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Expected Upturn in European Shopping Centre Development Knocked Off Course by Delays

  • New shopping centre completions in 2011 virtually identical to 2010, which saw the largest decline since 1983
  • Delays in a number of markets - notably Russia, Turkey and Italy - caused last year's new shopping centre space total to fall short of projections

The expected upturn in European shopping centre development in 2011 was knocked off course by delays in a number of markets, according to a report from Cushman & Wakefield.

If all the shopping centre projects scheduled for the year had been completed on time, provision across Europe would have increased by nearly 6.8 million sq.m, representing an increase of 15% on the (revised) 2010 total. However, delays in several markets - notably Russia, Turkey and Italy - resulted in the amount of new shopping centre space in Europe in 2011 totaling 5.9 million sq.m, nearly identical to that of 2010.

Of the 34 markets surveyed, 19 experienced declines in annual centre completions relative to 2010. There were particularly steep drops in the Czech Republic, Austria, Slovakia, Croatia and Bulgaria, where no new space was added after the previous year's record completion total. In Germany, the 2011 figure was the lowest level on record since 1989.

Just under 200 (197) shopping centres were completed across Europe last year. 117 of these took place in the second half of the year. Central and Eastern Europe accounted for over two-thirds (65%) of new space added in 2011. Similar to previous quarters, the Russia and Turkey shopping centre development markets were very active, accounting for 42% of new space. Poland, France and Finland experienced a rebound in activity after 2010?s slowdown.

The largest schemes completed across Europe were: Westfield Stratford City in London (176,500 sq.m), Marmara Forum in Istanbul (156,000 sq.m) and Marineda City in A Coruña, Spain (146,000 sq.m).

On 1 January 2012, total Gross Lettable Area (GLA) in Europe stood at 139.9 million sq.m. Average shopping centre provision per 1,000 EU inhabitants was 246.6 sq.m.

The European shopping centre development pipeline for 2012/13 is forecast to be 10.9 million sq.m, with 6.4 million sq.m scheduled for completion this year. However, further delays are possible and the pipeline may contract as projects are delayed or put on hold.

Central and Eastern Europe accounts for most (61%) of the pipeline. Russia and Turkey again top the list, accounting for 32% of new shopping space scheduled. In Western Europe, France and Italy continue to dominate the pipeline ranking.

The largest schemes in the 2012/13 pipeline are: OZ Mall in Krasnodar, Russia (169,000 sq.m), which has been delayed from 2011, Mall of Istanbul (135,000 sq.m) and Puerto Venecia in Zaragoza, Spain (123,500 sq.m).

Retail investment volumes totaled nearly €40 billion in 2011, a 3.5% increase on 2010. Retail?s share of total commercial property was 32%, compared with 33% in the previous year. The UK and Germany continued to dominate activity, accounting for 57% of the European total. Despite a 15% decline in volume relative to 2010, the UK remains in the number one spot, with nearly €12 bn of retail assets transacted.

Mike Rodda, Head of Cross-border Retail Investment, Cushman & Wakefield, said, "Core European retail assets in the stronger markets continue to attract aggressive global capital. During 2011 we saw a number of large lot-size transactions executed by global investors such as CPPIB?s part acquisition of CentrO Oberhausen in Germany. Russia, Germany, Nordics and CEE are amongst the most attractive markets as core investors seek out the defensive qualities of good quality proven retail assets."

Kristina Gorkovskaya, Research Analyst in Cushman & Wakefield?s European Research Group, said, "The outlook for next year is best described as mixed. While the market is set to be more active with more supply forthcoming, a shortage of affordable finance and sluggish occupier demand are likely to impact on investors? tolerance for risk in selected markets. There is also some uncertainty surrounding the development pipeline, with further delays possible."