Expected upturn in European shopping centre development

10 Apr, 2012, Prague

The reasons: delays in development projects – especially in Russia, Turkey, and Italy.

The revival in the development of shopping centres expected to take place in 2011 fell short of projections due to delays noted in a number of European countries. If all the shopping centre projects scheduled for the year had been completed on time, provision would have increased by 6.8 million. In reality, though, shopping centres amounting to "only" some 5.9 million square metres were completed, nearly identical to that of 2010, according to a report from Cushman & Wakefield.

Of the 34 markets surveyed,19 experienced declines in annual shopping centre completions relative to 2010. Almost no projects were executed in the Czech Republic, Austria, Slovakia, Croatia, and Bulgaria.

This year, 6.4 million square metres of new premises are due to be completed in Europe and 4.5 million square metres next year. However, further delays cannot be ruled out.

What can be expected to happen here?

“In the Czech Republic, this year’s plans count on the expected completion of more than one hundred thousand square metres of new premises. More than half of them belong to the newly opened Nová Karolina Forum in Ostrava. The shopping centre represents a unique project, which will probably remain the last one of such scope for a long time – it covers 58 thousand square metres”, says Rostislav Veselý of the Retail Team, Cushman & Wakefield, which acted as the exclusive letting agent.

“Its attractions are confirmed by the interest shown by merchants in taking-up the commercial units – pre-leases reached 99.6 per cent, and that is a major success at the current time,” he added.

“As far as the other planned projects are concerned, development work is still been under way and we have no information that any of the developers would consider discontinuing their projects. In the coming years, new shopping centres will be added only to a marginal extent. It is realistic to expect the opening of 1-2 shopping centres a year, depending on their preleases ratios. The successful regional centres will continue to strengthen their positions”, says Rostislav Vesely.

This year, the plans include an extension of the Avion shopping centre in Ostrava (opened on 15 March), an extension of the shopping centres Futura in Hradec Králové (May) and Breda & Weinstein in Opava (November), a reconstruction of the Galerie Moritz shopping centre in Olomouc (towards the end of the year), and an extension of the Centrum Zlín shopping centre (on the brink of this and next year).

Largest shopping centres in Europe

The largest schemes involving shopping centres in the pipeline in Europe this year are: OZ Mall in Krasnodar, Russia (169,000 sq.m.), Mall of Istanbul (135,000 sq.m.) and Puerto Venecia in Zaragoza, Spain (124,000 sq.m.).

Shopping areas per capita

There were 140 million square metres of commercial premises in Europe as of 1 January this year. The Czech Republic shares approximately 2.1 million square metres of this figure. Translated to per head figures, Europe offers on average 247 square metres in shopping centres per one thousand population. The Czech Republic, with its ratio of 203 sq.m./thousand population finds itself under this average value and it is unlikely that it will reach this ratio in the next few years.

Investment projections

Shopping centres represent an attractive product for investors into commercial property. In Europe, retail property worth in total EUR 40 billion changed hands last year, thus sharing 32 per cent of the total volume of commercial property (the balance was covered by offices, industrial property and premises for mixed commercial purposes).

“In the Czech Republic, the volume of investments into shopping centres accounted for more than one billion euro last year. Retail shares 51 per cent of the total investment volume. 2011 was an extraordinary year because it witnessed the conclusion of several major transactions; this year, we would rather expect interest to concentrate on office space. Thanks to their favourable vacancy rate, however, shopping centres will continue to remain the focus of investors, so the trouble would rather be in a lack of projects on disposal”, says Alexander Rafajlovič of the Capital Markets Group at Cushman & Wakefield.

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