Upturn Expected in Shopping Centre Development in Europe

  • Total amount of new shopping centre space in Europe in 2011 likely to be up 26% on last year
  • Czech Republic on the contrary will see the opening of only one new local shopping centre
  •  On 1 July 2011 total shopping centre space in Europe stood at 135.1 million sq.m

 An upturn in shopping centre development in Europe is on the horizon, according to a report from Cushman & Wakefield. Although development has been subdued in some countries for the past few years, improving retailer demand and concerns about potential shortages of prime space are contributing to expectations of a rise in development activity in many European countries.

“With retailers being in a cautious expansion mood and new supply being severely limited, the market also seems more predictable.  The fall in turnover back in 2009 has turned out to be much smaller than anticipated and the development in 2010 and this year has been positive or at least stable. This has clearly supported investor appetite this year,” says Alexander Rafajlovič, Head of Research at Cushman & Wakefield Czech Rep. and Slovakia.

More than 2.1 million sq.m of new shopping centre space in Europe was completed in the first half of 2011, roughly equal to that of the same period in 2010. 71 new shopping centres accounted for 90% of this space, while extensions of existing schemes made up the remaining 10%.

 “The Czech Republic is one of ten European countries where no new shopping centres were opened in the first half of this year. The same situation occurred in Hungary, Austria, and Bulgaria, for instance. As a result, the year 2011 in the Czech Republic will clearly be the year of retail park development. There will be approximately 60,000 sq.m of retail parks built by the end of the year,” says Rafajlovič.

If all the projects scheduled are finished on time, the development total for 2011 will be with 6,8 million sq.m. 26% higher than that of last year.  As with previous years, Central and Eastern Europe accounted for the majority (58%) of new space opened in the first half of 2011 with strong development levels in Russia, Turkey and Poland.

5.8 million sq.m of shopping centre space across Europe is scheduled for completion in 2012, although this figure will depend on occupier demand and the pace of economic recovery.

“Next year, around 116,000 sq.m of shopping centre space is expected to be delivered in the country, with three projects in northern Moravia taking the lion’s share of development. Seeing an upturn in activity and having learned their lesson in 2009 and 2010, less experienced or first time developers are also increasingly inclined to sell their projects or look for JV partners, opening new opportunities even for players currently not present in the market,” says Alexander Rafajlovič.

 

SHOPPING CENTERS PIPELINE – CZECH REPUBLIC, 2011-2012

Project

Location

Developer

Expected opening date

OC Lihovar

Říčany

Titan Real Invest

11/2011

Forum Nová Karolina

Ostrava

Multi Development

3/2012

Futurum Hradec Králové - rozšíření

Hradec Králové

TK Development

5/2012

Breda & Weinstein

Opava

Mint Investments

11/2012

Galerie Moritz

Olomouc

Reality management

2012

Géčko Ostrava

Ostrava

Reflecta Development

Autumn/2012

Source: Cushman & Wakefield, October 2011

 

Shopping Centres Investment

European retail investment volume totalled nearly €19.8 billion in the first half. Retail’s share of total commercial property investment edged up to approximately 35%.

“Investors had bought shopping centres worth EUR 841 million in the Czech Republic by the end of the third quarter. This accounts for 45 percent of the volume of year-to-date investment for this year so far. We expect further transactions of approximately EUR 100 million by the end of the year,” says James Chapman, head of Cushman & Wakefield’s Capital Markets Group.

“The total investment in retail to date has increased almost six times compared to last year. We expect this year’s retail investment volume to be 35 % higher than that of 2007, the strongest year so far. We have seen international investors acquiring the majority of shopping centres this year. For some of them, this is their very first investment on the Czech market,” says Chapman.

“Almost all shopping centres that changed ownership this year were well-established projects, with proven track records of successful operation. Investors bet on certainty. For projects situated outside of large cities and, in addition, away from the best locations as well, developers should expect to have to operate the shopping centre themselves for some time. Once it proves successful, they will find a buyer more easily,” comments Rafajlovič.

However, several European countries recorded significant declines in activity. In absolute terms, Spain saw the largest year-on-year contraction in Europe: retail volume in the first half was nearly €1.2bn lower than that in the first half of 2010, which amounts to an annual fall of 79%. Norway, France and the Netherlands also saw large declines in investment volume relative to both the previous six months and the corresponding period of 2010. In Norway, retail volume declined by 73% year-on-year; in France, by 36%, and in the Netherlands, by 50%.