Warsaw Retail: Mind the Gap!

Warsaw Retail: Mind the Gap • May 2009
Warsaw Retail:
Mind the Gap!
May 2009
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Warsaw Retail: Mind the Gap • May 2009
Warsaw Retail: Mind the Gap • May 2009
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New retail development? Sounds unrealistic given the
current economic circumstances. However, we should start
planning it now so that the leasing and completion stages
coincide with the economic recovery over 2011-2013.
Introduction
This innovative report has been created as a joint initiative of three
high-profile consultants in the real estate field: Jones Lang LaSalle leader on the commercial real estate market, GfK Polonia research
institute and REAS residential advisors. As a result, three different
aspects affecting the retail development opportunities have been
confronted. These are:
•
retail density across 92 urban areas of Warsaw;
•
future development of the residential market in Warsaw;
•
purchasing power broken down to the urban areas.
The aim of this report was to identify Warsaw sub-regions with
greatest potential for new sustainable retail centre. For this reason
the report is principally aimed at retail developers, investors and
financing institutions.
First dimension – retail market situation
The retail market in Warsaw has undergone a transformation,
particularly over the last decade. First and second generation
shopping centres, located in densely populated residential areas,
mainly in the outskirts of the city, comprised of a hypermarket
anchor e.g. Centrum Handlowe Targówek, Centrum Handlowe
Reduta, Centrum Janki, Centrum Ursynów, Auchan. Exceptions
include Promenada and Blue City which are supermarket-anchored.
Third generation retail centres such as Galeria Mokotów (20002002), Arkadia (2004) and Złote Tarasy (2007) included a leisure
element from the beginning of their operations.
this situation is, however, not due to market saturation. The retail
density in Warsaw is still relatively low (496 m2 / 1,000 inhabitants)
in comparison with other major Polish agglomerations. It must be
remembered that the density is based upon the official population
figures and would be significantly lower if unofficial population size is
used in the calculations. However, differences still exist between the
districts of Warsaw as pictured on the graph below.
Retail provision density (m2 / 1,000 inhabitants) – districts of
Warsaw
Rembertów
Wilanów
oliborz
Wawer
Wesoła
Bielany
Praga Pd.
Białoł ka
Mokotów
Praga Pn.
Ursynów
Bemowo
Wola
Ursus
Ochota
ródmie cie
Targówek
Włochy
0
The retail market situation in Warsaw is very unique. From mid1990s to 2007, there have always been construction works on new
large-scale retail centres in Warsaw. The last proper shopping and
leisure centre was, however, Złote Tarasy opened in 2007, whilst
overall the most recent addition to retail stock in Warsaw was
Galeria Rembieli ska in autumn 2008 as part of a residential block.
At present, retail construction activity in Warsaw is extremely limited
(gallery adjacent to E.Leclerc in Ursynów, department store by Wolf
on ul. Bracka and Metropol Dom i Wn trze). The reason underlying
1 000
2 000 3 000
4 000 5 000
6 000 7 000
Source: Jones Lang LaSalle, GUS
Retail provision data as of April 2009, population data as of July 2008.
Retail schemes of all types sized 500 m2 of GLA and above have been taken into
account
It is worth pointing out that the significant retail clusters in Janki,
Marki and Piaseczno have been included in the density of Włochy,
Targówek and Ursynów respectively, influencing the final ranking.
The reason behind this concept is that, despite out-of-town location,
these clusters have a significant impact upon the retail potential in
the adjacent districts and as such cannot be ignored.
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Warsaw Retail: Mind the Gap • May 2009
Therefore, Włochy is a frontrunner in respect of the retail density in
Warsaw, due to the inclusion of the Centrum Ok cie (Real, Media
Markt, Meble Agata, Praktiker), and the huge retail cluster in Janki
with Centrum Janki (Real, Leroy Merlin, Saturn, Cinema City) and
Park Handlowy Janki (Ikea, Praktiker, Electro World). Targówek,
ranked second, includes the cluster of retail development in Marki
i.e. M1 centre with Real and Praktiker; Centrum Handlowe
Targówek; Zielony Park Handlowy; Park Handlowy Targówek with
Ikea, Domoteka, Leroy Merlin, Electro World, Decathlon and others.
Interestingly, Ursynów ranks relatively low (in the middle of the
ranking) despite the inclusion of Auchan and Fashion House in
Piaseczno.
Second dimension - spending power in Warsaw
An important measure of affluence in a given area is the overall
purchasing power. It is defined as the total value of goods and
services that the population in a given area can afford to buy over a
year. Unsurprisingly Warsaw residents have higher purchasing
power in comparison to the entire country. On the average, they can
nominally purchase almost 64% more goods and services than an
average inhabitant of Poland, the best score amongst all 2,478
municipalities in Poland. However, the discrepancies in spending
power between the districts are in some cases 100%. An in-depth
analysis demonstrates that the majority of affluent population is
concentrated in the south-western and northern parts of Warsaw.
Ursynów, Wilanów Czerniaków, Natolin, era Zachodni,
Tarchomin, Pyry and Powsin are frontrunners in this respect. These
areas feature the highest overall purchasing power per capita.
From the point of view of a retail developer, the attractiveness of a
given area is determined not only by high purchasing power per
capita but also the overall volume of cash concentrated in that area.
A simple rule applies here - the more people live in the area, the
larger pool of money. Thus most desired retail locations should
feature a combination of a large pool of money with a high
purchasing power per capita.
Having regard to the two parameters as above, Ursynów and
Natolin are ranked high in Warsaw as the two areas are
characterized by top rankings of both parameters. The leader group
also encompasses Tarchomin, Słu ew, Czerniaków, Wierzbno,
Sielce, Mokotów Stary, Szosa Krakowska, Górce, Bemowo
Zachód – all these areas have a high purchasing power, coupled
with a relatively large pool of money. In addition, taking one of the
two aspects into account, the following areas should also be
regarded attractive for retail development: Bródno (large pool of
money) and Wilanów, Powsin, era Zachodni and Pyry (top
purchasing power per capita).
In conclusion, the capital city is diverse with regards to purchasing
power of Warsaw residents. This should be taken into account when
looking for sites for new retail projects.
Warsaw Retail: Mind the Gap • May 2009
Purchasing Power Broken Down to Warsaw’s Districts
Source: GfK Polonia
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Warsaw Retail: Mind the Gap • May 2009
Third dimension - future residential development in Warsaw
A key part of a retail analysis is the site catchment area. While
status quo analyses are quite easily feasible based on available
demographic data, prognoses are not. In order to estimate the future
population living in a defined catchment area, it is critical to monitor
the development of the residential market on a regular basis. This
applies both for the secondary market and the primary market. In
case of the former, transformations in the population pattern of a
functioning neighbourhood are mainly due to gradual changes in
household structures. Current trend in this respect is a development
towards less dense living, with the number of persons within a
household gradually declining. Thus, changes in the secondary
market typically point towards a decrease in residents lining in the
existing housing stock. On the contrary, Warsaw’s primary market is
quickly developing and adds a large portion of new dwellers to
certain neighbourhoods. The increase in population is derived from
both migrants and the inner-city redistribution of Warsaw residents.
In any case, new residential development plans are a barometer of
future growth areas in terms of population.
According to REAS monitoring of developers’ plans, there are more
than 38,600 apartments planned to be completed in over 300
residential developments over 2009-2010. A large part of these
projects is at advanced building stage, under construction or just
before construction starts. Thus, the current crisis, which heavily
impacts on Warsaw’s housing market in general, should bring
limited changes to the progress of the majority of these projects.
Nevertheless, it is inevitable that the completion of several
developments will be postponed until after 2010 or, in a certain
number of cases, brought to standstill, depending on the developer’s
financial situation and the advancement stage of each specific
project.
By far the largest concentration of residential developments to be
completed during the next 24 months can be found in the
Miasteczko Wilanów development area in the northern part of the
Wilanów district. Another important region with high building
intensities is the Białoł ka district, particularly the three
neighbourhoods of Ma ki-Brzeziny, Nowodwory and Tarchomin.
Furthermore, there are several smaller neighbourhoods of quite high
construction and pipeline activity, such as Bemowo’s Górce area or
the downtown neighbourhood of Centrum-Północ. These areas look
set to change not only the physical/ architectural appearance but
also the resident profile, both in quantitative and qualitative terms.
In addition to short-term outlook based on developers’ plans, REAS
forecast residential growth in Warsaw’s 92 urban planning areas by
2020. This long-term forecast is chiefly built upon residential
development opportunities according to official spatial planning
documents from the Warsaw Municipality. Furthermore, it also takes
into account development trends as well as developers’
announcements of projects for completion after 2010. Again, REAS
estimates show the highest long-term development potential in the
urban areas of Wilanów-Czerniaków and Ma ki-Brzeziny followed
by two other Białoł ka areas (Nowodwory and Tarchomin) as well
as Ursynów’s Kabaty neighbourhood and a few peripheral areas in
the southern parts of Warsaw. Since this forecast determines
potential housing expansion in usable area, it does not translate into
household or resident estimates, as single-family developments are
included too. However, it gives a general idea of future development
trends and, more importantly, it is able to confirm the key growth
areas out of the short-term analysis for 2009-2010.
Warsaw Retail: Mind the Gap • May 2009
Directions in Residential Development in Warsaw
Source: REAS
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Warsaw Retail: Mind the Gap • May 2009
Conclusion – development opportunities
When the three aspects are taken into account, a clear picture of
market opportunities emerges. Unsurprisingly, there are two regions
in Warsaw featuring considerable development opportunities. These
include:
Białoł ka, most notably densely populated Tarchomin and
Nowodwory. This region meets the three criteria under consideration
and is clearly underdeveloped in retail terms. The closest bigger
retail centre is the Auchan hypermarket with an adjacent Leroy
Merlin DIY store on Modli ska street in some distance to high-rise
housing estates of Tarchomin and Nowodwory. We trust this has
potential to support a hypermarket-anchored shopping centre with
‘life style’ retail facilities for young and reasonably affluent
catchment population. In addition, this region will gain additional
access and connectivity with the left bank of Wisła river upon the
completion of the Northern Bridge.
Wilanów area towards the neighbouring Powsin region is one of the
fastest growing residential hubs in Warsaw with high purchasing
power. In addition, the retail development does not catch up with the
amount of new residential units being delivered to the market. We
think that a proper shopping centre is sustainable in this area,
drawing from a wider catchment of Konstancin Jeziorna and Powsin.
In addition to the above, further two Warsaw areas rank high and we
advocate including them in the considerations. These are:
Ursynów / Kabaty whose spending power coupled with residential
development prospects justify further retail development of ‘life style’
category, catering for the needs of young catchment population.
This is despite some retail facilities are already represented here
e.g. Centrum Ursynów (Real, OBI), Auchan centre in Piaseczno,
E.Leclerc and Tesco in addition to other retail centres. A retail
development in this part of Warsaw should, however, have regard to
that in the Wilanów region. Although we believe that there is a
minor psychological barrier in travelling for shopping from Ursynów /
Kabaty to Wilanów, the increased connectivity between Wilanów
and Kabaty/ Ursynów following the extension of Płaskowickiej street
should make it possible.
Bielany district in the northern part of Warsaw clearly features a
lack of modern retail facilities whilst having an average spending
power and reasonably strong residential growth forecasts. It might
be arguable that this area is captured by the regional Arkadia
shopping centre, however, we are convinced that increased
connectivity of Bielany through the underground line and Northern
Bridge (to be completed by 2012), coupled with growing residential
estates are likely to positively impact retail development potential
here. Again, we recommend to have regard to a potential centre
which might be developed in Białoł ka, particularly if a site in a
vicinity of the Northern Bridge is selected.
By identifying the areas as above, we are not questioning
sustainability of retail development in other parts of the city. On the
contrary, we are convinced that there are likely to be some
development activities elsewhere in Warsaw, particularly in the
following retail categories:
Retail parks - due to lower development costs, short and simple
construction process and therefore lower rental levels this concept is
likely to become increasingly popular among occupiers. Retail
warehouse parks are flexible structures and can be developed in a
proximity to existing well performing shopping centres as extensions
to their offer e.g. Zielony retail park Targówek or Młyn retail park in
Wrocław.
Factory Outlet Centres – in a mid-to-long run, we identify a place
for a maximum of two retail centres of this type still to be developed
in the capital city.
Small convenience type formats with a supermarket or a discount
store anchor and a service gallery targeting the primary needs of
immediate catchment area population. Recent examples include
Galeria Rembieli ska, Berensona and Treny centres by MarcPol
launched in Białoł ka and Łomianki respectively.
Final remark
Following a period of unprecedented rises in land value and rental
levels, coupled with development of increasing number of projects in
increasingly smaller towns, the market clearly slowed down. Banks
and financing institutions have started to take an extremely cautious
approach towards new developments, with the current requirement
for a minimum of 50% but most often 60%-70% pre-let before
making a financing commitment. Given the recent weakening of
retailer demand, this threshold is difficult to achieve at the early
stage of the project.
Therefore a proper selection of retail site and concept is of critical
importance at present. It must be remembered that the planning
process typically takes 2-4 years from identifying a potential site
until the commencement of construction works, depending upon the
size of the project, its complexity and location. In addition, only 20%
of Warsaw area has valid master plans, and large retail
development is subject to stringent regulations. For these reasons,
we recommend undertaking initial planning stage and site selection
now in order to commence the leasing and construction when the
market is expected to recover.
Warsaw Retail: Mind the Gap • May 2009
Retail Market Gaps
Source: Jones Lang LaSalle, REAS, GfK Polonia
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Contacts
Anna Bartoszewicz-Wnuk
Associate Director
Head of Research and Consultancy
Jones Lang LaSalle
+48 22 318 00 07
+48 600 303 778
anna.bartoszewicz-wnuk@eu.jll.com
www.joneslanglasalle.pl
Przemysław Dwojak
Department Director
Geomarketing Research & Consulting
GfK Polonia Sp. z o.o.
+48 22 434 16 11
+48 502 196 091
przemyslaw.dwojak@gfk.com
www.gfk.pl
Paweł Sztejter
Partner
Head of Advisory
R E A S | Residential Advisors
+48 22 380 21 05
+48 664 088 222
pawel.sztejter@reas.pl
www.reas.pl
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