Market overview
Retail parks and convenience retail
In times of uncertainty ridden by war,
inflation and skyrocketing interest rates, investment value is double-checked. The real estate sector has always been a great hedge against higher inflation as rental levels are adjusted accordingly. The industry now finds itself in a difficult macroeconomic environment, accompanied by the looming potential energy crisis. However, Q1-Q3 2022 period didn’t indicate any alarming signs of a slowdown. Quite the contrary, the total investment volume exceeded the analogous result of 2021 by over 20%. Retail investment market in terms of transacted volumes is still far behind the pre-covid levels. In Q1-Q3 2022 period, retail investment volume amounted to 20% of the total investment volume transacted in Poland. Compared to 2020 and 2021, it may look like a slight rebound, however bearing in mind, that ¾ of this volume was the result of EPP JV’s established in Q1 2022, the real outlook looks less abundant.
Share of retail sector (%) in total investment market in Poland
Until 2020 and the COVID-19 pandemic outbreak, both share of retail investment volume as well as share of retail transactions were on the stable downward trend. 2020 saw the lowest level of retail volume, but the number of closed deals were symmetrically growing. It was due to investors redirecting their attention to the resilient retail parks and convenience retail facilities, which was also reflected in the low retail volume in the Polish investment market. Q1-Q3 2022 period was exceptional due to the EPP JV’s transactions, echoed in the 80% share of volume regarding shopping centres. Retail park and convenience retail schemes are the undisputed leaders in terms of number of acquisitions.
Prime yields in Poland are on the growing trend. The yield gap between prime retail parks and prime warehouse and office properties exceeds 180 bps, which is an exceptional result compared to the capital cities of Western Europe. As far as CEE markets are concerned, also Hungary and Romania offer very generous yields in this recession-resilient sector. Due to the lack of product and high interest in retail parks and convenience retail assets, further yield compression is expected.
Outside major markets, where the vast majority of retail parks and convenience retail schemes was transacted, yield levels depend on many external factors. The main factor is the location of the scheme, followed by city size and its position in the region as well as the presence of food anchor tenant and length of the lease agreements. Higher yield values are achieved by assets with high income share of food operators.
Next chapter: Investment market