UK will slip into third position as Russian market looks to expand significantly in next 12-18 months
Russia will soon overtake the UK for the first time to become the second-largest shopping centre market in Europe, according to a report published today by global property consultants Cushman & Wakefield (C&W).
- Total new European shopping centre space added to the market in 2013 is projected to be 7 million sq m – this would be the highest level since 7.8 million sq m in 2009
- 70% of new shopping centre space (4.9 million sq m) in 2013 is estimated to be delivered in Central and Eastern Europe
- 2.4 million sq m of new space is scheduled to be completed in Russia in 2013-2014 – 22% of the entire European pipeline
- Turkey is expected to witness a 23% increase in shopping centre space with 1.55 million sq m set to hit the market by the end of 2014
C&W’s European Shopping Centre Development 2013 report ranks France and the UK as the top two markets in terms of total existing shopping centre space with 16.95 million sq m and 16.48 million sq m respectively. But Russia, the third largest market with 16.47 million sq m of space, will shortly surpass the UK as it continues to see new developments completed – it has 2.4 million sq m forecast for completion in 2013-2014; this represents nearly a quarter (22%) of the entire European pipeline for this period.
Turkey is second in terms of volume of new shopping centre space in the pipeline for 2013-2014 with more than 1.5 million sq m due for completion; more than 50% of this new space will be located in Istanbul. If all projects are completed on time, Turkey will experience a 23% increase in shopping centre space by the end of 2014.
“Aside from Russia and Turkey, other countries expected to experience double-digit growth in shopping centre floorspace by the end of 2014 include Croatia, Bosnia and Herzegovina, Bulgaria and Ukraine, emphasising the increasing influence of Central and Eastern Europe on the proportion of new shopping centre stock coming to the market in Europe,” said Neal Best, Associate Director in C&W’s European Research Group.
Europe delivered 5.7 million sq m of new shopping centre space in 2012 with Central and Eastern Europe accounting for almost 65% of all this new space.
C&W’s report forecasts 7 million sq m of new shopping centre space will be added to the European market this year; it will be the highest level of shopping centre development since 2009 (7.8 million sq m). This is mainly due to the fact that several schemes were delayed last year due to funding issues in certain markets which caused completion to slip from H2 2012 into 2013.
Of the 215 new shopping centres scheduled to open across Europe in 2013, 147 of them will be in Central and Eastern Europe. There are a further 109 extensions planned for this year; 77 of them will be in Western Europe. The current pipeline for 2014 is just over half the size of what is projected for 2013: 3.7 million sq m.
There was 3.4 million sq m of new space added to the market in the second six months of 2012 – Russia alone accounted for a third of this (33%) with 1.1 million sq m.
Across Europe, 100 new shopping centres opened in H2 2012 in total: 66 in Central and Eastern Europe and 34 in Western Europe. The largest new shopping centre which opened in this period was the Marmara Park Shopping Center in Istanbul, Turkey (100,000 sq m). Additionally, 59 extensions were completed during the second six months of last year, with 12 in Central and Eastern Europe and 47 in Western Europe. The scheme that contributed the most space in a single completion was phase two of Puerta Venecia in Zaragoza, Spain; it added 123,475 sq m to the existing retail park on the same site. In 2013, two major schemes opened in March: the UK’s 75,900 sq m Trinity Leeds and the Paradise Center in Sofia, Bulgaria (80,000 sq m).
Justin Taylor, CEO UK Retail at C&W, said: “The projected upturn in European shopping centre development activity for 2013 is encouraging. Many major projects which were scheduled for completion last year were delayed – these are now back on track and look set to open in 2013. Central and Eastern Europe will continue to dominate the immediate future; 70% of all new space added in 2013 will be located there. We are also seeing a trend of mature Western European markets shifting focus towards refurbishing and extending existing schemes rather than sourcing new space for development.”
More than €21 billion of retail assets were transacted across Europe in the second half of 2012, an increase of €9 billion from the previous six months and compared with €19.4 billion in the second half of 2011. Retail accounted for 28% of commercial property investment in H2 2012, an increase of 7% on H1 and matching the proportion recorded in the same period in 2011. The UK and Germany remain the dominant markets for retail investment in Europe – together both account for more than half of the European total.
C&W’s Head of EMEA Retail Investment, Mike Rodda, said: “The first quarter of 2013 has seen relatively muted retail investment activity: €8.4 billion-worth of transactions took place during this period, €5.4 billion less than in Q4 2012. The outlook for the rest of 2013 remains cautious despite a strong demand for prime assets across Europe; access to capital is still problematic for many. A shortage of good schemes on the market with selective occupier demand will slow activity further.”