New shopping centre development in Europe is expected to increase by a quarter in 2012 to meet retailer demand for modern, high quality retail space, according to the latest research by global property advisor CBRE.
CBRE’s Shopping Centre Stock in Europe research examines existing shopping centres and those under construction in Europe of 10,000 sq metres (sq m) and above. This represents the vast majority of centres in which international retailers are located or would like to be located.
Across Europe, 51 shopping centres totalling 1.5 million sq m of space opened in the first half of 2012 with another 3 million sq m scheduled to open before the end of the year. If all of this space opens on time, completions will reach 4.4 million sq m in 2012, 25% higher than in 2011.
Turkey is the most active market with almost 400,000 sq m of new shopping centre space completed in 2012, accounting for one third of new space delivered in the first half of the year. This is some way ahead of Germany (165,000 sq m), with Italy and Poland (both 140,000 sq m) just behind.
Neville Moss, Head of EMEA Retail Research, CBRE, commented:
“A highly active shopping centre development market in Turkey, Poland and Russia is enabling retailers to grow store networks there, but elsewhere the number of new centres is more modest, providing fewer opportunities for expanding retailers. Crucially, very little of the new space addresses the lack of prime units in major city centres – the most sought after locations by retailers - and consequently some are finding it difficult to achieve their store expansion plans.”
Some 3.6 million sq m of shopping centre space was completed in Europe in 2011, representing a 4.6% fall on the year. Nevertheless, this still signifies a significant level of new space, with only the development boom years of 2005-2009 seeing higher annual completion levels.
Emerging markets have dominated new development in recent years, but construction activity continues apace in the more mature European markets to meet retailer demand. In 2011, the big five western European markets (Spain, Italy, France, Germany and United Kingdom) accounted for one third of all new shopping centre space in Europe.
Turkey was by far the most active market in 2011, accounting for just over 20% of new shopping centre stock built last year, including the 160,000 sq m Marmara Forum in Bakirkoy, Istanbul – the largest scheme in Turkey to date. In second position was Poland where 428,000 sq m was completed in 16 centres, accounting for 12% of new space. Development activity remained high in Russia with nine new centres completed in Moscow and St Petersburg alone.
Overall, some 7.5 million sq m of shopping centre space is under construction across Europe. Turkey is forecast to remain the most active market with around 1.5 million sq m under construction, followed by Italy (698,000 sq m) and Spain (612,000 sq m).
The amount of space under construction in the UK (120,000 sq m) represents just 1.5% of the total space being built in Europe - much less than that in France (7%) and Germany (6%), where there is still scope to fill gaps in the market. A tough consumer environment and limited occupier demand are to blame for the low level of construction in the UK but it also reflects the high cost of developing town centre schemes due to the demanding planning regime.
Italy has the second largest pipeline of new space. Its relative lack of shopping centre space – it ranks 13th in Europe in terms of space per capita – combined with a high level of occupier demand for modern, high quality retail space is supporting the extensive pipeline of new space. Some ten new schemes are due to open before the end of the year and another ten are scheduled to open in 2013, including the 90,000 sq m Finiper Villesse in Villesse.
Spain has a relatively small number of schemes under construction – just ten, but this includes some large centres, including the 100,000 sq m Rio Shopping in Arroyo de la Encomienda (Valladolid) and the 120,000 sq m Puerto Venezia in Zaragoza. The latter will open in October and together with the existing retail park will comprise one of the largest shopping destinations in Europe, totalling over 200,000 sq m. The overall amount of new space coming on to the market is still quite high in spite of a difficult consumer environment. This is due primarily to strong occupier demand for good quality prime shopping centre space, which is still in short supply in some markets.
In Germany, some 400,000 sq m is under construction, with eight centres due to open before the end of the year, including the 30,000 sq m Höfe am Brühl in Leipzig and the 24,000 sq m Forum Mittelrhein in Koblenz. A highly controversial plan is under discussion which could restrict the number of large-scale new shopping centres, particularly in small and mid-sized towns. The proposal states that existing shopping centres should be extended first, and only then should consideration be given to the building a new centre. The idea is to preserve a town’s existing retail market structure.
There are 18 schemes under construction in Poland, the vast majority in smaller and medium sized cities. Most notably, there are only two new centres due in Warsaw, where occupier demand is highest, and the vacancy rate is only 1.5%. This is forcing retailers to consider high street locations. At the same time consumers are adopting a more ‘continental’ outdoor lifestyle which is encouraging more independent retailers, cafes and restaurants to locate there.
Elsewhere in Central and Eastern Europe (CEE), Ukraine, Bulgaria, and Croatia are all active markets, with the amount of space under construction accounting for 25% or more of existing stock. In contrast, there is no new development in the Baltic countries.