MIPIM 2010: European shopping centre development falls 28%

Annabel Dixon 18/03/2010 12:08

 

Almost 6m sq m of new shopping centre space was developed across Europe during 2009 - a 28% decline on 2008, Jones Lang LaSalle said this morning at MIPIM.

 

Russia remained the most active market, representing 21% of the total increase in European stock.

 

However, actual completions were 340,000 sq m lower than last year.

 

Poland, Turkey and Italy collectively contributed a further 33% of all completed development space in Europe.

 

Jeremy Eddy, head of pan-European retail capital markets at JLL, said: “The tightening of the supply pipeline during 2009 was largely synchronised across Europe, but the recovery will be diverse, notably in the emerging or growth markets.

 

"A significant number of planned schemes could be written off entirely - previously agreed land prices are unsustainably high in too many cases for the development to stack up given the climate of lower rents, uncertain consumer markets, lower exit price and worse or no finance terms.

 

"However, the growing demand from retailers for the very best schemes should stimulate development for prime shopping centres."

 

The total EMEA pipeline for 2010 equates to 8.5m sq m of new shopping centre space.

 

This includes a high proportion of schemes that were originally planned to open in 2009 but were subsequently delayed due to the financial crisis.

 

The actual level of openings in 2010 is likely to reduce further still.

 

James Dolphin, head of pan-European retail agency at JLL, said: “Retailer demand is strong for prime shopping centres in the best locations, with many international brands looking to expand their presence across the region and tap into the large high-spending catchments.

 

“In the markets where demand is strongest, such as Germany and Italy, it could be a catalyst for some recovery for pipeline product.

 

"Italy in particular lacks route to market options for new entrants given the low number of high-quality shopping centres, but less nervousness around the economy and consumer spending compared to Spain for example has brought it to the fore of retailers’ thoughts which should benefit further development.”

 

An appetite for development exposure is also evident among the REITs, which now have stronger balance sheets and growing equity and will require development profits to drive returns in the future.

 

JLL says that finding the right product remains a challenge due to strong pricing competition and prospect of limited medium term returns due to the rental pressures. 

 

Execution of the pipeline is additionally being stimulated by third parties taking over planned developments.

 

annabel.dixon@estatesgazette.com

 

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Read all the latest news from MIPIM 2010 here.

Read Estates Gazette's MIPIM 2010 blog here.  

 

 

 

 

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