Cushman&Wakefield: Polish shopping centre market constrained by restricted availability of finance

n Q2 2009 the Polish shopping centre market was a period characterised by the renegotiation of terms with financial institutions, search for strategic investors and launch of recovery programmes, according to the Cushman&Wakefield Shopping Centre Market Quarterly Snapshot.

A positive feature was that the market saw first signs of unlocking decision-making process both on developers and tenants side on the back of the improved economic news and the reported retail sales growth. Nonetheless, the activity in the shopping centre market in Poland is still severely constrained by the restricted availability of finance.

Supply

Q2 2009 saw the delivery of ca. 154,000 sq.m of shopping centre space, similar to Q1 figures. The most notable development in the past quarter was the completion of: Renoma Wrocław and Cuprum Arena Lubin. The currently opened schemes differ both in terms of location (primary, secondary and tertiary cities) and character (core city, district and suburban facilities). Moreover, the opening of a number of suspended or delayed developments is likely to be postponed from the planned 2009 to the next year.

Demand

The most important news of Q2 2009 was the opening of the first Starbucks coffee chain in Nowy Swiat street, in Warsaw. The current retail leasing market is dynamic in nature. Decisions on location of new stores are made with greater caution, the expansion and shop format strategies are subject to modification, lease terms are renegotiated and incentive schemes widened. At the same time new market entries, merger and acquisitions can be observed. We are also witnessing the creation of secondary leasing market in shopping centre sector, with a handful of chains looking for subtenants for their stores.

Outlook

As at the end of Q2 2009 there was ca. 890,000 sq.m of shopping centre space under construction, to be delivered onto the market
between 2009-2011 with further 250,000 sq.m waiting for the decision to resume the development. Realisation of new investment projects in the Polish market is closely linked with the access to fund and with prevailing leasing market conditions. Retail investment market shows first signs of revival, with demand focused mainly on stand alone food formats and DIY stores, which sold in packages constitute an attractive and secure alternative for institutional investors.

Polish Market

ECONOMIC MONITOR

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• ● In December 2009 and January 2010, as in previous months in the second half of 2009, the Polish economy stood out against other countries in terms of GDP growth. Poland’s economic growth was higher than projected and higher than in other European countries.
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• In 2009 construction output increased by 3.7%.
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• Retail sales increase in most product groups.
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• On the Warsaw Stock Exchange, stock prices were very volatile in January 2010.
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• At the end of December 2009 the registered unemployment rate (claimant count rate) amounted to 11.9% versus 11.4% in November.
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• At the end of January the president signed the 2010 budget bill into law. The bill was adopted by the parliament on December 18.
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• In the fourth quarter of 2009 the Polish economy turned out to be more resistant to the global crisis than had been projected and than the economies of Polish neighbours, something which boosts optimism in forecasts for 2010 and the next years.
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WEEKLY MARKET ANALYSIS

Retail sales up again in June
Retail sales growth in nominal terms accelerated in June to 6.4% y-o-y from 4.3% y-o-y in May. The increase was higher than expected. In real terms, retail sales growth accelerated to 4.5% y-o-y from 2.0% y-o-y. June was a consecutive month with retail sales figures stronger than expected, which indicates that consumption is recovering after it slowed significantly at the beginning of the year. Private consumption is driven by an improvement on the labour market coupled with a rise in disposable incomes. In Q2 2010 retail sales grew by around 3% y-o-y in nominal terms and around 1% y-o-y in real terms. On the basis of retail sales and industrial production data, it can be estimated that the GDP growth rate was close to 3%.

MARKET INFO

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