Growing competition for retailers combined with new spectacular openings and changing shopping expectations of customers is causing a shift in focus to upgrading older shopping centres. This trend is expected to carry into 2016.
This year’s leading trend has been the focus on improving the quality of retail space. The volume of space redeveloped and added to existing older shopping centres is clearly rising. In 2015, more than 150,000 sq m came onto the Polish market through fifteen extensions of retail schemes.
The biggest extension completed this year was the Bielany shopping centre (renamed Aleja Bielany) in Wrocław. Some 35,000 sq m was added to the centre, making it the largest retail scheme in Poland with 145,000 sq m of retail space. The second largest completion of this type was the extension of the Ogrody shopping centre in Elbląg (22,500 sq m added). Next in line was the 17,500 sq m extension of Wola Park in Warsaw, whose food court was relocated and expanded, and existing tenants were joined by Castorama and more than a dozen fashion brands. Wola Park is now the second largest shopping centre in the Warsaw agglomeration after Arkadia.
Shopping centre extensions and redevelopments are also on the cards for 2016, albeit on a smaller scale. They will account for 10-15% of the new retail space supply estimated at 500,000 sq m. A substantial volume of space to be delivered onto the Polish market in 2017 will come also through extensions. The biggest projects in the pipeline include adding 22,000 sq m to the Janki shopping centre, around 20,000 sq m to Centrum Krakowska 61 and 16,000 sq m to Galeria Bałtycka in Gdańsk. A large extension and refurbishment is also planned for Fort Wola in Warsaw (up to 55,000 sq m), scheduled to complete in 2019.
The current trend for enlarging shopping centres results mainly from competition between various retail formats and growing needs of customers who expect both an attractive retail offer and an interesting range of cultural and entertainment options, as well as innovations. E-commerce is another factor driving market competition, impacting on shopping patterns and the growth in ‘click and collect’ services in physical stores.
As a result, shopping centres now need to evolve further, come forward with more attractive offers and improve space quality in line with the latest market trends and technological developments in order to boost customer engagement. Many factors help to create a positive shopping experience, including the number of attractive brands, technological innovations, the interior appearance and fit-out, accessibility (such as a large car park and convenient entrances), and a choice of entertainment, food and drink offerings.
Retail schemes that fail to invest in their quality or respond to the ongoing evolution of customer needs will lose their competitive edge, which in the long term will impact on their vacancies and rents.
This year 23 new retail schemes were opened with the average commercialization level at around 90% on their opening days. Schemes that were fully let when they opened were Supersam in Katowice and the extension of Galeria Sudecka in Jelenia Góra.
Projects coming on stream in the next twelve months comprise four redeveloped and sixteen new shopping centres with key openings including Posnania (99,000 sq m), Metropolia (34,000 sq m), Fabryka Wołomin and Glogovia (25,000 sq m each).
Demand for retail space comes largely from retailers expanding their footprint on the Polish market as well as new market entrants. Brands making their debut in Poland tend to open their first stores in Warsaw, for example fashion brands such as Kiabi (in Blue City), Superdry (Złote Tarasy) and the US restaurant chain Fuddruckers (Wola Park). New market entrants outside Warsaw included the sports brand Decimas (Magnolia in Wrocław) and the fashion retailer Colin’s (Bonarka City Center in Krakow). Q1 2016 will see the long-awaited debut of Tallinder, a fashion brand of the LPP Group’s portfolio, planning to open 20 stores across the country. Another new entrant on the fashion market next year will be Forever 21.
Next year is shaping up to be a continuation of the current trends of extension and redevelopment of existing retail schemes. Increasing quality competition is set to continue with a trend to combine brick-and-mortar sales with e-commerce, as a result of which more retail schemes will offer conditions suitable for multichannel sales.
Magdalena Sadal, Senior Consultant, Valuation & Advisory, Cushman & Wakefield