top brands are, however, increasingly looking for alternative ways of growing their store portfolios and are considering expansion into retail parks or housing estates and ultimately opening flagship stores in high streets. This strategy poses no risk to the position of shopping centres – on the contrary, it is testament to the strength of the Polish retail market,” explains Michał Masztakowski, Head of Retail Agency Poland, Cushman & Wakefield.
The growing interest in alternative retail locations is quite natural for the Polish retail market at this stage of its growth, adds the expert. Poland’s political and economic transformation in the early 1990s provided a major impetus to the development of the Polish retail market, which, however, evolved differently to those in Western Europe and the USA.
"The first shopping centres that were developed in Poland in the early 1990s met the lion’s share of demand for retail space as the legal status of real estate remained largely undefined at that time, which translated into supply constraints on the rapidly growing retail market. By contrast, shopping centres in such countries as the UK, France and Italy constituted an addition to the rich offer of high streets. What’s more, they were not built there in city centres - or at least not on such a big scale as in Poland. Today, as some tenants, including fashion, sports and convenience brands, are facing a scarcity of growth options in shopping centres, many are increasingly shifting their focus towards high streets,” adds Michał Masztakowski.
The omnichannel trend supports the diversification of store locations
Last September, Decathlon, known for its presence in shopping centres and retail parks, announced the opening of a new format store in the International Business Center (IBC), near Politechnika metro station in Warsaw. The brand had sought a high street location to enable customers to make quick purchases near their workplace or home. In April this year, Empik announced its plan to open a flagship store at ul. Marszałkowska, in the Cepelia building, which is undergoing refurbishment. This will see the iconic Warsaw building put to retail use again soon. Both brands opted to create positive shopping experiences by aligning offline and online platforms. This means that they want to open stores in diverse locations in line with the principle of “close to everywhere”.
"Could these leases suggest that competition for prime addresses in Polish high streets is intensifying? There is no doubt that we are seeing a gradual increase in demand for such locations from a wide range of brands. More and more tenants are becoming aware of ever-changing trends and lifestyles. Urban dwellers are increasingly embracing the concept of a 15-minute city, they want to live more sustainably, value their time and would like to do shopping in their favourite stores spontaneously - when out on a walk, on their way home from work or to meet friends. It is worth taking advantage of this opportunity as there are still many compelling locations available in high streets,” comments Magdalena Gniazdowska Leasing Manager, Retail Agency, Cushman & Wakefield.
Paradoxically, the office sector is changing the perception of high streets. According to Cushman & Wakefield’s report Retail @ Office, already 64% of Warsaw’s office buildings offer at least one retail and service unit.
"At the end of 2023, retail stock in Warsaw’s office buildings stood at 390,000 sq m in 1,400 units in more than 360 locations. At the end of last year, the proportion of office buildings offering such units was 64%, up from 60% in 2013. This best illustrates qualitative changes on the commercial property market in Poland and a synergy of retail and offices. Is it relevant in the context of high streets? As many as 87% of retail and service units are located on the ground floor of office buildings which are beginning to serve as a natural extension of high street retail while becoming an increasingly integral part of the urban fabric and attracting stronger footfall. This is a win-win strategy for office landlords and retailers,” says Magdalena Gniazdowska.
"Cushman & Wakefield notes that tenants opening stores in high streets appreciate greater operational flexibility, the lack of costs resulting from non-standard opening hours and lower store running costs, as well as rental rates which are a key factor.
For example, market rents for retail space in prime office buildings stand at EUR 50-60 per sq m, compared to EUR 150-170 in shopping centres. There are, of course, some drawbacks to retailing in office buildings such as lower weekend turnover levels or the lack of large spaces. However, these disadvantages appear to be well compensated by a convenient location and a customer profile,” explains Magdalena Gniazdowska.