MAPIC: France to see big rise in shopping centre development

Shopping centre development activity is set to gather pace rapidly in France over the next two years, according to Henderson Global Investors.

In its latest THINK property research report, Henderson says available shopping centre space in France will expand by 5% per annum on average during 2013-14 - the fastest rate in Europe after Central and Eastern Europe.

Henderson says the development looks ill-timed given the short-term profile for consumer demand. But medium-term prospects for rental growth should improve as the economy picks up, unemployment falls and consumers feel more confident about the future.

The research found that France’s shopping centre stock has grown by just 2.4% per annum on average over the last three decades, the lowest of any major European economy with the exception of the Netherlands. Existing stock is relatively old, with nearly half of the total constructed prior to 1980. Only 30% of shopping centre floor space in France was completed after 1990.

France has below-average shopping centre space per head, lower than the UK, Spain, Italy and Netherlands, and therefore remains relatively under-supplied.

Shopping centres are difficult to access for investors, says Henderson. Around two-thirds of the centres covered by the IPD are owned by property companies who are reluctant to part with them. Yet, shopping centres as a sector perform strongly relative to other segments of the market. According
to IPD, shopping centre total returns averaged 14.8% a year between 1998 and 2011, compared with just 9.6% a year for central business district offices.

Andy Schofield, director of property research at Henderson, commented: 'Short-term capital growth seems an unlikely prospect with yields already having fallen markedly since 2010. There are, however, good reasons to believe that shopping centres can deliver capital growth again, once the economy has surpassed its current difficulties.'