Russia has broken France’s 43-year hegemony as Europe’s largest shopping centre market, thanks to a number of large-scale malls that were delivered in H2 2014, according to new research from Cushman & Wakefield.
Russia has broken France’s 43-year hegemony as Europe’s largest shopping centre market, thanks to a number of large-scale malls that were delivered in H2 2014, according to new research from Cushman & Wakefield.
Russia’s total shopping centre stock climbed to more than 17.7 million m2 at the end of last year, overtaking France’s 17.66 million m2 of GLA. In doing so, Russia accounted for more than half of all the shopping centre space added to the market in H2 2014, C&W found.
The UK followed Russia and France as Europe’s third-largest market with 17.1 million m2.
According to C&W's latest European Shopping Centre Development report, total shopping centre floor space across Europe totalled 152.3 million m2 on 1 January 2015, a 3.3% year-on-year increase on the year-earlier period.
While Western Europe currently accounts for 69% of total built space, development activity in Central and Eastern Europe (CEE) surged ahead in H2 2014, with 2.2 million m2 of space delivered to the market compared to 981,000 m2 in Western Europe over the same period.
Development activity throughout Europe has been driven by the need to meet consumer demand for larger centres which offer a greater diversity of retailers, an array of leisure activities and a wider choice of food and drink offerings, C&W said.
Western Europe’s biggest markets have seen an increasing number of extensions and refurbishments as developers seek to ‘future-proof’ small or outdated centres, whilst CEE is still dominated by the creation of new, dominant regional centres that serve a wide catchment area.
These trends will continue into 2015 and 2016, with Russia and Turkey continuing to dominate the development pipeline as overall density remains at a low level, albeit the completion of projects of Russia will be subject to financing conditions and the wider geopolitical environment. In Western Europe, development activity in markets with lower densities such as Italy and Spain is also gaining momentum, with Italy’s pipeline more than doubling that of the UK over the next two years.
C&W's head of retail services in Russia, Maxim Karbasnikoff, said: 'The Russian retail market has been under unprecedented pressure since March 2014. In addition to the Ukrainian crisis and following sanctions, rouble and oil depreciation especially in the second half of last year has placed occupiers into a near panic situation. Unsurprisingly, the exceptional volume of new supply delivered remains partially vacant, with occupiers being more focused on the optimisation of the existing network, rather than opening stores without economic visibility.'
Nevertheless, stable retailer sales in Q1 2015, recent rouble appreciation, low vacancy in existing malls and a somewhat more limited pipeline of new projects, seem to suggest that the market is showing signs of resilience and has now entered into a consolidation phase, he added.