A total of 1.8 million sq.m of new shopping centre space was added to the European market in H1 2013 and whilst significantly below the 3.4 million sq m in the previous 6 months due to a number of project delays, a total of 4.9 million sq.m. is projected for completion by the year end with Central and Eastern Europe (including Turkey) expected to account for 70% of the total pipeline.
Although still the third largest market, Russia is poised to overtake UK as the second largest market with a total of 3.2 million sq m under construction and due for completion in by the end of 2014. Turkey followed in second place as 422,500 sq.m of gross lettable area (GLA) were added in the first six months of 2013, with the largest opening Vialand Theme Park which included 110,000 sq.m of shopping centre GLA.
The UK was in third spot with 182,600 sq.m, meanwhile, Poland and Germany were fourth and fifth respectively, together delivering 214,200 sq.m of GLA. Development in the UK picked up in H1 2013 when compared with the record low total recorded in 2012, when almost 37,000 sq.m was delivered – the lowest figure in over 52 years. Development activity consisted of seven new schemes and four small extensions of existing shopping centres.
Supply in Poland was increased by approximately 126,100 sq.m, nearly 10% of the European total, consisting of 7 new schemes and 1 extension. Galeria Solna (30,000 sq.m) and Europa Centralna (27,000 sq.m) were the two largest schemes built in the country during this period, located in Inowrocław and Gliwice respectively.
Maxim Karbasnikoff, Head of Retail in Russia for Cushman & Wakefield said: “Russia demonstrates sustainable growth with demand for quality shopping centers exceeding supply, despite 1,5 million sq.m. delivered annually. There are large cities with almost no quality retail supply, such as Perm, where there are opportunities to gain a dominant position. In Moscow we still see potential for new development, notwithstanding the pipeline of 1.4 million sq.m. of new space under construction.”
Looking forward to 2014 there are already 171 new schemes and 65 extensions due to be delivered across Europe, with the pipeline volume estimated at 6.2 million sq.m of GLA. Shopping centre growth in Finland is expected to be the strongest among Western European countries. Despite no space being added in the first sixth months, total floorspace in the country is expected to be enlarged by 13.7% by the end of 2014 . Similarly, although development activity in Norway was extremely subdued in H1 2013, with no space added, it is anticipated to improve considerably, particularly in the second half of 2013.
Martin Mahmuti, Senior Analyst at Cushman & Wakefield: “Emerging Central and Eastern European markets will continue to drive shopping centre development activity. Notwithstanding the several new schemes added and others in the pipeline, countries such as Russia and Turkey will be far from saturated on a per capita basis and in fact still suffer from a shortage of quality space in some markets, highlighting the potential for further development growth in the short let alone the long term.”
The investment market meanwhile is once again growing more alert to the potential of emerging markets to deliver for the longer term. Retail demand in general has continued to steadily increase across Europe, with shopping centres the main focus for larger funds, but with a strong demand for modern quality schemes which are typically in short supply, investors have had to adjust their search area and take on board more risk, leading to increased demand in previously overlooked markets such as Southern as well as Central & Eastern Europe.
Mike Rodda, Head of Cross Border Retail Investment at Cushman & Wakefield said: “Retail demand has clearly responded to the better news coming out of the eurozone as well as the improved flow of finance now evident in some markets. Additionally, however we’re also now seeing a healthier pipeline of schemes coming to market as investors broaden their search area and as a result, activity is likely to increase quite notably in the coming 6 months. What’s more, with risk tolerances increasing, we’re also likely to see more speculative projects being considered, bringing a mellowing in attitudes towards development in some markets.”