Polish retail market well-placed to weather the global financial crisis

Despite financial uncertainty around the globe, the short-term growth outlook for the Polish economy remains favorable. The Polish real estate market experienced a successful year in 2007, with all sectors witnessing growth primarily fueled by Poland's accelerating economy. In 2007, GDP growth reached 6.6 percent, while in Q3 2008 GDP growth was running at about five percent. Estimates for next year predict lower, though still healthy, growth.

Foreign investors continue to consider Poland an "opportunity market" and are willing to expand their businesses in the country. The retail market is still developing and shopping-center stock is increasing each year.

Shopping in the city

There are currently over 270 modern shopping centers in Poland. Some 94 percent of these are traditional shopping centers and six percent are labeled as "specialized" shopping centers (retail parks and factory outlets).

Out of a total 6.5 million sqm of modern shopping-center space in Poland, almost 66 percent is located in major  cities with more than 400,000 inhabitants, along with the best developed economy, infrastructure and qualified work force.

Warsaw remains the largest and most attractive market for shopping-center operators. Even though investors have become more focused on regional cities, the total retail stock in Warsaw remains the highest. In terms of shopping-center density, Warsaw has fallen into second place, giving way to Poznań.

Poland's main cities and regions are well supplied in retail terms, though there are problems in finding attractive, free sites for development. Such sites are the most sought-after locations for flagship stores and newcomers.

New opportunities

The market for typical shopping centers is generally saturated in the big cities, and now developers and investors are forced to search for new retail opportunities, such as the development of leisure centers, convenience centers, multifunctional centers, retail villages, retail parks and outlet centers. The focus is either on the development of small schemes or on redevelopment of the existing older properties, particularly restoration of historic and post-industrial properties.

There are many examples of such investments, including the redevelopment of Renoma and Marino in Wrocław, the expansion of Klif or Wzgórze in Gdynia, and the restoration of Hala Koszyki in Warsaw.

A very frequent comment about the retail sector in Poland is that "High Street" retailing is beginning to develop in Poland. This is mainly due to the low availability of good-quality retail premises and units on the main streets in the cities. For that reason, different initiatives have been undertaken in order to modernize the city centers both to increase the retail space and to make the city center a more enjoyable place to visit.

In the smaller cities (less than 400,000 inhabitants), development is now based not only on the construction of new projects, but also on the refurbishment and extension of existing properties which were built in the mid1990s and now lack important functions and are not able to compete with newly built shopping centers.

Plenty in the pipeline?

Currently in Poland there is approximately one million sqm of shopping-center space under construction and an additional 1.7 million sqm still in the pipeline through the end of 2010. Of this, about half a million sqm is being constructed in medium-sized cities (between 100,000 and 400,000 inhabitants) and almost one million sqm is being planned there.

The current year has not been very dynamic in terms of retail development - only 360,000 sqm of retail space has been completed in 2008 so far and retailers are still waiting for some 200,000 sqm of shopping-center space planned to open by the end of the year. Retail properties are now being developed in Bydgoszcz (Pomorska Park Handlowy, Galeria Fordon), in Gdańsk (Oliwa), in Koszalin (Forum Koszalin) and in Płock (Galeria Wisła).

A significant investment boom is planned over the next two years. Almost 1.3 million sqm is planned for 2009 and another 1.2 million sqm for 2010. Many of these projects, however, will probably be postponed, if not cancelled. The impact of the current uncertainty in global markets will probably have an influence on the Polish retail market, as developers and investors become more cautious in the realization of their planned investments. Banks should be more demanding in terms of financing, expecting more from their own contributions. Still, good investment projects should not have any problems securing financing.

The panic in the Polish financial market is very closely connected with Poles' inexperience and inability to cope with the ongoing financial crisis. Nevertheless, observers believe, once emotions ebb, the retail market should be the first to recover.

Anna Federak is a research analyst in the research and consultancy department at CB Richard Ellis Polska