Development of shopping centers still declining to a low point in 2011 (EUR)

The rate of development of new shopping center space in Europe slowed considerably in 2009. It is unlikely that development levels will pick up before 2012 at the earliest, says real estate adviser Cushman & Wakefield in its new European Shopping Centre Development report.

2009 saw the sharpest decrease in new space in almost 15 years, with around 7.4 million m2 of new shopping center space completed, a 19% fall on 2008. 2010 should see around 6.1 million m2 being completed. In 2011 shopping center development is expected to hit its lowest level in seven years with around 5.0 million m2 due to be completed, 46% down on the peak of around 9.3 million in 2008.

However, should the European economy bounce back quicker than expected, Cushman & Wakefield says that a large number of shelved shopping center projects could be revived relatively quickly, boosting the development pipeline.

After losing its number one position in 2009 to Turkey in the country ranking of shopping center pipeline space, Russia once again dominates Europe, with 2.5 million m2 of space in development and scheduled to open by the end of 2011. Romania has had one of the most significant falls in the ranking from seventh to tenth place, as a large number of pipeline schemes have been put on hold. Development is expected to slow to 130,000 m2 in 2011, compared with the peak of around 750,000 m2 in 2008.

In Western Europe, Italy, France and Spain saw the most new space being completed in 2009. The Italian market has been especially resilient, with just around 20% of its 2010-2015 pipe line so far being put on hold. It currently has just over 1 million m2 of new space under construction. Development activity has also increased significantly in France with around 880,000 m2 of space currently under construction. The largest shopping center under construction is developer Westfield's Stratford City at 186,500 m2 located alongside the 2012 Olympic Park and due to open in 2011.

During 2009, France also moved into the top five of the new shopping center completions table, with around 530,000 m2 delivered. The Netherlands also experienced a high level of completions during the year with more than double the 10 year average completed over the year.

Alexander Colpaert, Retail Researcher at Cushman & Wakefield said: "Whilst forecasting completion levels beyond 2011 is difficult given the uncertain market conditions, it is clear that much will depend on the pace of the economic recovery across Europe as well as the appetite for risk taking among investors and funders. Emerging markets such as Russia, Turkey and Poland will most likely lead the way in terms of a recovery in shopping center development activity, with favorable demographics and healthy demand from (international) retailers for the best space in prime locations. In many mature, western European markets the focus will be on the regeneration of existing retail destinations as the polarization between prime and secondary locations continues to increase.

There are a large number of shelved projects throughout Europe which could be reinitiated in the short term. For example, in the UK alone around 1.2 million m2 shopping center space is currently on hold. When the economic environment improves and finance eases, such projects could boost the medium term pipeline significantly. Whilst there will be a delay before new schemes come on-stream, suggesting supply shortages in some markets over the next 2-3 years, investor interest in development is steadily re-awakening and the best schemes are unlikely to remain stalled for long."

Razvan Gheorghe, partner and managing director, Cushman & Wakefield Romania, said: "Job insecurity during 2009 in the private sector coupled with the 2010 Government layoff program did not help consumer confidence or boost spending or borrowing. This has therefore affected the development of new shopping centers. We believe that the upturn in development will take place only after improvement in the jobs market and after banks regain confidence in the rea

Related News