Russia has now overtaken the UK as Europe’s second largest shopping centre market, according to new research from global real estate adviser Cushman & Wakefield.
Second only to France, which recorded 17.6 million sq m of shopping centre space at H1 2014, Russia now moves from third position into second ahead of the UK with 17.5 million sq m of space added to the market. The UK follows behind with 16.98 million sq m.
Economic growth and urbanisation has been the main driver of development this year, as developers see potential in densely populated regions with a lack of high-quality schemes, as revealed in Cushman & Wakefield’s latest European Shopping Centre Development report.
Central and Eastern Europe (CEE), fuelled by frenetic development activity in Russia and Turkey in particular, will account for 81% of shopping centre space added to the market by the end of 2014.
Total shopping centre floor space in Europe is estimated to rise to 161.4 million sq m by the end of 2014, a 4.5% increase. CEE reached 1.4 million sq m in H1 2014, more than double the 637,000 sq m added to the Western European market.
Russia and Turkey alone accounted for 1.1 million sq m of added space in H1, as developers aim to catch-up with the Western European market, focusing on larger centres that serve a wide catchment area. More than 100 new shopping centres will have been developed in Russia over a two year-period by the end of 2014.
A further 4.57 million sq m of space in the development pipeline is expected to be delivered to the Russian market between H2 2014 and 2015 – this could see the country overtake France as Europe’s largest market. One of these developments in Russia is Europe’s largest mall, Moscow’s Avia Park, which spans 230,000 sq m and is anticipated to complete before the end of the year.
In H1 2014, there were 53 new malls in Europe with 12 of them in Russia – a further 49 are scheduled to be finished by the end of 2015.
Cushman & Wakefield’s head of retail services in Russia, Maxim Karbasnikoff, said: “Russia is now the largest consumer market in Europe but until very recently supply was not meeting demand. Strong development activity witnessed in Russia since 2010 has led to a very large pipeline now being delivered. However, political uncertainty, steady depreciation of the rouble and stagnating consumer demand is pressurising retailers. Nevertheless, fundamentals are still positive in the mid-term and we expect vacancy to stablise and rents to reach a healthier level in the coming six months.”