- Shopping centre floorspace in Europe totalled 166.2 million sq.m as of 1st July 2018.
- One third of Europe’s shopping centre space was originally built over 20 years ago.
- In H1 2018, 1.0 million sq.m of new shopping centre space was delivered to the market, a 10% decline on H1 2017.
- Approximately, 6.1 million sq.m of new shopping centre space is expected to be delivered in H2 2018 and 2019. This represents an 11% drop on the amount of space that was under construction as at 1st July 2017.
H2 2018 – 2019
2.1 mil sq.m
Following 2017, when development activity in Western Europe reached its second lowest
level in 30 years, a slight increase in development was recorded in H1 2018. Approximately 373,000 sq.m of new shopping centre space was delivered to the market, an 8.2% increase on H1 2017, with the UK, France and Finland being the most active countries. However, despite the slight growth in H1 2018, the level of new shopping centre openings is expected to decrease further. Only 2.1 million sq.m of new space is currently under construction and scheduled to be completed in H2 2018 – 2019, a 25% drop year-on-year.
In the UK, weaker demand for space, the growth of online, high levels of supply and higher operating costs have curtailed development activity in recent years. Nonetheless, the UK was the most active Western European country in terms of new openings, adding nearly 90,000 sq.m of new space in H1 2018, driven mainly by the 69,000 sq.m extension of Westfield Shopping Centre in White City, London.
France added 83,000 sq.m of new shopping centre space and recorded the second highest amount of new shopping centre development in Western Europe in H1 2018. The size and maturity of the market, an uncertain consumer environment and the growth in online sales have led to a further decrease in shopping centre development, which has been on downward trajectory since 2016. As a result, retail development is increasingly focused on different formats. In 2018, the volume of shopping centre completions is expected to decline by 24% year-on-year. However, this is expected to be offset by an increase in retail park openings of 27% year-on-year and factory outlet centres of 5% year-on-year. Moreover, a new hybrid retail format is emerging, which combines a shopping centre and a retail park element with non-commercial uses (offices, leisure and public realm), with a strong focus on high quality architecture.
An improving economic environment and increasing urbanisation is supporting shopping centre development in Finland. The country had the third highest amount of new shopping centre space in H1 2018, with 69,000 sq.m completed. However, despite the expected strong growth in new space – with 312,000 sq.m in the pipeline for H2 2018/2019 – it is nevertheless expected that the supply of shopping centre space may not be sufficient by the early 2020s. This is due to the strong population growth and improving purchasing power in the Helsinki area and other main cities.
Shopping centre development activity is also expected to accelerate in other countries, particularly in Germany. Nearly 60% of existing shopping centre space was originally built over 20 years ago. Much of this space no longer matches consumer expectations and is unable to compete with more modern schemes. As a result, there are a lot of opportunities for redevelopments and extensions or the development of new innovative or even hybrid retail formats. Germany is expecting more than 200,000 sq.m of new shopping centre space to open in H2 2018 – 2019, with 24% of this space in the form of extensions to existing schemes.
Central & Eastern Europe
H2 2018 – 2019
4.0 mil sq.m
In Central and Eastern Europe, H1 2018 recorded an 18% drop in the amount of new shopping centre openings, mostly due to a decrease in the number of new openings in Turkey. However, with 1.4 million sq.m of new space scheduled for H2 2018, 2018 as a whole is expected to end with a 5.0% drop year-on-year. Overall, 4.0 million sq.m of new shopping centre space is expected to open in H2 2018 – 2019, representing a 2.4% decline year-on-year.
Shopping centre supply in Turkey rose by 358,000 sq.m in H1 2018, representing a near 40% decline on H1 2017. A slowdown in the economy, continued pressure on rents due to currency volatility and weaker consumer spending are the main reasons for the slowdown. This trend is expected to continue in H2 2018 – 2019, with 925,000 sq.m of new space currently under construction and expected to open. This represents annual declines in development of 30% and 19% for 2018 and 2019 respectively.
A subdued consumer backdrop in recent years, a lack of credit and less ambitious retailer expansion plans has had an impact on development in Russia. New shopping centre completions decreased by -7% year-on-year in H1 2018, while the total annual volume of 570,000 sq.m of space scheduled to be completed for the full year will be the lowest since 2004. A slower than expected recovery in the consumer market, new legislative initiatives (higher VAT, the raising of the retirement age and the restriction on cross border online purchases) are expected to have a negative impact on the retail market. However, the volume of completions is expected to increase in H2 2018 – 2019, with Russia holding Europe’s top spot for shopping centre development over the next 18 months. Approximately 1.9 million sq.m of space is currently under construction and almost half of this space is being built in cities with a population above 1 million. However, as the development cycle is extended, there is a risk that not all these projects will be completed on schedule and some could be postponed until a later date.
In Poland, a strong economy, driven by rising wages, low unemployment, sustained low inflation and a buoyant consumer market, remains the key driver of shopping centre development. In H1 2018, approximately 125,000 sq.m of new space was completed – the third highest in Europe. The development pipeline remains strong, with 444,000 sq.m of space currently under construction and expected to open in H2 2018 – 2019. Development is focused on large and very large schemes in major agglomerations, in addition to smaller projects, retail parks and convenience centres in smaller towns.
In Europe, over the last two decades, an average of 5.4 million sq.m of new shopping centre space was built every year. In 2018 – 2019, an annual average of just 3.5 million sq.m of new space is scheduled to be completed, which represents a significant decline.
This trend is largely expected, given that most of Europe has now had over twenty years of continuous shopping centre development – much more in the case of established markets such as the UK, France and Germany. Arguably, most European shopping centre markets are at or near maturity, with net new additions to space likely to slow considerably. As a result, development will focus increasingly on the revitalisation and renewal of existing space, as a growing number of older schemes become obsolete. In fact, over one third of Europe’s shopping centre space is now over twenty years old and, while much of this space has been refurbished and remodelled over time, equally much of it is ripe for redevelopment.