New European Shopping Centre openings slow to lowest rate since 2005

13 Sep, 2010, Budapest, Hungary

- Number of new shopping centres opening in Europe falls by almost 50% year on year
- Levels of new openings likely to decline further in 2011, with the smallest annual increase in shopping centre space in almost 30 years expected

The number of new shopping centre openings in Europe has slowed to the lowest rate since 2005, according to new research from Cushman & Wakefield. Just 2.1 million sq.m of shopping centre gross lettable area (GLA) was added to the market in the first half of 2010. A total of 64 centres opened - a decrease of around 50% year on year compared to the same period in 2009, which saw 120 centre openings.

In its new European Shopping Centre Development report, the global real estate adviser states that a further 3.8 million sq.m GLA is expected to open before the end of this year, a decrease of 17% on 2009. It forecasts that completion levels will fall even further in 2011 to around 5.2 million sq.m. This would equate to a 3.9% increase in total provision on 2010 ? the smallest annual increase in almost 30 years.

Virtually all European countries have seen shrinking pipelines in recent years. In total, ten countries saw no new shopping centre openings in the first half of 2010, including the Czech Republic, Hungary and Ireland. Completion levels are not expected to pick up in the short term, although the number of new development projects may increase in some countries next year, depending on the pace of economic recovery and, in particular, domestic demand/ retail sales.

With a combined 2010/11 shopping centre pipeline accounting for just over half of the European total, Russia and Turkey still top the pipeline "league table" of shopping centres. Russia recorded the highest amount of new centre space in the first half of 2010 with just under 430,000 sq.m GLA completed, of which 41% was located in Moscow. The 130,000 sq.m scheme Vegas shopping centre in Moscow, which opened in June, was by far the largest scheme completed in the first six months of 2010.

France and Italy have the largest pipeline of new space in Western Europe. In France, which has seen a strong increase in retail development in recent years, the focus is on smaller centres in secondary cities. There has been a relatively steady level of development in Italy where the pipeline figures for 2010 and 2011 indicate a slowdown of 25-30% on the 10-year average for annual completions.

Central and Eastern Europe continue to top the chart in terms of percentage increase in floor space. Bulgaria saw a 96% increase in total shopping centre floorspace in the first half of 2010. Bosnia, Romania, Serbia, Slovakia and Slovenia all also experienced growth in floorspace of around 5-10%. In Western Europe Italy and Germany recorded the largest amount of new space. There were six new centre openings in Italy, adding just under 170,000 sq m of GLA to the market. In Germany five new shopping centres opened and six extensions/ redevelopments took place, resulting in around 150,000 sq.m of GLA being added.

Hungary is currently standing at the 23rd place in Europe in terms of shopping centre developments. There was no retail scheme delivered in the first half of 2010, but 35,000 sqm new supply, one new scheme, is to come to the market by the end of the year. The Corvin Atrium Shopping Centre is located in the 8th district of Budapest and is planned to open in October.

Viktória Szabó Partner, Head of retail at Cushman & Wakefield Budapest said: "Although the amount of delivered shopping centre sqm is below the average this year, there are more developments in the planning phase. In the gear of the economic upturn, we can count with up to 200,000 sqm new supply in the next couple of years."

Darren Yates, Associate in Cushman & Wakefield's European Research Group, said: "Based on current data, total shopping centre completions look set to fall to around the 5 million sq.m mark next year - the lowest in six years. Whilst the last two years have been gruelling for developers, arguably the reduction of new space coming through will help to support the shopping centre sector going forward and will open up new development opportunities as supply is absorbed quickly in the upturn, potentially exposing the market to growth pressures as early as next year in some cases."

In the first half of 2010, European retail investment volumes amounted to '16.5bn' an 80% increase year on year. Retail's share of total commercial property investment has also continued to rise, confirming its continuing popularity as an asset class. In particular, the UK, France and Germany recorded strong growth in activity.

Mike Rodda, Head of Cross-border Retail Investment, Cushman & Wakefield said: "Judging by the transaction pipeline, we expect to see a significant increase in the number of deals closed as we approach the year-end. Investor demand for good quality assets in core markets remains strong, albeit always with an eye on the strength of the occupational sector."

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