Traditional retail is seeing a return to pre-pandemic numbers, with increased footfall and sales numbers in shopping malls, and significant improvements for tenants, particularly after the difficult years of 2021–2022. “Places in malls are filled and rented. Demand in the market seems stable and healthy,” says Maciej Kotowski of JLL. He predicts that smaller commercial units, such as retail parks and convenience centers, will continue to dominate the Polish market this year, with larger, regional shopping centers not expected to be handed over to customers until after 2026.
Data from the Polish Council of Shopping Centres for October of last year shows sales figures for tenants in shopping centers were 5% higher than the same month the previous year. This aligns with the retail sales results provided by GUS, which saw a 4.8% rise. The analysis of over 47 million monthly customer visits to shopping centers also shows a 2% year-on-year increase in footfall per square meter of rental space for October.
“The retail sector in Poland is returning to pre-pandemic figures and conditions: we see much better turnover in malls, footfall is increasing, and the tenants’ situation is steadily improving. This is also shown in retail sales figures. Poles have returned to making physical purchases and continue to shop online. Projections indicate further growth in retail sales, and these forecasts are extraordinarily positive for Poland,” says Maciej Kotowski, Director of Market Research and Consultancy at JLL.
According to Oxford Economics, from 2024 to 2027, Poland is forecasted to have one of the highest retail sales growth rates at 14%, compared to 5% in the Eurozone. Meanwhile, the share of online retail will remain at around 10%, a peak level from 2021. This suggests that increases in online sales will coincide with a slowdown in traditional retail. Customers are now expecting these two sales channels to merge, and omnichannel is a trend that has firmly taken root in the retail sector.
“We are observing new trends among tenants, including a move towards multichannel sales that combine e-commerce with traditional retail. Store functions are also changing, transforming in many cases into showrooms. Changes are also happening in dining areas, known as food courts, which are now more commonly referred to as food halls – these are new concepts with new tenants. Local restaurants and representatives of the food service sector with authentic cuisine have a chance to establish themselves in these large shopping galleries,” lists Maciej Kotowski. “Another trend is a turn towards entertainment. We are talking about shopping and entertainment centers, and this function is becoming increasingly important, as evidenced by the modernized Sukcesja Centre in Łódź, whose offer is being transformed towards entertainment. This trend is not only seen in new malls in Poland, but also abroad. They are becoming a place for young people and more to spend their free time, and not just a place to shop.”
The situation for tenants, particularly after the tough years of 2021–2022, marked by the pandemic slowdown, is significantly improving. “We are seeing the good condition of tenants who are planning to expand, open new stores, and new concepts. This is evidenced by the decreasing vacancy rate, which has dropped to an average level of about 3% this year from a record 5%. Spaces in malls are filled and rented. Demand in the market seems stable and healthy,” emphasizes the director at JLL’s Market Research and Consultancy Department.
Supply is defined by retail parks, which have been setting new records and are clearly in a phase of development. Between 2021 and 2023, these properties accounted for 82% of the new supply of retail space. There is a similar share of convenience centers and retail parks in the currently built area (approx. 470,000 sqm.). Nearly 40% of the area in these formats is being developed in towns of less than 50,000 inhabitants. The popularity of smaller formats remains maintained – the average size for all new retail investments under construction is just under 10,000 sqm. GLA.
Due to their format, retail parks – relatively small areas usually not exceeding 10,000 sqm – can be located in the most favorable locations.
“This primarily applies to small towns where this offer was missing. On the other hand, we also see increased activity of developers on the outskirts of the largest agglomerations, which are developing residentially. There, too, small local centers are being built, usually in the convenience format or a small retail park. Demand for a place where comprehensive shopping can be done, preferably with the offer of a food operator, is very high. Investors and developers are actively responding to this demand, constantly bringing new projects to the market,” says Maciej Kotowski.
The expert points out that the last openings of large centers with a significant regional scope and GLA above 50,000 sqm. took place before the pandemic and it was the Warsaw Galeria Młociny (78.5 thousand sqm. GLA) and the Forum Gdańsk (2018, 62 thousand sqm. GLA).
“We do not expect such openings this year, such galleries are not currently under construction and we expect them only after 2026, and maybe even 2027. I am mainly thinking of projects in Warsaw, i.e. Góraszka and Wilanów Park, which are currently in the process of preparation for construction,” points out the director at JLL.
2024 will be marked by the modernization of shopping galleries. Among the largest projects of this type is the reconstruction of the CH Bonarka in Krakow, which started in 2022 and will end in 2025. In the following years, work will also begin on the comprehensive change of function of already closed centers – examples include Galeria Malta in Poznań and CH Belg in Katowice.
“In recent times we have observed a change in older buildings – as in the case of the former Tesco, which exited Poland – into modern retail parks and local centers. This is certainly one of the trends – local, smaller renovations that involve changes to both the offer and the appearance or format of the shopping center,” says Maciej Kotowski. “On the other hand, some property owners decide on a complete change of function, selling or rebuilding from a commercial function to a residential one, for example, rental apartments.”
He points out that regarding investments in existing buildings, aspects related to ESG, cost optimization of maintenance and property management, green energy solutions, and the growing popularity of green rental agreements are becoming increasingly important from the owners’ point of view.
2023 was a period of low investor activity in the retail space sector, influenced by high financing costs and uncertain mood. This resulted in investment volumes falling to record low levels. Despite the increase in rents, turnover, and generally good operational situation of most retail properties, the volume of transactions in the retail sector recorded in 2023 was very low and amounted to only 450 million euros. This was the third-lowest result in the perspective of the last 15 years (after 2008–2009, when transaction volumes were similar). A total of 27 transactions were recorded, with the most attractive product being properties with volumes of 20–30 million euros.
“Despite the significant decrease in investment values in 2023, in the last quarter of that year we observed increasing investor activity, especially in the segment of retail parks. We expect this to translate into transactions in the first half of this year. The anticipated interest rate reduction in 2024 should also reduce the polarization between the price expectations of buyers and sellers and gradually increase the investment volume in the retail sector,” says Agnieszka Kołat, Head of Retail Investment at JLL.
