MAGAZINE Extensions dominate in Western Europe, new schemes lead in CEE

The opening in March of a 69,000 m2 extension to Westfield London in the UK capital exemplifies the trend in shopping centre development that has been evident across EMEA for some time. Extensions to, and redevelopments of, existing shopping centres are the big story in western Europe, while new developments are more likely to be found in the east.

German developer ECE illustrates this trend well in Western Europe: of the total 225,000 m2 of retail space delivered in 2017, the bulk related to redevelopments (Loom in Bielefeld, the Löhr-Center in Koblenz, the Billstedt Center in Hamburg and the Gesundbrunnen-Center in Berlin). Only one new scheme was completed: the 42,000 m2 Adigeo in Italy’s Verona. Similarly, the majority of the company’s delivery pipeline for 2018 involves redevelopments: of the seven schemes to come onstream this year, five (PEP in Munich, Europa Passage in Hamburg, Hallen am Borsigturm in Berlin, Galeria Lodzka in Lodz and Sachsen-Allee in Chemnitz) fall in this category. Meanwhile, the pipeline for 2019 and beyond relates to redevelopments and extensions only.

The picture is similar for French peer Klépierre. A large part of the company’s development eff orts last year went into extending the Val d’Europe’s centre near Disneyland Paris (to more than 105,000 m2 of GLA) and the ongoing redevelopment of Hoog Catharijne in Utrecht, the Netherlands. Planned projects involve extending and refurbishing the Créteil Soleil shopping centre near Paris and adding 16,000 m2 of space to the Gran Reno mall in Bologna, Italy.

Extension pipelines
According to research by CBRE, extensions made up 20% of the more than 11 million m2 of shopping centre stock under construction in EMEA in 2017, and form a growing proportion of the pipeline as landlords use them to diversify a mall’s offering in the face of growing e-commerce penetration. The UK, Ireland and Austria all have sizeable extension pipelines.

According to estimates by Green Street Advisors, big Grade A shopping centres in the UK, many owned by listed companies such as Landsec, British Land, and retail specialists Hammerson and Intu, are planning extensions amounting to over 1 million m2 in the next six years.

Westfield London’s £600 mln (€687 mln) expansion brings the total size of the mall to 242,000 m2, overtaking its East London stablemate Westfield Stratford and making it the biggest in Europe. Westfield London also exemplifies the trend of extensions and redevelopments forming part of a broader urban regeneration – in this case of the UK capital’s White City district.

In the central Dutch city of Utrecht, the redevelopment of Hoog Catharijne shopping centre by Klépierre also fits in with this theme. Located next to the country’s busiest railway hub, the scheme forms part of a complex urban renewal plan.

The complex planning procedures and large upfront capital expenditure associated with starting new schemes in western Europe are partly the reason why developers there prefer to opt for extensions and redevelopments. But shopping centres are also using add-ons to boost their experience-focused retail offerings and leverage an already loyal customer base. Nonetheless, a number of new schemes are in the pipeline in western Europe, such as Westfield’s Croydon and Milan projects, Klépierre’s Okern Sentrum in Oslo, two smaller ECE centres in the German cities of Singen and Lorräch, and Unibail-Rodamco’s 58,000 m2 Benidorm scheme in Valencia planned for 2020.

New shopping centres
The 11.1 million m2 of new shopping centre space currently under construction across EMEA is down 10.7% on levels previously surveyed, according to CBRE, whose research is based on traditional shopping centres over 10,000 m2 in 32 countries across the region. Turkey has the largest shopping centre pipeline in EMEA with 2.2 million m2 under construction, followed by the United Arab Emirates with just under 2 million m2. A key scheme under way in Dubai is the massive Meydan One Mall, set to open in 2020.

In western Europe, the UK has the largest shopping centre development pipeline with a total of 460,000 m2 of new space under construction and due be delivered over the next five years. France follows in second place with 409,000 m2 while Spain is slightly behind with 345,000 m2. Spain’s better-than-expected economic recovery is improving asset performance and boosting investor and developer sentiment.

In eastern Europe, Russia, Poland, Ukraine and Romania all have strong development pipelines. Russia’s development pipeline currently stands at 1.9 million m2, largely due to improving macroeconomic fundamentals coupled with strong retail sales forecasts which are starting to improve developer sentiment. Among the biggest projects to be delivered in Russia this year, according to Colliers, are Arsib Tower in Tyumen, Golden Park in Nizhnevartovsk and Kalina Mall in Vladivostok. Despite the advanced stage of completion of most projects, the opening of some may still be postponed until 2019. This, says Colliers, may mean that the volume of shopping centre completions may amount to 560,000 m2 by end-2018, or 70% of the volume initially forecast.

Ukraine and Romania set for strong year of completions
Ukraine and Romania are set for mall completions to more than treble in 2018 compared to 2017 levels, according to CBRE. In Ukraine, JLL puts Kiev’s pipeline at 114,000 m2 for 2018, following a year in which no new shopping centres were delivered at all. The openings of three shopping malls – Smart Plaza Polytech, Rive Gauche and Retail Park Petrovka – were postponed last year due to construction delays, but should come on stream this year. Two more – Smart Plaza Obolon and River Mall – also plan to open their doors this year.

Katarína Brydone, head of retail at CBRE, commented: ‘Eastern markets are less saturated, and Ukraine, for example, is not in the CEE, which is why the percentage of new construction is so high. But let’s not underestimate their purchasing power. Generally, the retail spending of Eastern European countries is more dynamic than the rest of Europe.’

In Romania, some 175,000 m2 of new retail space is in the pipeline for 2018 (based on schemes bigger than 5,000 m2), according to figures from Colliers. Of this, the capital Bucharest accounts for less than 20% with just one project planned on the outskirts of the city. Nationwide, no new big schemes are in the pipeline at all, with most of the
activity centred on smaller scale centres and expansions and redevelopments in secondary towns.

The JV between Prime Kapital and MAS REI looks set to be the most active developer in 2018 based on its current plans to create close to 100,000 m2 of new GLA. Most of this relates to retail parks and extensions in cities like Slobozia, Roman, Baia Mare. It will also deliver one of this year’s large new additions: a retail park north of Bucharest, near Balotesti, with 28,000 m2 in new retail GLA.



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