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Shortage of new shopping centres in Europe, report suggests

Some 1.9 million square meters of shopping centre space was completed in 2010, a fall of 36% from the previous year, the latest Shopping Centre Stock in Europe report from consultants CB Richard Ellis shows.

The 2009 total was also 30% lower than 2008, which represented the peak in shopping centre development. However, if all of the new shopping centres due in 2011 are completed on time, there will be an increase of 53% in new space available to retailers next year, totalling 2.9 million square meters.

Although the development pipeline is considerably smaller than it was in the period from 2007 to 2008, renewed confidence in markets such as Turkey, Russia, and Poland has resulted in an upturn in construction starts and completions are forecast to rise again in 2011, the report says.

There are currently 146 shopping centres over 20,000 square meters under construction in Europe, with the highest levels of activity in the emerging markets of Turkey with 1.3 million square meters over 26 schemes, Russia with 856,000 square meters over 19 schemes, and Poland with 712,000 square meters over 21 schemes.

‘The shopping centre development market in Turkey, for example, has sprung back to life. This resurgence in activity is due to increased confidence among retailers, developers and investors on the back of the strong economic growth seen in 2010, and the forecast of equally strong growth in 2011. This is attracting new retailers to Turkey, while major international brands already present there are also expanding aggressively,’ said Neville Moss, head of EMEA Retail Research at CBRE.

In Western Europe, Italy with 394,000 square meters, Germany with 369,000 square meters and Spain with 356,000 square meters recorded the largest amount of new space currently under construction. The United Kingdom currently has three shopping centres under development, with Westfield Stratford City being the largest at 177,000 square meters and due to open in September 2011.

‘Since the global economic downturn the majority of investors have focused on core assets and locations, and this still remains the case today. However, the retail sector in particular is now starting to see more capital looking for value add opportunities,’ said John Welham, head of European Retail Investment at CBRE.

‘Lack of shopping centre development in Western Europe, combined with a growing interest in riskier markets, should show through in 2011 investment activity, with an upside potential often greater than the current fundamentals may be suggesting,’ he added.