NEPI Rockcastle Report: CEE retail market outpaces Western Europe amid strong economic growth

Central and Eastern Europe (CEE) is rapidly closing the income gap with Western Europe, driven by robust economic growth and rising consumer spending in markets like Poland and Romania. This trend is attracting international and regional retailers to CEE’s modern shopping centers, which offer higher margins and lower operating costs, according to NEPI Rockcastle’s report, New Europe: The Future of Retail Development in CEE.

The report highlights that GDP growth in CEE markets where NEPI Rockcastle operates is projected to reach 3.16% in 2025, significantly outpacing the Eurozone’s forecast of 1.5%. Between 2012 and 2023, GDP growth in CEE countries such as Poland (3.3%) and Romania (3.2%) consistently outperformed the EU average of 1.3%.

“Retail real estate in the CEE markets offers significant growth potential, far exceeding that available in Western Europe,” said Marek Noetzel, COO of NEPI Rockcastle. “Consumers in Poland and Romania are showing increasing confidence in their household incomes, which is reflected in higher spending and turnover at our shopping centers. Strong demand for space from both international and regional brands is driving rents and higher net operating income.”

CEE is benefiting from strong real wage growth, which has bolstered private consumption and retail sales. While Western Europe’s main markets—France, Germany, and the UK—have experienced declining retail sales over the past two years, CEE markets are seeing sustained growth.

Large, modern shopping centers in CEE have become central retail and social hubs, with their share of total retail volume often exceeding 50%. Unlike Western Europe, where smaller shopping centers face challenges from e-commerce and rising costs, CEE shopping centers are thriving. According to NEPI Rockcastle, two-thirds of CEE consumers prefer in-person shopping experiences, and the region’s shopping centers are well-positioned to deliver.

“Lower operating costs, higher margins, and the dominance of well-positioned shopping centers in CEE make them attractive to retailers, food and beverage operators, and entertainment companies,” the report states. Even in smaller cities and less affluent areas, CEE shopping centers outperform Western European counterparts in attracting retailers and customers.

In contrast, Western Europe’s retail market is grappling with oversaturation, high operating costs, and lingering effects of the pandemic. Main shopping streets and smaller centers in less developed areas struggle to compete with e-commerce, while high construction costs and stringent environmental regulations have stalled retail space development. Shopping center retail space growth in Western Europe has slowed to just 0.4%, with some countries like Germany, Spain, and Italy seeing declines.

The report notes that rents in prestigious high street and shopping center locations across Western Europe have dropped by an average of 14% since their peak in 2019.

NEPI Rockcastle, which operates a €7.4 billion portfolio of 56 retail properties across eight CEE countries, is uniquely positioned to capitalize on the region’s retail growth. The company owns 14 shopping malls in Poland alone.

As Western European markets stagnate, CEE continues to attract investment, offering retailers opportunities to tap into growing consumer confidence and rising household incomes. With international and regional brands vying for space, NEPI Rockcastle’s CEE assets are positioned to benefit from this upward trajectory, making the region a standout performer in the global retail landscape.

Source: NEPI Rockcastle and ISBnews