Polish Retail continues outperformance
Warsaw, 2nd March 2011 – Continued interest in defensive retail assets and the completion of some prime transactions in Central and Eastern Europe (CEE) resulted in the region’s 2010 retail investment turnover reaching €1.8 billion, twice the level registered in 2009 according to the latest report by CB Richard Ellis (CBRE). Poland was not only the most liquid market last year, but was also one of the few with strong cross-border investor support. In most other markets, especially in Eastern Europe (EE), local buyers and non-institutional purchasers have become more important. Overall, the level of distress during 2010 steadily increased and the expectation is that this trend will continue in 2011.
Most of Central Europe’s economies have recovered from recession and are posting growth above the EU-15 average. However, some are still struggling and, despite the fact that positive economic growth is expected in 2011, most of SEE will probably need another year to recover from the crisis. With the exception of Poland, retail sales growth remained weak in the majority of CEE, underperforming the Eurozone average. Retailers however, became more optimistic towards the end of 2010, and a growing number of international brands are reconsidering expansion strategies after a steep fall in activity in recent years. Retailer demand has been focused on the large CEE countries with Poland and Romania attracting over a dozen newcomers in 2010. Looking ahead, Poland will remain the key destination for most retailers followed by other core CEE markets such as the Czech Republic, Russia and Hungary and this demand is expected to be led by mid-range and value retailer brands.
On the supply side, modern shopping centre stock in CEE (excluding EE) increased by 1.6 million sq m from the end of 2009, but the level of annual completions in 2010 was down by 20% year-on-year. New developments have started mainly in Poland and Slovakia on the back of strong and/or improved economic fundamentals. Currently there is about 1.27 million sq m of shopping centre space under construction in Poland, with nearly 800,000 sq m of GLA scheduled for 2011 alone.
‘Base rents in Poland have remained stable, despite strong economic growth. It is expected that continued economic growth, combined with a strengthening Polish Zloty may start having a positive influence on base rents as well as increasing turnover levels” – said Magdalena Frątczak, Director of Retail at CB Richard Ellis.
Patrick O’Gorman, CB Richard Ellis Director of Capital Markets, CEE, added: ‘Polish retail market is one of the most attractive sectors for European investors in today’s market and we expect growing investor’s interest into CEE.’