European Shopping Centers: Opportunities despite the challenging economic context
Apr 11, 2012
According to the recent survey from DTZ « European Retail Guide, Shopping Centers », shopping center demand is still maintained especially for prime sites where opportunities exist for expanding retailers. On the other side, secondary centers are suffering from a weak interest and the vacancy rate increase. The development and supply per capita vary highly by the country and the city. This way, compared with the European average à 382 sq.m, Stockholm and the cities of Riga and Tallinn in the Baltics have the highest stock per inhabitant with more 800 sq.m and Vilnius, Stuttgart, Cologne, Dusseldorf and Rotterdam the lowest. This lack of shopping centers in some markets may be due to a cultural preference for other retail forms such as the high street (Vilnius) or to difficulties to obtain buildings permits (Brussels, Milan).
The slowing economy is weighing on the activity development and the number of shopping center openings is expected to fall below the average over the next years. The highest growth of modern centers will be in the less developed cities of Central and Eastern Europe and in Istanbul. In more mature markets, focus will be on extension, improvement and reactivation rather than on new constructions (Copenhagen and Prague). DTZ has identified the future cities offering a strong economic growth and which are currently shopping center undersupplied such as Vilnius, London, Hamburg, Birmingham and Manchester. Early 2012, the total stock of shopping centers in Europe approached 150 million sq.m. United Kingdom, France, Italy, Germany and Spain account for 60% of this total. While Western Europe accounts for the most important share of the existing stock, the activity development concentrated highly those past years in the countries of Central and Eastern Europe and in Turkey, especially in Istanbul, which counts 28 centers in development. The largest one is Marmara Park, a project of 100,000 sq.m expected to be completed in 2012. Other cities also have many projects in the pipeline such as Kiev, Warsaw and Budapest.
European economy is weakened, unemployment higher, wage growth low and generally growth prospects for 2012 are declining. Hence, a declining confidence rate among consumers and retailers, which weighs on the global spending level. However, GDP growth prospect is positive in the medium and longer term. Cities of Central and Eastern Europe, the capitals of the Baltics and Istanbul are expected to post the highest growth over the next 5 years: Vilnius is forecast to show +6.7% per annum followed by Kyiv (+5.5%). Cities of the Nordic Countries including Helsinki and Stockholm are forecast to show a slight growth above the average with 3.3% and 3.1% respectively. On the other side, South European cities including Milan, Lisbon, Rome and Lille in France are forecast to underperform the European average with a growth below 1% over the next five years.
If the retail growth is to be positive in the medium and longer term, it will be still modest and there will be differences between the regions. The European average of retail sales growth forecasts for the 2012/2016 period is 2% per year. It will be higher in the Nordics as well as in the Central and Eastern Europe countries, the strongest growth is forecast in Vilnius (+7.3%) followed by Riga (6.4%).
Vilnius, Riga, Warsaw, Istanbul and Tallinn show the strongest economic performance over the forecast period. Cities with the lowest performance are all located in peripheral Eurozone economies are Lisbon where retail sales are expected to fall -1.2% and Milan -0.3%.