The rate of shopping centre development in Europe is slowing, with completions down 23% year-on-year at 3.8 million m2 in 2017, according to Cushman & Wakefield’s latest European Shopping Centres report.
The total stock of shopping centre space in Europe stood at 166.5 million m2 at the start of 2018, a year-on-year increase of 2.3% during 2017. Western Europe accounts for 109.7m m2 while 56.8m m2 is in Central and Eastern Europe (CEE).
During 2017, Turkey replaced Russia as Europe's most active development market, adding 495,000 m2 in the second half of the year, ahead of Russia (330,000 m2) and third-placed Poland (298,000 m2).
Changing consumer behaviour and the growth of e-commerce have created a challenging environment but also opportunities for shopping centre owners and retailers, the advisor said. Looking ahead, the amount of new space set to be delivered in the next two years is estimated to be 6.6m m2. However, there will be a significant East-West divide, with Western Europe expected to see a fall in volumes of 21.3% while CEE will experience growth of 12.3%, C&W said.
Report author Silvia Jodlowski, senior research analyst at Cushman & Wakefield, said: 'The focus for developers now is on quality of space and placemaking. Developers now consider placemaking a critical component of a successful shopping centre, as a combination of retail, leisure and entertainment still provides a destination which is not replicated online.'
Within Western Europe, France was the most active country in terms of new openings, adding more than 326,000 m2 of new space in 2017. Nevertheless, the maturity of the market and significant existing provision resulted in a 28% drop in newly-built space compared with 2016. In the UK, weaker retailer demand outside of prime locations and an oversupply of retail space have led to a 23% decrease in shopping centre development activity, with just 120,000 m2 being completed in 2017. Germany saw an 82% decline in 2017 as restrictive planning legislation curtailed the development of new out-of-town shopping centres.
In Spain, a record 82.4 million tourists in 2017 had a positive impact on shopping centre development, as demand from retailers and investors has increased. Spain holds the second position in terms of development activity in 2017, with 210,000 m2 of new space and has the second-largest development pipeline for 2018/19.
Central & Eastern Europe
In 2017, Russia was the second most active country in the CEE region in terms of development, despite annual completions falling from 1.6 million m2 in 2016 to 0.6 million m2 in 2017. This is partly due to the economic downturn in 2014 when the number of new projects starting construction decreased significantly. Supply has now also caught up with demand. The structure of the pipeline for 2018 shows that developers have now shifted their focus from large-scale projects to smaller schemes.
Turkey’s shopping centre supply rose significantly last year, with 1.1 million m2 of new space, making it the most active country in terms of development and accounting for 47% of total completions in the CEE region. The 2018/19 development pipeline includes 1.4 million m2 of new space, with approximately 70% of this in Ankara or Istanbul, although this is set to slow due to the relatively weak trading environment and near-saturation levels in parts of the market.
In Central Europe, 2017 saw a near 20% fall in the amount of newly-opened shopping centre space. However, the improving economic environment has led to higher wages and retail sales growth in the region. Interest from international retailers remains strong, thus supporting retail development in Poland, Czech Republic and Slovakia.