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 Centre Stock in Europe' research found that 1.9 million m² 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, totaling 2.9 million m².
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 m²) under construction in Europe, with the highest levels of activity in the emerging markets of Turkey (1.3 million m² over 26 schemes), Russia (856,000 m² over 19 schemes), and Poland (712,000 m² over 21 schemes).
Neville Moss, Head of EMEA Retail Research, CB Richard Ellis, commented: "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 m²), Germany (369,000 m²), and Spain (356,000 m²) 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 m² 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, with an upside potential often greater than the current fundamentals may be suggesting."
There are currently 26 new shopping centers under construction in Turkey, providing an additional 1.3 million m² of modern retail space. Many of the centers opened this year and those now being built were put on hold during the economic crisis, and have recently been reinstated. In Istanbul, three new centers opened in March, all of which were started in 2006-2007.
Russia also has a highly active development market, underpinned by a healthy consumer environment and strong occupier demand. Moscow remains active; however, this is expected to decline as local governments refuse permission for new retail space, blaming the city's large shopping centers for the increased traffic problems. At the same time, the level of occupier demand cannot be met by the relatively low completion levels, which is pushing up rents in the most sought after locations. This is one of the factors persuading retailers and developers to target the larger regional cities, many of which are still under supplied in terms of shopping center space.
Poland is the third most active market in Europe with 21 new centers due to be completed over the next two years. However, there is no new space due in Warsaw where occupier demand is strongest. This has prevented some retailers from entering the market while others are taking space in