Retail Parks In Poland Are Thriving Even In Challenging Times

By Jacek Wesolowski

Consumers are increasingly willing to choose retail facilities close to their homes in order to do daily shopping. One of the aims of tenants in the retail sector is to be close to their customers and expand the reach of their brands. They can achieve this in retail parks. Trei Poland develops retail parks under the Vendo Park brand in Poland. Each Vendo Park has been fully commercialized at the time of opening, and new brands such as Woolworth, Sinsay and New Yorker are eager to grow with us. In addition, tenants in our retail locations include value retailers, which against a backdrop of high inflation and a rising cost of living, are proving to be very popular among customers.

Retail parks appear to be resilient to economic headwinds

The last few years have proved to be a challenging time for the retail market in Poland. The sector had to cope with the Covid-19 pandemic and the accompanying lockdowns which had a sudden and dramatic impact on the retail industry. On top of this, those operating in the sector have had to deal with the effects of the war in Ukraine and the unfavorable economic situation in Poland. However, the retail park has successfully met these challenges, and is proving to be a relatively shock-resistant format.

Retail parks, due to their specific nature and the fact that they fulfill basic shopping needs, remained open during the pandemic. The fact that they emerged relatively unscathed from the difficult period of 2020-2021 has also boosted investor interest.

However, 2022 saw a temporary slowdown in the development of this retail format. The outbreak of war in Ukraine, the increase in energy and fuel prices along with high inflation in general, has meant construction costs have dramatically increased. At one point, the launch of new contracts was delayed due to the large discrepancy between projected pre-war and actual costs. Today, the start of new construction is much easier, but prices are still about 20% higher than before the outbreak of the conflict in Ukraine.

Undoubtedly, two of the biggest challenges for retail park developers in Poland today is to acquire financing and then properly balance the budget for the realization of new investments. Large players that have been on the market for a long time, such as Trei Real Estate Poland, find this process a lot smoother than other competitors in the market. We build new facilities using our own funds, and prepare some of our investments in a joint venture with Patron Capital. Therefore, it is much easier for us to acquire financing than the average developer. In fact, we can see that some of the smaller developers operating in the Polish market are now abandoning previously planned construction projects due to financing issues.

Moving toward ESG

The commercial real estate sector is currently undergoing a transformation aimed at achieving climate neutrality. Compared to other sectors in this market, retail parks in Poland are just at the beginning of this journey. I can say that Trei Real Estate Poland is one of the first retail park developers in the country to have started the implementation of green solutions.

Currently, some of our Vendo Parks are in the process of BREEAM certification, and we are implementing the first eco-friendly solutions in our retail parks. In one of our facilities, in addition to traditional energy sources, we are generating solar energy from photovoltaic panels. To support green transportation solutions, we have installed charging stations for electric vehicles in other Vendo Parks and  have plans to gradually roll out this solution to other locations. What’s more, depending on the specifics of the facility, we are implementing dedicated pro-environmental solutions such as green roofs.

We are aware that this is the right development direction at the moment, which on the one hand responds to current environmental challenges and the expectations of our customers, and on the other, increases the attractiveness of such retail facilities among investors. Although there are still many steps to be taken, the entire retail park sector in Poland is moving closer to achieving climate neutrality.

Jacek Wesolowski

Jacek Wesołowski is Managing Director at Trei Real Estate Poland