CEE THE RETAIL NOVEMBER 2018 RETAIL Real Estate for a changing world CONTENT INTRODUCTION Robust growth of national WARSAW 4 economies, rise in employment, PRAGUE 6 growth of salaries and purchasing power, all these BUCHAREST 8 WARSAW factors demonstrate that the BUDAPEST 10 CEE region has been flourishing P O L A N D for the last couple of years. CEE CUSTOMERS 12 PRAGUE he retail industry benefits massively from these positive C H Z E C economic trends. Tight labour markets and robust growth R E P U B L I C T of wages resulted in rising consumer confidence which spurred consumer spending. Over the last five years retail turn- over across the CEE countries has soared by over 20%, with BUDAPEST Romania leading the group and recording a stellar increase by 36%. Although retail sales growth is expected to soften, it will In cooperation with Inquiry and Robertson. still remain healthier than in the Eurozone. O M A N H R Y R I U N G A A Another important socio-economic factor which clearly contrib- utes to extensive potential of the retail sector in the CEE region is BUCHAREST a rapid growth of the pool of middle-class shoppers. Aspirations of consumers have been steadily growing and now they are more demanding of products, services and brands than ever before. Although the selection of renowned, international brands in the region is good, there are still market gaps and opportunities for newcomers which remain untapped. All these factors underpin the high potential of the region as a destination for retail expansion. BNP Paribas Real Estate 3 POLAND DEVELOPMENT OF MODERN SHOPPING CENTRE STOCK3 WARSAW m² GLA POLAND 1,34m 2.6m €12,473 1,400,000 SELECTED RETAIL Population agglomeration Purchasing Power 1,200,000 1.7m population city1 (per capita / year)2 WARSAW 1,000,000 800,000 SCHEMES 15 is limited and operators have to wait for reasonable op- 600,000 With a circle of satellite towns and 13 intervening rural areas, Warsaw has portunities. Last year Hamleys, Newbie, Love Republic and 400,000 16 Zarina entered the newly opened Galeria Północna. A new 200,000 a metropolitan area inhabited by nearly medium–sized concept store by IKEA opened in Blue City, 18 0 10 20 2.6 million people which amasses more while Primark will come on stage next summer in a new 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 14 4 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 than 10% of the country’s purchasing power. shopping and leisure complex, Galeria Młociny. 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 he per capita purchasing power has grown by over In the southern, western and north-eastern outskirts of 2 Warsaw operate three outlet centres. Two IKEA-driven re- 1.94m m Galeria Mokotów 6% since 2015 and today exceeds the country average 517 SELECTED MAJOR SHOPPING CENTRES 12 by 55%. The unemployment rate in Warsaw is at its tail parks of paramount importance (HOMEPARK Targówek 2 Density of shopping centre 1 T and HOMEPARK Janki) serve the north and the south stock (sq m of GLA / 1,000 NAME TYPE ADDRESS 17 lowest, whilst salaries have been on an upward trend for 1.34m m residents) – agglomeration3 Arkadia SC Jana Pawła II 82 the past several months. of the agglomeration respectively. Small, convenience Modern retail stock / 1 21 retail schemes have emerged in new residential clus- 3 Shopping centre stock (GLA) 2 Atrium Promenada SC Ostrobramska 75C 2 THE MARKET IN THE WARSAW AGGLOMERATION OF- ters in the suburbs as well as in the satellite towns of 15 Galeria Mokotów SC Wołoska 12 22 18 Warsaw in Łomianki, Piaseczno, Brwinów, Podkowa Leśna, FERS A DIVERSIFIED SELECTION OF FORMATS AND RE- 21 Wola Park SC Górczewska 124 TAILER POOL. At the end of Q3 2018, a volume of 1.9 mil- Pruszków and others. 3 22 Złote Tarasy SC Złota 59 6 lion sq m of GLA was recorded across all retail formats. 11 Shopping centres of various typology accumulate over Given the volume of retail space in the development 1.3 million sq m of GLA. Large shopping and leisure com- phase, the market will enlarge by a further 19,000 sq m plexes, such as Arkadia, Złote Tarasy and Galeria Mokotów in 2018 and by a further 105,000 sq m in 2019. Over the dominate the market and lead in terms of tenant mix, se- last 3 years, prime rents were on the rise and today has 15 lection of leisure and F&B facilities; implementing novelty peaked at €120 – 130 / sq m / month in the top shopping centres. Rental conditions in lower class schemes, partic- 2 factors into their offer, innovating and quickly responding HOMEPARK Janki ularly those purely hypermarket-driven schemes of older 160,000 m €110 – 130 to ever changing customer behaviour. Modern retail stock under Prime shopping centre generation, have been tightening since customers’ have construction (GLA)3 rents (sq m / month)3 SELECTED BeFree TEDI Owners of secondary but well established shopping cen- shifted towards more convenience retailing, predominant- 7 Zarina DEALZ 8 tres react strongly to toughening competition and un- ly in neighbourhood discount stores. NEWCOMERS Love Republic Fissman 19 dertake extensions and refurbishments in order to bol- Forever 21 Max Burgers FitOne ster their market position and increase the value of their The high capacity of the retail market is reflected in the low 1 Arkadia 12 Galeria Bemowo assets. Atrium Targówek, Atrium Reduta, Blue City and vacancy rate which has been oscillating around a healthy & Other Stories Newbie Miniso NUMBER OF SCHEMES 2 Atrium Promenada 13 Galeria Łomianki 3 Atrium Reduta 14 Galeria Młociny (UC) Centrum Janki are the most pronounced examples of ongo- 2% for the past several years. There are, however, clear Steve Madden Mi Store (Xiaomi) Bebe 5 45 4 Atrium Targówek 15 Galeria Mokotów ing changes. Wola Park, although currently suffering from disparities between locations, with a number of distressed 26% 15% Tezenis Sfera Yamamay Shopping 5 Auchan Piaseczno 16 Galeria Północna assets suffering from extremely limited tenant demand. Growth of private Uterqüe Centres 4 9 major road closures in the area, will benefit greatly from Retail sales growth in the Carpisa Menya Musashi 6 Blue City 17 Galeria Wileńska High street retailing is dominated by F&B facilities thus consumption in the Retail Parks the opening of a new metro line in the near future with country (over the course Max&Co E-obuwie Primark 7 Centrum Janki 18 M1 Marki premium and luxury brands are clustered in leading shop- of the last 5 years)4 country (over the course 3 a stop planned in front of the property. 4 Homla Blue Frog Papa Diego 8 Centrum Ursynów 19 HOMEPARK Janki ping centres such as Galeria Mokotów, Atrium Promenada, of the last 5 years) Outlet Centres Hamleys Papa John’s 9 Designer Outlet Warszawa 20 HOMEPARK Targówek Leading shopping centres are the most sought-after des- vitkAc and Klif. 10 Factory Annopol 21 Wola Park Tresspass Action tination for newcomers, however, the availability of space 1. National Statistical Office; 2. GfK; 3. BNP Paribas Real Estate; 4. Oxford Economics SC – shopping centre 11 Factory Ursus 22 Złote Tarasy 4 CEE the Retail | 2018 BNP Paribas Real Estate 5 CZECH REPUBLIC DEVELOPMENT OF MODERN SHOPPING CENTRE STOCK3 PRAGUE m² GLA CZECH REPUBLIC 1,200,000 SELECTED RETAIL 2.6m €10,908 967,000 Population agglomeration Purchasing Power 1,000,000 1.3m population city1 (per capita / year)2 PRAGUE 800,000 SCHEMES 600,000 The Prague retail market is benefitting brand Hispanitas, and the outdoor brand 400,000 from very strong consumer demand Trespass. In Centrum Cerny Most, a re- nowned Chinese electronics operator 200,000 10 fundamentals fuelled by the positive opened its first mono-brand Mi Store. 12 0 situation in the labour market with 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 unemployment oscillating around 2%, PRIME HIGH STREET IN PRAGUE IS STILL 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 PERFORMING VERY WELL, SUPPORT- wages rising strongly and increasing ED BY THE GROWING NUMBER OF IN- 2 purchasing power. COMING TOURISTS. While mass market 1.1m m 345 SELECTED MAJOR SHOPPING CENTRES 3 brands focus on Na Příkopě Street, the 2 Density of shopping centre rague is the seventh richest region in the EU with luxury prime spot at Pařížská has seen 0.9m m stock (sq m of GLA / 1,000 NAME TYPE ADDRESS 11 residents) – agglomeration3 Atrium Flóra SC Vinohradská 151 182% of GDP per capita above the EU average. among others new arrivals last year Modern retail stock / 2 8 3 2 P Prague Purchasing Power per capita exceeds the such as Philip Plein, Hogan or Brunello Shopping centre stock (GLA) 4 Centrum Chodov SC Roztylská 2321/19 5 Czech average by 30%. Cuccinelli, followed by Valentino and 8 Myslbek ICA Na Příkopě 1096/19 – 21 9 Furla in 2018.