Editor's Choice: The West has been won. So where to next?

Hamburg-based ECE has done it again. For the second year running, the German retail giant has captured the top spot in PropertyEU's annual ranking of top retail developers in Europe thanks to a string of recent completions including the Milaneo shopping centre in Stuttgart.

It is followed by a trio of west European giants with strongholds in the core countries in mainland Europe: Sweden’s Ikea Centres at nr 2, Paris-listed Unibail-Rodamco at nr 3 and Dutch developer Multi Corporation at nr 4. And nr 5? That spot has gone for the first time to a Russian player: Amma Development.

Amma is not the only newcomer worth signalling. Indeed, several Russian as well as Turkish players feature prominently in our ranking this year. In addition to Amma Development, its local peers Crocus Group and RosEvro Development feature at nr eight and 10 respectively. Meanwhile Turkmall heads the Turkish delegation in sixth position, followed by its local peers Renaissance Development at nr 12, Torunlar GYO at nr 13, Vialand AVM at nr 14 and Metta 15.

The ranking is based on projects delivered between 2012 and 2014 and includes extensions. The inclusion of so many Russian and Turkish contenders is a novelty for our Top Retail Developers ranking which we thank to a large degree to our cooperation with ICSC Europe. Through our joint research initiative on behalf of our annual European Retail Atlas, we have gained access to a broader range of leading retail developers in all regions in Europe including the emerging markets of Russia and Turkey.

Turning point
In that sense, this year’s Top Retail Developers ranking marks a turning point – in more ways than one. Not only are we able to provide a more comprehensive and accurate picture of who the leading retail developers are across Europe, we can also signal who will likely continue do so in the years to come.

One thing is certain: ground for new retail developments is fast running out in Western Europe. Almost without exception the leading western players in our ranking are focussing increasingly on extensions or redevelopments. Take our winner ECE for example. The German developer may rank number one again this year, but the actual volume of retail space it delivered between 2012 and 2014 is down on the previous three-year period. The same is true of nr 2 (Ikea Centres) and nr 3 (Unibail-Rodamco).

To be sure, ECE still has a number of new developments that it is working on such as Aquis Plaza mall in Aachen, which is scheduled to open later this year. More new developments are in fact in the pipeline, but increasingly these are concentrated eastwards of ECE’s home base. Late last year, the company announced it had started the development of a new major shopping centre in the Polish city of Bydgoszcz. The mall, dubbed Zielone Arkady and scheduled for opening later this year, represents the largest project by ECE Polska to date and will involve an investment of around €150 mln.

Other big western retail specialists like Unibail-Rodamco and Westfield also have a select number of greenfield projects in the pipeline in some of Europe’s leading cities including Brussels and Milan respectively. On the whole, however, the buzzword for retail developers in this part of Europe remains redevelopment. The UK is well ahead in this category but the trend is also emerging in other core Western European markets. ECE recently announced it had completed the first phase of the redevelopment and expansion of Odense Rosengårdcentret, the second-largest mall in Denmark. The site, which ECE acquired in early 2013, covers 100,000 m2 of gross lettable area.

Turkey and Russia are less mature and less saturated
All in all, PropertyEU’s latest survey of retail landlords and developers across Europe indicates that pipelines for new developments are decreasing in Western Europe while the bulk of new projects is concentrated in the less mature and less saturated markets of Turkey, Russia and Central and Eastern Europe. No wonder ECE is stepping up its activities in Turkey together with local developer Sur Yapi.

The two companies will initially work on the realisation of the Axis Istanbul Shopping Center & Office project in Istanbul’s Eyüp district and the Sur Yapi Marka Shopping Center & Residence project in the Nilüfer district of Bursa. ECE will provide concept optimisation, leasing and long-term management services for both malls.

As it celebrates its 50th anniversary this year, ECE appears to have shifted the boundaries for the next chapter of its evolution. Fund management is another terrain that it is seeking to exploit further in the coming years. Meanwhile new developers are coming through the ranks as a number of mega projects get under way on the eastern and southern fringes of Europe. Indeed, six of the 10 biggest pipeline projects that we recorded this year are located in the capitals of Russia, Turkey and Ukraine and the bulk are being developed by local players.

There are exceptions. Dubai-based Emaar Properties is behind the biggest new scheme in Istanbul, while Dutch developer Multi Corporation, which has dived in this year’s ranking based on projects delivered between 2012 and 2014, is scheduled to open Forum Antalya this year. But possibly the most poignant example of east meeting west is the largest of the 10 schemes in the pipeline: Mega Mytischi in Moscow. The 215,000 m2 mall is being developed by Sweden’s Ikea Centres.

While most western companies have labelled the country a no-go area following the outbreak of the Ukraine conflict, Ikea claims to have a long-term commitment to Russia and its growing retail market. The company has set aside €2 bn for its investment programme in Russia which is aimed at building new, modern Mega centres throughout the country in the coming years and the strongest retail destinations in each of its local markets by 2025.

Mega Mytischi will be Ikea Shopping Centres Russia’s fourth super-regional mall in the Moscow region, and its 15th overall.

It takes guts to take on emerging markets like Russia and Turkey at the best of times. But as Western Europe runs out of ground for new developments, the question some developers are clearly asking themselves is: where else can we run to? For TIAA Henderson, the next stop is China. In Western Europe, the company is seeking opportunities in the highly fragmented outlet centre market with its new partner Neinver. But in terms of greenfield developments, China's outlet centre market is even more attractive. Put simply, it is virgin territory.

ECE has tackled the question as well. Last year the Hamburg-based company bought a 50% share of a joint venture with Portugal's Sonae Sierra which in turn owns 67% of Sonae Sierra Brasil. Sonae Sierra has for years been broadening its horizon beyond its home base in Europe and the listed Brazilian company is now one of the largest shopping centre specialists in the country.

The West has clearly been won in Europe in terms of greenfield schemes, compelling its home-grown retail developers to explore new frontiers.

Judi Seebus
Editor in chief