The latest figures from global real estate adviser Cushman & Wakefield indicate that up to 7 million m² of planned shopping center development in Europe has been put on hold or cancelled as a result of the credit crunch.
Cushman & Wakefield in its new European Shopping Centre Development report says it expects around 10 million m² of new shopping center space to open across Europe in 2009, 40% less than forecast in July 2008, with an even lower amount of 7 million m² now expected to open in 2010. This would represent the slowest rate of expansion since 2005 and would bring an end to five consecutive years of growth in shopping center development.
2008 was a record year for shopping center openings in Europe, with over 9 million m² of new shopping center space opening in 310 schemes. Russia led the way with 1.65 million m² of new space a 23% increase in total shopping center provision followed by Turkey, the UK, Spain and Romania. The UK was the most active western European market with around 840,000 m² of new space coming onto the market in 2008, primarily due to the opening of three large regional shopping centers. In pure percentage terms, however, Bulgaria and Romania experienced by far the largest increases in shopping center provision, at 76% and 63% respectively.
Nevertheless, expectations for 2009 and 2010 have been sharply reduced as the combination of the financial crisis and global recession has resulted in weaker consumer sentiment, tougher financing requirements, and reduced developer confidence. In particular, emerging markets like Russia, Ukraine, and to a lesser extent Turkey, will all be notably impacted. Whereas 12 months ago these three countries accounted for 58% of the total development pipeline, this has now fallen to just 22%.
Charles Slater, Partner, Head of Retail Services in Cushman & Wakefield Stiles & Riabokobylko, Moscow, said: "The slowdown in development activity is not necessarily a negative trend for many of the emerging countries in Europe as some areas, in particular in Russia, have seen an enormous amount of shopping center space added and planned in a very short space of time. This environment therefore gives developers, retailers and local administrations the time to assess the current situation and, for example, to examine how well-provided certain cities now are and what the impact would be of further large scale schemes on the current retail landscape. Moreover, the pause will give existing projects a chance to bed down and establish themselves in the local retail hierarchy."
Although a number of schemes have been put on hold in Turkey, the impact has so far been less serious than in Russia or Ukraine. Indeed, Turkey now has the largest development pipeline of new shopping centers in Europe, with over 2 million m² now due to open by the end of 2010. All the same, with Turkey's economic environment deteriorating rapidly, more schemes are expected to be terminated in the near future.
Gülsin Hakman, Head of Retail, Cushman & Wakefield Turkey, said: "Turkey has been relatively less affected by the global economic crisis and new shopping center projects in the right locations are in particular in demand from domestic and international retailers who are looking to expand their businesses. Turkey's population of over 75 million and relative undersupply of modern shopping provision makes it an attractive market for retailers. We also expect that the development of outlet centers will increase."
Boris van Haare Heijmeijer, European retail partner, Cushman & Wakefield, said: "The downturn in the development market is mainly due to the difficulty in securing finance for schemes. This is exacerbated by many retailers being cautious in their expansion and being reluctant to commit to new shopping centers. It is a real pity that some very promising schemes are being put on hold for these reasons but we can be sure that the best of these will ultimately be developed once economic conditions are more favorable."
Source: Cushman & Wakefield