Trei Real Estate GmbH (“Trei”), an international developer and asset manager for residential and retail real estate, and Jones Lang LaSalle Poland (“JLL”) jointly published the fourth edition of their market report on retail parks and convenience centres in Poland. Here is the key finding: Despite a difficult market environment, the share that retail parks claimed out of the total transaction volume in the retail sector increased significantly. During the first half of 2023, it climbed to a record level of 51%. Overall, transactions in the retail real estate segment as a whole added up to nearly €200 million by mid-year 2023. Compared to the prior-year figure (H1 2022) of €760 million, this implies a decline by 74%. Then again, it should be noted that the high volume of 2022 is largely explained by two portfolio transactions. Twelve transactions were closed during the first half of 2023, involving a total of 17 retail assets. Cap rates have climbed to about 6.90% as a result of softening prices.
Pepijn Morshuis, the CEO of Trei Real Estate, commented: “Compared to previous years, the investment volumes and the number of transactions concluded may seem low, but some deals were moved back into the second half-year, which was not covered by the report yet. Further deals will be closed before the end of the year, so that significantly better results are to be expected for the second half of 2023.”
The average rents of retail parks range from €6.00 to €13.00/sqm/month, and thus experience a modest increase over prior year. The rent level obviously depends on the location of a given property, its size and the services provided by the tenant. Pepijn Morshuis, CEO of Trei, commented: “The macroeconomic situation, including the war in Ukraine and the relatively high inflation rate, has driven up capital expenditures, and this fact is in turn reflected in the rent level. But compared to big-ticket shopping centres, rates in retail parks remain very competitive, encouraging tenants to choose these as sites for their outlets, including local brands and chain retailers.”
Tenant-side demand for retail units remains strong in Poland. However, the tenant structure of retail parks has shifted. “Retail parks have long ceased to be perceived merely as bases for large-scale grocery stores. Services as well as brands from the fashion, footwear or jewellery segments supplement the retail spectrum. It means that shoppers are offered greater retail diversity in close proximity to their place of residence,” Morshuis added.
Boom in Retail Park Development Continues
While the market share of shopping centres is shrinking due to changed shopping behaviour on the customer side, retail parks are booming, and their stock continues to grow. Out of the nearly 380,000 square metres of retail area that were under construction in Poland during the first half of 2023, retail parks accounted for no less than 70% of the total, the majority of it (68%) in cities with populations of less than 100,000. Most of the new facilities are developed in small towns previously undersupplied with modern retail outlets.
Trei, too, is enlarging its inventory of retail parks. Four new sites were opened in 2023 so far, bringing the Poland portfolio up to a total of 36 properties at this time. Another two retail parks, one in Lubin and one in Konin, are currently under construction.
ESG Aspects Moving Centre Stage
ESG factors have evolved into a core issue even in the retail park segment. Relevant measures include choosing an environmentally friendly architecture, optimising the energy consumption and using environmentally friendly building materials. The introduction of green building certificates is making good progress, even though certification remains a voluntary practice at this time. Compared to other market segments, however, retail parks are just getting started with the transition process because ESG solutions have barely gained traction so far, mainly for cost reasons.
The full-length survey is available for download under the link below: Report – Retail parks and convenience centres in Poland