The pandemic favours the smaller, with almost ¾ of retail schemes under construction being under 20,000 sq m.
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The first quarter of this year was marked by limited shopping centre activity. As a result, this market increased by only 30 thousand sq.m. and currently the total available space amounts to 12.07 million sq.m. – According to CBRE. Another 280 thousand sq m is under construction, 73% of which are smaller schemes, mainly retail parks. The remainder of the new space under construction is made up of extensions to existing centres and schemes over 20,000 sq m. If construction is completed on time, new retail space delivered to the market in 2021 will be higher than in the previous two years.
– Due to the epidemic constraints, few built schemes started operating in the first three months of the year. As a result, the market expanded by only 30,000 sqm. Some openings have been postponed until the restrictions are lifted. Despite the difficult experience of trading in the pandemic, there is quite a lot of space under construction, mainly retail parks, which have proven to be “covid proof”. The location close to residential areas, the often discount shopping offer and the lack of common areas responded to specific needs in the pandemic and reinforced the sense of security. As a result, retail parks have been less affected by declines in footfall than large centres and are attractive to investors, says Magdalena Frątczak, head of the retail sector at CBRE.
Small facilities in small cities
Of the 280,000 sq m of new retail schemes under construction, 73% are small schemes, mainly retail parks, up to 20,000 sq m in size. Shopping centres larger than this size comprise 10% of the space under construction and 17% are extensions to existing buildings. The vast majority of new retail schemes will be located in smaller towns with up to 100,000 inhabitants.
The completion of all the space under construction is planned by the end of the year. This is very likely to exceed the volume of supply delivered to the market in 2019-2020.
Rents unchanged, but current openness to negotiations
Rents in the best large shopping centres remain unchanged at between €100 and €130 per sq m per month for a 100 sq m unit in Warsaw and between €40 and €60 per sq m per month in other large cities. In retail parks these amounts fluctuate between 8 and 12 euros per sq m per month. Owners of successful schemes prefer to wait for a tenant who will pay the full rate, even at the expense of temporarily empty premises. Nevertheless, a slightly greater openness to negotiation than before can be observed.
– Retail schemes with a weaker market position may experience downward pressure on rents due to rising vacancy rates. Premises cannot remain without tenants for long, especially now that the industry is slowly starting to return to normal functioning. Everyone also hopes that the accelerating vaccination programme will ensure that there will be no more closures of the magnitude seen in previous lockouts,” Magdalena Frątczak concludes.