European shopping-center business conditions remain firmly in contraction, although the pace of decline has slowed since last month, according to the March International Council of Shopping Centers (ICSC) pan-European survey of shopping-center industry business conditions.
ICSC’s Euro-Shop Index, the survey’s summary index of current and future business conditions, continued to decline, albeit the pace has slowed. Market sentiment was similarly gloomy a year ago.
Current conditions are particularly tough. Although the end of the month may have seen an improvement in sales and footfall due to the Easter break; this was too late to filter through into this month’s survey results, compiled from responses of European shopping-center executives collected between 14–31 March 2013.
The one bright aspect emerging from the survey is that the market is not expected to deteriorate further over the coming six months according to the Expectations Index, which makes up part of the Euro-Shop Index. Despite the growing unemployment rate in the Eurozone, which according to Eurostat, reached a record high of 12% in February, shopping-center executives are feeling optimistic that business conditions are not expected to weaken further.
The Euro-Shop Current-Conditions Index, another part of the Euro-Shop Index and measures the performance of four components (sales, footfall, occupancy and re-leasing rent), is still well in decline. Following on from last month’s sudden acute drop in performance, all four industry indicators continued to contract in March though the pace of decline decelerated for sales and occupancy.
The lack of footfall in shopping centers is likely to be a consequence of the recent unseasonably cold weather, which is either delaying demand for spring apparel or perhaps shifting it online as consumers look to avoid venturing outdoors.
This level of confidence in the industry is perhaps surprising given the ongoing economic difficulties being faced by a number of European countries. The current financial crisis in Cyprus has led to the EU and International Monetary Fund stepping in with a 10 billion euro bailout deal. The short term outlook for the country looks incredibly bleak as restrictions on bank accounts remain in place and confidence in the banking system is at an all-time low. Some forecasters have estimated a 20% shrinkage in the country's GDP as a result.
There is also the issue of the current political stalemate in Italy that some commentators believe could undermine the European Central Bank’s efforts to stabilize the euro-zone economy. Indeed, over two thirds of shopping-center executives who responded to our survey expressed concern that the situation could reignite the debt crisis. These issues will be debated in depth by the over 600 delegates expected at the upcoming ICSC European Conference from 16-18 April in Stockholm.
Source: Nicky Godding