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Delays to Hinder Expected Upturn in European Shopping Centre Development

Arena Plaza Shopping Centre night
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  • 2.4 million sq.m of new shopping centre space was completed in Europe in H1 2012
  • Central and Eastern Europe account for nearly 75% of the total new space in H1
  • An additional 4.5 million sq.m is scheduled for completion in H2 bringing projected total completions for 2012 to 6.9 million sq m (6.5 million sqm in 2011) 
  • Reported delays in a number of countries could see completions fall short of the projected total.
  • The pipeline for 2013 currently stands at 5.4 million sq.m 

Whilst this year’s projected volume of new shopping centre completions at 6.9 million sq. m exceeds the 2011 total, a more cautious mood has clearly taken hold among occupiers and developers and delays have been reported in countries including Italy, France, Portugal, the Czech Republic and Romania. As a result, the actual volume of space delivered could well fall short of projections,” according to the latest European Shopping Centre Development Report released by Cushman & Wakefield today. 

Of the 71 new shopping centres opening in H1 2012, 53 were in Central & Eastern Europe and 18 in Western Europe. The largest centre delivered in H1 was Oz mall in Krasnodar, Russia (169,000 sq.m). The largest centres delivered in Western Europe were Boulevard Berlin (64,000 sq. m.), Gran Plaza 2, Madrid (60,000 sq.m) Conca d’Oro in Palermo, Italy (55,000 sq. m) and Confluence in Lyon, France (52,000 sq.m) 

Russia tops the European ranking in terms of both pipeline and H1 completions. Approximately 725,000 sq.m of new space was completed in Russia in H1, taking total floorspace to 15.4 million sq . m. Russia accounts for more than one fifth of the European pipeline with a further 2.1 million sq.m of new space scheduled for completion in H2 2012/13, which will boost floorspace by 13% and lift Russia ahead of the UKto become the second largest shopping centre market in Europe after France. 

More than 250,000 sq.m of new shopping centre space opened in Turkey in H1 (if factory outlets are included, the figure increases to an estimated 350,000 sq.m) with a further 1.6 million sq. m under construction, accounting for 16% of the total European pipeline. If all of the schemes in the pipeline are completed on schedule, shopping centre provision in Turkey will increase by 25% between 1 July 2012 and 31 December 2013. More than 800,000 sq.m of new space is scheduled for completion in Istanbul alone by the end of 2013.

Poland saw the completion of nine new centres and five extensions totalling 235,000 sq m in H1. While no new shopping centres were completed in the capital, the Warsaw metropolitan area should see a boost in provision in 2012/13.

In Western Europe, France and Italy continue to top the pipeline ranking. However further delays have been reported in Italy, including several schemes that have been put back until next year; the projected 2012 completion total has been revised from over 400,000 sq.m to the current figure of 284,000 sq.m. In Spain Puerto Venecia in Zaragoza accounts for nearly 30% of the pipeline while in the UK, completions will reach an historic low this year before moderately picking up again in 2013; schemes in the pipeline include Land Securities’ Trinity Leeds (75,900 sq.m)

Justin Taylor, UK CEO Retail & Leisure said: “The programme of shopping centre openings and pipeline across Europe is positive compared to 2011 with the particular focus on schemes coming forward being in central and eastern Europe and Turkey being one of the stand out markets. Developers do however remain cautious with access to capital for some being more difficult. For many markets, the occupier profile is positive as many of the leading brands continue to internationalise and look to expand into major cities across Europe.”

Investment activity slowed in H1 2012. Nearly €12 billion of retail assets were transacted across Europe, compared with €19billion in the previous six months and €21 billion in the first half of 2011. Retail accounted for 21% of commercial property investment , a decline on both the previous six months (28%) and the corresponding period of 2011 (36%). The UK and Germany continued to dominate although activity has slowed considerably in both markets. 

Mike Rodda, Partner and head of EMEA Retail Investment, Cushman &Wakefield said: “On average in European Retail Investment accounts for around 30% of total investment volumes, this increased to around 40% during the early stages of the recovery, but recently this has fallen back, finance shortages have hit particularly hard especially for the larger transactions, however, demand for the best schemes is still good and the pipeline to the year end looks positive with some sizeable transactions expected.”

In Hungary there are currently 57 shopping centres on the market, which means approximately 1,320,000 sq m supply. In the first half of 2012 only 6,000 sq m new space was delivered (Sió Plaza Shopping Centre) and for the rest of the year we expect a smaller, ca. 4,500 sq m Hegyvidék Shopping Centre to be handed over, developed by WING in the 12th District. By the end of 2013 the Árkád 2. Shopping Centre will be finished, meaning 20,000 sq m new supply. 

Viktória Szabó Partner, Head of Retail at Cushman & Wakefield Budapest said: „The shopping centre development activity decreased in the past few years and due to the economic situation and financing difficulties significant part of the pipeline was put on hold at the planning phase. This trend is not likely to change in the coming years but since international retailers are planning expansions we expect the vacancy rate to decrease.”