Let’s go to Poland! Retail investment’s second wave.

The Polish retail property market will see a wave of fresh investment over the next year, with real estate developers and investors having launched or announced the start of a bevy new investments across the country.  The bulk of these developments will be located in regional urban centers, many of which are still plagued by a serious shortage of modern retail space.

After a slowdown in development activity caused by the outbreak of the global financial crisis in 2008, an increasing number of projects are obtaining financing and entering the construction phase. As a result, the volume of new annual supply is set to increase significantly within the next few years.

According to Colliers International data, by mid-2012 construction was under way on more than one million sqm of retail space in Poland, 700,000 sqm of which was scheduled to be completed by the end of the year. That would make for a huge increase over 2010 when developers delivered some 460,000 sqm of modern retail space to the Polish market.

Regional bias.

New projects are now mostly located in mid-sized regional cities, many of which have, until recently, remained empty spots on Poland’s retail property map. In the country’s main urban centers, relative market saturation now means increased risk in terms of project commercialization, said Przemysław Błaszkiewicz from the valuation department of Colliers International Poland.

The numbers show the trend clearly. In the second quarter of 2011, no major retail project was completed in any of the eight largest cities in Poland. Other cities with populations of less than 400,000 are expected to see new openings in the near future. 

“The current increased activity of developers marks a second wave of supply targeted at regional cities and its dynamics allows us to forecast that the retail property market may prove to be the most active sector of the whole real estate market in the upcoming year,” Colliers International Poland’s Błaszkiewicz said. He added that the majority of under-construction and planned retail projects are traditional shopping centers. Ongoing or recently completed retail park schemes account for some 110,000 sqm of space while outlet centers, which until recently constituted just 1 percent of modern retail space in Poland, are now increasing their share of the market. In the face of continued economic turmoil, developers will certainly continue to turn to outlet center schemes, which have fared well in times of decreased shopping activity, Mr Błaszkiewicz said. He pointed to Factory Outlet in Krakow (21,320 sqm) and Outlet Park Szczecin in Szczecin (23,000 sqm) as some of the planned investments of this kind.

Investor interest.

Growing development activity has largely been driven by considerable investor interest in retail facilities, Mr Błaszkiewicz pointed out. With their large nominal revenues and relatively long lease deals, shopping centers prove a very good purchase option for funds and other financial institutions seeking safe cash flow, he said.

According to Cushman & Wakefield the first half of 2011 showed that real estate investment activity in Central and Eastern Europe was gaining momentum and could come in at a total of  4.8 billon by the  end of the year.

Barbara Gawior