Poland is located in Central Europe, and provides a strategic link between western and eastern Europe (notably Ukraine, Belarus and Lithuania) plus to Scandinavia and other Baltic states via the Baltic Sea to the north. It is the largest of the Central European countries in terms of population with 38.45 million inhabitants. The consumer market is attractive because of its youthful age profile (some 30% of the population is aged under 30 years old) and the number of cities across the country in which to build a store network.
Since its transition to a market economy Poland has experienced sustained economic growth, assisted by its accession to the European Union which is now its main trading partner. Like many of its neighbours, Poland was affected by the recent global financial turmoil through declining demand for its exports, a slowdown of credit activity, and lower foreign direct investment inflows. However the country fared well as it was the only EU nation to escape recession in 2009, attributed to less dependence on external demand, limited pre-crisis imbalances as well as relatively sound and well-capitalised financial system. Despite a more recent and relative slowdown, the country has maintained its reputation of a star performer in economic terms within the EU.
The economic reforms implemented in the early 1990s coupled with an investment-friendly business climate and growth prospects have meant that Poland became a key target for international retail companies. A number of sectors are dominated by foreign retailers, notably food, DIY and furniture. While the retail market is well developed, it remains fragmented overall, with a large number of shops.
The best retail locations in Poland are still to be found in the 8 main cities: Warsaw, Kraków, Lodz, Wroclaw, Poznan, Katowice, Tricity and Szczecin. Warsaw is generally the first port of call, followed by the other major cities.
|Unemployment rate (%)||10.5||9.2||8.7||8.4||8.2|
|Interest rates 3-month (%)||1.5||1.3||2.0||3.0||3.4|
|Interest rates 10-year (%)||3.0||3.0||3.0||5.0||5.4|
NOTE: *annual % growth rate unless otherwise indicated. E estimate F forecast **end of June 2015 ***end of March 2016
Source: Oxford Economics Ltd. and Consensus Economics Inc
|Population||38.45 million (2015)|
|GDP||US$ 473.5 billion (2015)|
|Public sector balance||-3.2% of GDP (2015)|
|Public sector debt||52.1% of GDP (2015)|
|Current account balance||-0.2% of GDP (2014)|
|Parliament||Law and Justice has a significant majority in the Parliament being also responsible for the Government.|
|Prime Minister||Beata Szydlo|
|Election dates||Mid-2020 (Presidential) Late 2019 (Parliamentary)|
|RETAIL SALES GROWTH: % CHANGE ON PREVIOUS YEAR|
Source: Oxford Economics Ltd.
|Largest cities (June 2015)|
MAJOR DOMESTIC FOOD RETAILERS
Piotr i Pawel, Stokrotka, Alma, Zabka
MAJOR INTERNATIONAL FOOD RETAILERS
Auchan, Carrefour, E.Leclerc, Tesco, Lidl, Netto, Intermarché, Biedronka, Kaufland, Lidl
MAJOR DOMESTIC NON-FOOD RETAILERS
LPP S.A. (Reserved, Cropp, Mohito, House, Home & You), RTV Euro AGD, CCC, Martes Sport, Media Expert, Komputronik, Monnari
INTERNATIONAL RETAILERS IN POLAND (A SELECTION)
H&M, C&A, TK Maxx, Zara, Deichmann, , Foot Locker, IKEA, Jysk, Inditex Group, ToysRUs, New Yorker, Rossmann
FOOD & BEVERAGE OPERATORS
Costa Coffee, McDonalds, Burger King, Starbucks, KFC, Dunkin’ Donuts, Grycan, Subway
|MONDAY - FRIDAY||SATURDAY||SUNDAY|
|07.00-20.00 Food 11.00-20.00 Non-Food||08.00-19.00||Permitted but uncommon except in superstores. High steets closed.|
Modern Polish retail is dominated by shopping centres. Space in shopping centres totalled 9.67 million sq.m as at 1 January 2015 in 404 centres. There is slightly above European average levels of floorspace in shopping centres (250sq.m/’000 population compared to 235sq.m/’000 in EU27 at January 2015). The most successful shopping malls have 100% occupancy with retailer waiting lists. The typical entry point for international brands are the top shopping centres.
High street retail currently lags behind shopping centre development across all major Polish cities. The best streets are in Kraków and Warsaw. High street retail in Poland tends to comprise relatively short stretches of streets, and tenants tend to be mainly local retailers and businesses. High street development as seen in western Europe is hindered by low availability of suitable sites in central locations, ownership structure (mostly communal) and undefined legal status of property. However, two new types of investment projects are being rolled out. One involves the rehabilitation of existing tenements, adapting them for retail, leisure and catering uses. Such projects are planned in Warsaw on Chmielna and Nowy Swiat streets as well as in other conurbations. The second involves the refurbishment of old department stores. The last year’s opening of Supersam in Katowice is an example of such a redevelopment. In Warsaw, Smyk and Sezam buildings are being redeveloped into modern commercial multi-use schemes.
Growing interest in Polish retail parks indicates that the retail market is reaching maturity, as both developers and chains look out for expansion opportunities. Development activity is expected mostly in small and medium-sized cities. At the beginning of January 2015 there were a total of 110,600sqm in retail parks with considerably more standalone retail warehouses. The largest facilities are owned by IKEA. Retail park tenants are mainly retailers from the DIY, household appliances and electronics, furniture, sports equipment and homeware sectors. Dominant market players include OBI, Castorama, Leroy Merlin, Media Expert, Decathlon, Media Markt, Saturn, BRW, Agata, Komfort and Jysk. The largest retail park is IKEA Matarnia in Gdansk. Some fashion retailers, such as H&M, C&A, TK Maxx, New Yorker and Smyk also operate in these locations.
Hypermarkets have delayed their expansion plans while small food retail formats moved ahead with growth strategy. The most active retail chain are Auchan who is still working on rebranding Real stores (acquired in 2012 from Metro Group) and Carrefour focusing on a few new openings and several remodellings of existing hypermarkets. In discount sector Biedronka is still the leader.
Poland now has 13 factory outlet centres totalling some 210,000sq.m including Factory Ursus (Warsaw), Factory Wroclaw, Factory Lubon (Poznan), Factory Kraków, Fashion House Piaseczno (Warsaw), Fashion House Gdansk and Fashion House Sosnowiec Outlet Park Szczecin and the recent openings in Bialystok and in Lublin. Together with three new openings, a significant extensions of already existing Factory Ursus in Warsaw (by 6,000 sq m GLA) and Outlet Szczecin (by 5,000 sq m GLA) have been completed in 2015 The market today comprises over 1,000 stores, with the clothing (specifically youth fashion, men’s and women’s fashion and underwear) sports and footwear sectors accounting for the largest share. High demand is reflected by low vacancy rates depending on location.
Poland still has some way to go to catch up with more developed e-commerce markets in Western Europe. Online retailing is still in its relative infancy, but growing fast (double-digit yoy growth), partly by the relatively strong Polish economy. Major international retailers are introducing new online shopping services. All main food operators currently run on-line trading, including Tesco, E.leclerc, Auchan (but only with the Warsaw Agglomeration) and Carrefour (in late 2015 they have introduced on on-line service), Alma and Piotr i Pawel superamrkets. Some retailers focusing on click and collect services (Intermarche).
Retailers can enter direct and it is relatively easy to do so, though many also franchise and enter via concessions/shop-in-shops. A business needs to be registered in the Register of Business Entities at the National Court Registry (KRS) or in the Register of Commercial Activity. An incorporated company, i.e. a limited company and joint-stock company, may start even before registering.
|TOP SHOPPING CENTERS BY SIZE|
|NAME||CITY||SIZE (GLA SQM)||YEAR OPENED|
|Bonarka City Centre||Krakow||91 000||2009|
|Silesia City Centre||Katowice||84,000||2005/2011|
New Entrants to the Market
|Skechers||Fuddruckers||Dairy Queen||Gate||Dunkin’ Donuts|
|KEY FEATURES OF LEASE|
|Lease Terms||Retail terms are generally five to ten years with options to extend. Rents are pegged to the Euro, expressed per sq. m per month. By law the rent is paid in Zloty. Shorter leases (2-3 years) with options for extension are getting more popular, especially in secondary schemes and/or in very competitive markets. Termination options exist in open-ended leases with a 3-6 month notice. In the majority of purpose-built shopping centres there are restrictive user clauses. Generally there are no restrictive user clauses in the high street with exceptions in certain cases such as bookshops and pharmacies. Security of tenure varies considerably but is not automatic for defined-term leases. Under the Civil Code the landlord may terminate the lease if his consent is not obtained and given prior to the change in ownership of the tenant. This situation has only recently come to light.|
|Rental Payment||They are payable monthly in advance, although quarterly is preferred by some. Frequently turnover rents of between 3-10% (depending on use) are employed in new retail developments. Turnover rents are usually subject to a base rent. A security deposit equivalent to between three and six months rent is usually required or the equivalent bank guarantee. Frequently a parent company guarantee is also required. Premiums/key money are not common as so few shops have changed hands, although this is likely to change in the future, especially if restrictions on new development increases and when there is more availability in the high street.|
|Rent Review||Most rents are indexed to Zloty equivalents of the Euro, and are frequently indexed annually to the relevant inflation index. However, sometimes in new shopping centres these are fixed to annual increases of between 2-3%.|
|Service Charges, Repairs and Insurance||Landlord: has responsibility for the main Structure (may be charged to the tenant through the service charge). The Civil Code provides that the tenant is responsible for minor outlays and superficial repairs. In a multi-let building, the landlord will provide such services but charge back via the service charge. The tenant is also responsible for reinstating the premises to their previous state, with the exception of wear and tear at the end of lease, unless otherwise negotiated . The service charge normally includes management fees, security, cleaning, internal maintenance of common parts, external maintenance, servicing of elevators, external insurance, water, heating, air conditioning, property taxes and snow clearance. It excludes internal maintenance and insurance of rented accommodation, electricity and VAT. The landlords are responsible for insuring the main structure while the tenant pays internal third party insurance.|
|Property Taxes and other costs||The landlord and tenant are each partly responsible for the property tax levied by the local authority. However, these are currently low and the landlord tends to pay the tax and charge it back to the tenant via the service charge. Local taxes are planned to be charged on the value of the property. VAT 23%|
|Disposal of a Lease||Sub-leasing is often permitted with the landlord’s consent, not to be unreasonably withheld. Assignment of the lease is only possible with the landlord’s consent. Wearly termination is not possible in the agreements executed for defined period of time, except for case regulated in the Polish Civil Code. Agreements concluded for undefined time can be terminated by written notice (term to be negotiated - usually 3 months). No reinstatement liability following disposal of the lease. However, some leases maybe structured to the contrary although this maybe unenforceable under the Civil Code. Depends on lease disposal and how the contract is structured.|
|Valuation Methods||Gross Internal Area although in some shopping centres half the thickness of the dividing wall is included. First floor is valued at 70% ; basement at 30-50% of ground floor per sq.m rate.|
|Legislation||Polish Civil Code and Legal Act on Premises Leasing. In process of adjusting to EU law regulation. While becoming increasing standardised, leases do still vary depending on whether the landlord is a Polish authority or developer and the nationality of the developer. Leases from a Polish authority tend to be shorter and do not cover all points normally expected in a lease, thus relying on the Civil Code. Leases from developers vary but in the main are recognisable as a standard lease as one would see in Western Europe. Leases are enforceable but not widely tested in the courts. Due to the lengthy process of taking legal action, parties will generally initially seek to resolve disputes by arbitration.|
Renata KusznierskaSenior Director, Head of Retail Agency
Direct: +48 (22) 820 20 20
Fax : +48 (22) 820 20 21
Mobile: +48 606 886 888