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Developers look to smaller markets

Galeria Veneda in Łomża (Echo Investment)

Retail developers focused on medium and small markets in the last half year which account for 63 percent of the retail space currently being built. Knight Frank’s latest report on the commercial real estate market shows that Poland continues to be an interesting location for tenants, with new brands, making their debuts or planning further expansion in this market.

– Developers are looking to increasingly small markets because of growing barriers to building retail properties in the largest agglomerations. On the one hand, they face market constraints - significant competition and high levels of retail space saturation and, subsequently, limited availability of land for large format retail premises. Not insignificant also are aspects related to local land use plans or to the absence of such plans or to protracted administrative procedures. Projects in smaller locations are developed within shorter time frames, which also translates into financial advantages – says Agnieszka Mielcarz, Head of Retail Asset Management at Knight Frank Poland.

Small and medium markets (in towns or cities with a population under 400,000) were the predominant locations in terms of new openings. This segment currently accounts for nearly 45 percent of the whole supply of retail space in the country. The strong dynamics of this trend manifest themselves in the fact that over 63 percent of total retail space currently being built will be located in cities with a population of under 400,000. Furthermore, every new project completed in Q2 2014 was handed over in a city with a population under 100,000. During that period two new shopping centres and four retail parks with a total space of around 85,000 sqm were delivered to the market.

At the end of the Q2 2014 the stock of modern retail space in Poland reached 11.3 million sqm, with 6.3 million sqm located in the 8 largest agglomerations, 3.1 million sqm in medium markets (100,000 – 400,000 residents), and the remaining 1.9 million sqm in smaller cities (under 100,000 residents). This means that the average index of retail saturation in Poland is 293 sqm per 1000 inhabitants, while in the case of the 8 major agglomerations this index continues to stand at 553 sqm per 1000 inhabitants.

– Poland is an attractive market for tenants – Agnieszka Mielcarz adds. – Brands such as Inside, Gattinoni Roma, Medicine, Celio and Giacomo Conti made their debuts in our market in the last half year. Some of these companies immediately decided to open stores in several locations. Many brands already present in our market also decided to expand – e.g. Michael Kors (the first boutique in Pomerania), New Balance, C&A, Go Sport, Jula and Hebe.

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