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Central & Eastern Europe leads shopping centre development activity

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CEE accounted for nearly 70% of all shopping centre space added to the market in H2 2013

Central and Eastern Europe (CEE) continued to dominate shopping centre development activity last year and accounted for nearly 70% (2.4 million sq m) of all space added to the market in H2 2013, according to the latest European Shopping Centre Development report by global property consultancy Cushman & Wakefield.

Overall, development across Europe picked up considerably in the second half of 2013 with 3.6 million sq m of new shopping centre gross leasable area (GLA) delivered onto the market. This is twice the amount of space completed in H1 2013, albeit the total figure was lower than previous forecasts, with the opening date of a number of projects delayed into 2014.

James Chapman, head of Cushman & Wakefield’s Central European capital markets team, said: “Appetite for shopping centre investment is returning to pre-crisis levels and recent development activity has created new opportunities. Many of the larger cities across Central Europe are now reaching saturation point with the exception of Warsaw where potential exists for new large-scale retail. In most other top-tier cities the focus is on repositioning existing centres to drive performance, whilst the completion of numerous new centres in smaller cities – with a 100,000+ population – has helped to intensify competition and attract investor attention.”

Marek Noetzel, Partner, head of Cushman & Wakefield’s retail department in Poland, said: "Improving investment sentiment in the western Europe translates into the markets in the CE region. Clear signs of the recovery in the occupier market are still subdued compared with pre-recession levels, however, with the economy heartbeat visibly growing stronger, the investment activity in the long-term perspective looks optimistic".

Total European shopping centre floorspace now stands at approximately 154 million sq m of GLA as at 1 January 2014. France remains the largest market by shopping centre space, with 17.3 million sq m of GLA, followed by the UK in second place with 16.93 million sq m and Russia in third with floorspace now exceeding 16.86 million sq m. However, Russia is expected to replace the UK as the second largest market by the end of this year.

Russia could also contend for the largest European shopping centre market title if the majority of its pending projects come to fruition. Around 2.6 million sq m of shopping centre space is scheduled to be delivered in Russia in 2014 and 2015, including what will be Europe’s largest shopping centre, Avia Park (235,000 sq m) in Moscow. In H2 2013, Russia accounted for 29% of all shopping centre space (1 million sq m) which opened across Europe. The largest three openings were all located in Russia with the first phase of Aero Park City (91,000 sq m), Kristall (75,000 sq m) and Planeta (63,440 sq m) opening their doors.

Meanwhile, Turkey is anticipated to benefit from the second largest pipeline in Europe, with over 2.2 million sq m expected to be completed by the end of 2015. France leads the way in terms of the pipeline among Western European countries and is third overall, with a total of almost 1.3 million sq m of retail space to be delivered in 2014 and 2015, comprised of several extensions to existing schemes.

Turkey was again second as 486,800 sq m of shopping centre space were delivered in the six months to December 2013, with the largest opening Zorlu (60,000 sq m) completed in the last quarter of the year. A new entry in the top three was, however, the Ukraine where approximately 340,800 sq m was added in H2 2013. The top five was rounded off by Poland and France.

Martin Mahmuti, senior investment analyst at Cushman & Wakefield, said: “CEE is expected to remain a development hotspot with two-thirds of all projected European space to be completed in 2014 and 2015 – 6.8 million sq m and 4.2 million sq m respectively – to be delivered in region. However, the development pipeline for 2015 may be affected by geopolitical concerns in Eastern Europe which could lead to some projects being postponed into next year.”

Looking forward to 2014, there are 203 new shopping centres due for completion across Europe; and 127 of these will be delivered in Central and Eastern Europe. Of the 86 extensions to be opened, 65 will be located in Western Europe. There will be 103 schemes and 32 extensions opening in 2015. The Ukraine, Turkey and Russia will continue to fuel development across the continent, all three recording double-digit rises in total floorspace.