The commercial real estate market, together with many other economic areas, after being impacted heavily by the Covid pandemic, is undergoing recovery. These positive indicators are also mirrored in the retail real estate sector. Recent figures indicate that retail parks and convenience centres, are recovering strongly as are discount shops, while large shopping centres, are reporting increasing footfall levels, optimistic economic outlook; these are the key highlights from Q3 of the year. The analysis of the retail real estate sector was prepared by experts from BNP Paribas Real Estate.

Diversity in formats increases

At the end of September, total retail space levels approached 15.3 million m². The third quarter saw the opening of 10 new locations, of which more than half did not exceed 10,000m² in area. The largest market debuts were: the commencement at the Norblin Factory in Warsaw, where architects set aside about 26,000m² for commercial, service, gastronomic, entertainment and cultural premises as well asthe opening of a Leroy Merlin store having an area of 11,000m² in Bydgoszcz. Market located at at Rondo Toruńskie, replaced the former Tesco store and is today the second lead address of the French DIY chain in the city, and the 70th location in the country. At the end of August, residents of Bydgoszcz and the surrounding area, were also treated to the opening of Agata Meble furniture chain. It is located close to the Auchan Shopping Centre.

- We have been rapidly convinced about the applicability of small format commercial facilities. We like them because they are close to residential areas, they have convenient parking and exterior entrances accessible from the parking area, moreover, we can find all the most necessary things within them and the whole shopping process is done very efficiently and comfortably. Despite the ever extending time for project completions, due in part to increasing construction costs and obstacles regarding the availability of materials and professional construction services, this year may turn out to be a record year for this kind of format in terms of new space being delivered to market - states Natasa Mika, Director from Department of Retail Agency at BNP Paribas Real Estate.

In the last quarter, the sixth retail park in 2021 was opened by Trei Real Estate Poland. Vendo Park, with an area of 5,000m², incorporating a Lidl store as the grocery operator, located on a redeveloped plot of land of the former PKS (Bus) station in Inowrocław. In addition, Lidl also became one of the main tenants of the park, which was launched in Limanowa during the first half of September.

- This passing quarter goes to show, that retail parks are great at dealing with the effects of the Covid pandemic. They manage a lot easier with any risks associated with potential limitations and, moreover, they fit perfectly into new shopping habits which change strengthened during pandemic. This means that convenience centres and retail parks are growing and will continue to grow further, as there are approximately 218,000 sqm of projects under construction which refer to this format only – adds Natasa.

The main players in this segment of late, are TUF RE and Trei Real Estate Poland. The first one is preparing another five shopping arcades, while the second one intends to break the record of number of openings of new facilities by the end of the year, which to date, were seven a year. The largest construction sites during the third quarter within the retail park segment were: Galeria Andrychów (24,000m²), Pasaż Kępiński (11,000m²) and Park Handlowy Ustroń (10,000m²).

Rents becoming more significant

Attractive and, more importantly, stable rental rates, have a strong appeal in attracting tenants to retail parks. They are incomparably lower than rates listed for shopping centre space. Lower fees are the result of not only from peripheral town locations, a lack of joint-usage areas, or the simple single-storey layout, but also from significantly lower marketing and promotional costs. Rents in the best performing locations in the third quarter ranged between €8 - €12 per m² / month, with service charges being in the range of €1.5-2 per m² / month.

- Another argument that helps tenants decide to go fo a smaller format is the significantly lower costs of fitting out the shop. In light of the significant increases in construction materials prices, as well as fit-out costs, the smaller formats seem to be a very attractive incentive, and another reason why brands that have until now developed solely on large centres are interested in switching their the presence to such locations - stresses Fabrice Paumelle, Head of Department of Retail Agency, BNP Paribas Real Estate.

A time for discounters, a time for mixed-use

The whole year of 2021, just like the previous 12 months, is a time of intensive development of discount networks. The authors of the report point out, that 3 out of 4 Poles go to a discount store for their daily food shopping. A great advantage of discount brands, especially non-food brands, is the speed of adaptation to changing consumer expectations. A good example is the Sinsay brand, which, by following the example of discount stores, changed, enlarged and adapted its offer to customers with a smaller wallet.

Q3 showed that the pandemic did not stall developers implementing and planning thee introduction of mixed-use projects. Following the summer break, the revitalized Norblin Factory returned to Warsaw's Wola, offering visitors many new attractions. Also in Q3, Immofinanz and Atrium European Real Estate presented a new concept, enlarging single-storey centres with flats and announced further plans to redevelop three shopping centers in Warsaw and expand them with residential buildings.

AAG Retail Q3 2021 ENG
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Fabrice Paumelle
head of Retail
fabrice.paumelle@realestate.bnpparibas
AAG Retail Q3 2021 press release
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