JSE-listed EPP, Poland’s biggest retail landlord, issued a market update for 2020 that reveals an encouraging recovery for retail and the continued strengthening of its operational resilience.
Poland emerged from a three-week COVID-19 lockdown on 28 November with a robust return to shopping at EPP’s centres. Footfalls for December to date have recovered to 76% of 2019 levels, supporting EPP’s strong and steady operational recovery. Nearly 90% of the EPP portfolio’s gross lettable area (GLA) is currently trading. Average tenant turnover from July to October returned to the level of 90% for the same months in 2019, and December 2020 turnovers look set to reach 90% or more of December 2019 levels.
EPP’s average portfolio occupancy remains stable at the robust pre-lockdown level of 96%. From June to end-September EPP extended its weighted average lease term by GLA from 4.7 years to 5.4 years. All lease negotiations applied for by tenants have been concluded. Rental collection rates were more than 95% of the discounted rental levels for an average of four months before November’s lockdown (July-October 2020). EPP also continued to secure new store openings from some of the biggest names in retail, including Sephora, Hebe, 50 style and Martes Sport, among others. EPP’s tenant base comprises a nearly equal split of international retailers and Polish retail chains. Tenants in the EPP portfolio have a track record of outperforming average sales on the Polish market.
The second three-week lockdown has been much less severe for EPP than the first one, which lasted for seven weeks from 14 March until 3 May 2020. It was shorter and not as restrictive, with roughly 10% more GLA allowed to remain open in November. Polish shopping centres were able to reopen after only three weeks of the country’s second lockdown because they have proven to provide safe, sanitised environments for shoppers and staff alike. EPP’s strict sanitary and safety regimes go well beyond what is required by law. Because of the proactive response of the entire retail community in Poland, including many landlords, retailers and industry associations, the Polish government allowed malls to open in time for the critical festive trading period, which has become even more important for the retail industry in 2020 given the significant impact of COVID-19.
“We were pleased with the recent reopening of the shopping centres in Poland and happy to confirm that, as a result, EPP remains on track to deliver full-year earnings of EUR 4.75 – EUR 5.25 cents per share in line with previously provided guidance. We look forward to the busy end-of-year retail season and are optimistic that the vaccination programs that will be made available to the public in Europe in early 2021 will help to efficiently defeat the virus and enable the return of a stable operating environment next year and beyond,” says Tomasz Trzósło, CEO of EPP.
The Polish government has also provided various support programmes, topping EUR 70 billion, some directed at retailers including cost subsidies. Additional support has been provided with added trading Sunday. Retailers in Poland would normally only trade on two Sundays before Christmas, but this year trading has been increased to three Sundays in December to support retailers and enable safer shopping across more days.
Even though Poland, like most European countries, has experienced relatively high rates of new COVID-19 cases in the recent weeks, it is expected to be one of the least impacted economies in Europe in the next 12 months.With forecasts estimating that Poland will be among the few European economies to show positive average GDP growth for the years 2020 and 2021.
