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Development of shopping malls in Europe sees sharp decline

The latest figures from global real estate adviser Cushman & Wakefield indicate that around 10 million square metres of new shopping centre space is expected to open across Europe in 2009, some 40% less than forecast in July 2008, with an even lower amount of seven million square metres now expected to open in 2010.

This represent the slowest rate of expansion since 2005 and would bring an end to five consecutive years of growth in shopping centre development which culminated in a record year in 2008 with over nine million square metres opening in 310 schemes.

In 2008 Russia led the way with 1.65 million square metres of new space, a 23% increase in total shopping centre provision. This was followed by Turkey, the UK, Spain and Romania. The UK was the most active western European market with around 840,000 square metres of new space coming onto the market in 2008, primarily due to the opening of three large regional shopping centers.

In pure percentage terms, however, Bulgaria and Romania experienced by far the largest increases in shopping centre provision, at 76% and 63% respectively.

Nevertheless, expectations for 2009 and 2010 have been sharply reduced as the combination of the financial crisis and global recession has resulted in weaker consumer sentiment, tougher financing requirements, and reduced developer confidence.

In particular, emerging markets like Russia, Ukraine, and to a lesser extent Turkey, will all be notably impacted. Whereas 12 months ago these three countries accounted for 58% of the total development pipeline, this has now fallen to just 22%.

Charles Slater, Partner, Head of Retail Services in Cushman & Wakefield Stiles & Riabokobylko, Moscow, said the slowdown would give developers, retailers and local administrations the time to take stock. He said that they need to examine how well-provided certain cities now are and what the impact would be of further large scale schemes on the current retail landscape.

'Moreover, the pause will give existing projects a chance to bed down and establish themselves in the local retail hierarchy,' he added.

Although a number of schemes have been put on hold in Turkey, the impact has so far been less serious than in Russia or Ukraine. Indeed, Turkey now has the largest development pipeline of new shopping centres in Europe, with over 2 million square metres now due to open by the end of 2010. However, with Turkey's economic environment deteriorating rapidly, more schemes are expected to be terminated in the near future.