Why retailers are moving into Central and Eastern Europe

More international retailers are setting up shop in central and eastern Europe amid rising consumer spending power and the emergence of a new generation of malls.

In recent months, Weekday, Primark and Urban Outfitters have all announced plans to open stores in Poland and the Czech Republic – in many cases making their debut in the region.

The arrival of such brands is both reflecting and driving Central and Eastern Europe’s increasingly international retail scene.

"New schemes are attracting tenants from abroad who are looking for something different beyond traditional mall concepts," says Dagmara Filipiak, head of retail tenant representation at JLL Poland. "Retail vacancy is now at 3.8 percent and that means that new tenants – in particular retailers looking for large floorplates in prime locations – will need to widen their search for suitable space.”

New developments are also rethinking – and in many cases raising the bar - on what modern retail space looks like.

Urban Outfitters for example, has taken space in Warsaw's Elektrownia Powiśle, a former plant enjoying a second lease of life as a mall.

“It’s where retail meets dining, a boutique hotel, living and office space,” Filipiak explains. “These are the kind of concepts new retailers will continue to seek out.”

A new retail world

In the Czech Republic, several brands, including Red Valentino, as well as German jewellery chain Thomas Sabo and Italian jeweler Gismondi, are getting a foothold in Prague’s retail areas.

Shopping centres are the more viable option, with space hard to find in Prague’s mainstream Na Příkopě, Pařížská or Wenceslas Square (Václavské náměstí), explains Tomas Soukup, head of retail agency at JLL in Prague.

"Competition for units on Prague's main high streets is intense," he says. "Rather than waiting for space to emerge, conventional international retailers looking to build a presence in the city have often seized the opportunity to move into some of Prague's refurbished or extended shopping centres."

Shopping centers such as Warsaw’s Arkadia shopping centre and the Chodov centre in Prague, both developed by mall specialist, Unibail-Rodamco-Westfield, have proven popular with new tenants. As part of an extension at Chodov, Zara Home recently made its Czech Republic debut.

Soukup says some relief could come in the arrival of a new central scheme, Savarin Palace, a redevelopment of six buildings with an inner courtyard area between Na Příkopě, Wenceslas Square, Jindřišská and Panská.

Another major development in central Prague, near Masaryk station, should add around 10,000 square metres of retail space.

A social experience

Consumer behaviour across the region is adapting to rising spending power and a greater range of retail brands.

"It wasn't that long ago that Polish people were more likely to eat at home," Filipiak says. “Now many retail areas have growing numbers of popular bars and restaurants that attract today’s shoppers – and that is a real draw for international retailers.”

Plus, many of the brands entering Poland are familiar to Poles from their trips abroad, she adds, pointing to the likes of Papa Johns and Menya Musashi, as well as Primark and Urban Outfitters and Sloggi.

In Prague, high levels of tourism are also boosting retailers.

"At the luxury end of the market, Prague is competing with the likes of Vienna and Munich," Soukup says. The tourist clientele, often Asian or American, is the same across those cities."

Luxury retailers, who in the past have increased their presence in the region through the franchising of their brands, are now taking space outright.

In 2018, Christian Louboutin opened its first boutique on Široká, with high end accessories brand, Montblanc, another recent high-profile addition.

Soukup believes they’ll be joined by more luxury brands in the coming years: "It's a city which because of its extraordinary high visitor numbers, is well-positioned to withstand any potential slowdown in domestic consumer spend – we saw that in the last downturn in 2008.”

In Poland, Filipiak says new international retailers will continue to seek openings in the capital and regions in the coming months.

“In the medium and long-term, purchasing power is set to rise and competition among retailers will increase. However, a wider choice of new schemes under construction in Warsaw and across the country should go some way to help satisfy demand," she concludes.