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Retailer expansion held back in Europe by lack of new shopping center development

A shortage of new shopping centers being built in Europe restricted the expansion plans of retailers in 2010, but an increase in the amount of space available in emerging markets next year is expected to put retailer growth back on track, according to new research by leading global property adviser CB Richard Ellis (CBRE).

CBRE’s Shopping Center Stock in Europe research found that 1.9 million sqm of shopping center space was completed in 2010 - a fall of 36% from the previous year. The 2009 total was also 30% lower than 2008, which represented the peak in shopping center development. However, if all of the new shopping centers due in 2011 are completed on time, there will be an increase of 53% in new space available to retailers next year, totalling 2.9 million sq m.

Although the development pipeline is considerably smaller than it was in the period from 2007 to 2008, renewed confidence in markets such as Turkey, Russia, and Poland has resulted in an upturn in construction starts and completions are forecast to rise again in 2011. There are currently 146 shopping centers (over 20,000 sq m) under construction in Europe, with the highest levels of activity in the emerging markets of Turkey (1.3 million sq m over 26 schemes), Russia (856,000 sq m over 19 schemes), and Poland (712,000 sq m over 21 schemes).

The shopping center development market in Turkey, for example, has sprung back to life. This resurgence in activity is due to increased confidence among retailers, developers and investors on the back of the strong economic growth seen in 2010, and the forecast of equally strong growth in 2011. This is attracting new retailers to Turkey, while major international brands already present there are also expanding aggressively.

In Western Europe, Italy (394,000 sq m), Germany (369,000 sq m), and Spain (356,000 sq m) recorded the largest amount of new space currently under construction. The United Kingdom currently has three shopping centers under development, with Westfield Stratford City being the largest at 177,000 sq m and due to open in September 2011.

John Welham, Head of European Retail Investment, CBRE, commented: “Since the global economic downturn the majority of investors have focused on core assets and locations, and this still remains the case today; however, the retail sector in particular is now starting to see more capital looking for ‘value-add’ opportunities. Lack of shopping center development in Western Europe, combined with a growing interest in riskier markets, should show through in 2011 investment activity.”

In Hungary shopping center construction activity is still at low levels. In 2010 four shopping centers opened in the country, while in H1 2011 only one, the Europeum in downtown Budapest.  At present eight new projects are in the pipeline on 144,000 sq m to be delivered this year and in 2012, including CET and KÖKI in Budapest,  and Árkád in Szeged.  New projects are mainly new generation shopping schemes at strategic locations attracting high-end tenants.  More than ten projects exceeding 200,000 sq m in total are ready to start but have been delayed due to the crisis. As retail turnover slowly increases pipeline figures will grow as well in the medium term.