The New Year has brought confidence in the European shopping-center industry, according to the International Council of Shopping Center's (ICSC) Euro-shop Index, its pan-European survey of shopping center industry business conditions. Despite January's unfavorable weather and rising unemployment in many markets across Europe, and ongoing pressure on disposable incomes, current business conditions were judged significantly better than a year ago and improving month-on-month.
Sales and footfall saw impressive growth, and occupancy held up well, regardless of several recent retailer failures. This unexpected, yet welcome, turnaround in industry conditions is expected to continue as the majority of executives participating in the survey are feeling positive about the outlook for the next six months.
The survey results were compiled from responses of European shopping center executives collected between January 16 and January 31, 2013.
ICSC's Euro-Shop Index, the survey's summary index of current and future business conditions, rose to 61% in January, an 18 percentage point improvement from the previous month and significantly better than a year ago when it stood at 42%. In fact, the latest figure is the highest the index has been since April 2011.
The Euro-Shop Current-Conditions Index, which measures the performance of four components (sales, footfall, occupancy and re-leasing rent), saw a sharp upturn, moving from declining conditions at year-end of only 44% to a growth level of 58% in January.
The latest figure is considerably higher than a year ago when the index was in contraction of 42%. Much of this is due to the performance of the sales and footfall components, which are up by 29 percentage points and 35 percentage points respectively year-on-year. This is an exceptional performance given that much of Western Europe has been affected by harsh wintery weather in recent weeks, which would usually be expected to discourage shoppers. In this case, however, the lure of final sales, combined with a sheltered shopping environment, was evidently successful in encouraging them.
Occupancy was the only component to experience a year- on-year decline in January (by five percentage points); however, despite this, the index remained stable at 50%, representing no change on last month. Given there have been a number of retailer administrations over the past month, particularly in the UK (Jessops, HMV and Blockbuster), it is perhaps surprising that occupancy has held up this month.
Sentiment for the next six months also improved dramatically in January with the Euro-Shop Expectations Index rising to 63%. This is significantly better than a year ago when the index stood at only 42% and also a marked turn-around in sentiment compared with last month's figure of 41%.
This renewed confidence is surprising given that in many markets economic growth continues to be stifled as a result of government measures to reduce national debt and unemployment continues to rise with more than 26 million people out of work across the EU. However, the industry's view may be a reflection of the European Commission President, Jose Manuel Barroso's recent statement that he believed the worst was over.
Anecdotal evidence suggests that shopping center owners are feeling confident in the quality of their assets and management to drive performance over the coming months.
Source: Nicky Godding
