Global shopping centre development grows 15%

An unprecedented 32 million square metres of shopping centre space is currently under construction across the world, representing a 15% increase year-on-year, according to the latest research from global property advisor CBRE.

Shopping centre development activity is heavily concentrated in emerging markets, with China home to more than half of all the space under construction (16.8 million sq m). Seven of the 10 most active development markets globally are in China. These include Chengdu (2.9 million sq m) and Tianjin (2.1 million sq m), with Shenyang, Chongqing, Wuhan, Guangzhou and Hangzhou due to deliver over one million sq m over the next three years. Other markets experiencing substantial expansion include Istanbul, Moscow, St Petersburg, Abu Dhabi, New Delhi, Kiev, Hanoi and Kuala Lumpur.

The rapid growth of new shopping centre development in emerging, as opposed to ‘mature’, markets is attributed to a growing middle class, the urbanisation of large cities and consumer demand for better quality retail. Retailers, including many from Western Europe and North America, are competing to take advantage of these new opportunities.

Across Europe, shopping centre development in 2012 increased by 10% year-on-year to 1.71 million sq m; however, a large proportion (72%) was in Eastern Europe. Istanbul was the most active European development market last year with the opening of seven new centres, including Marmara Park (94,000 sq m) and Trump Towers (41,000 sq m). Istanbul will be the most active development market in coming years with 32 centres currently under construction.

Europe’s other highly active development market is Russia which, like Turkey, is benefiting from strong economic growth and rising incomes. In St. Petersburg, new residential areas supported by enhanced road and rail links are driving shopping centre development, with 0.5 million sq m under construction. Moscow has the largest development pipeline, with 815,000 sq m due to open over the next two to three years. In neighbouring Ukraine, Kiev has 445,000 sq m under construction in eight centres, making it the fourth most active development market in Europe, and attracted a record 40 new international retailers last year.

Neville Moss, Head of EMEA Retail Research, CBRE, commented: “The fact that a substantial majority of new shopping centre development in Europe is within its emerging markets is hugely significant. Prime space is in short supply in mature markets and retailers are increasingly turning to these emerging, but increasingly promising, alternatives.

“In Hungary this year only 22,000 GLA shopping centres space was added to the Hungarian market with ECE’s Örs vezér tere Árkád II extension” – Anita Csörgő, Head of Retail at CBRE Budapest said. “There is no true pipeline of shopping centres under development currently in Hungary due to low consumer spending (retail spending has seen negative trends since 2006) and low achievable rental values. The economy needs to improve to bring new major commercial brands to the Hungarian market.”

“Financing is still difficult to get for new projects.  In order to obtain financing a developer needs to have at least 65% of the future rental income of the project secured by tenants in advance. This can mean pre-lease up to about 80% of total GLA as larger anchor stores pay lower rents than the average” – Anita Csörgő added.

CBRE sees ECE’s planned Buda Szentendrei út shopping centre the only one which could start construction in 2014 as financing has for the most part already been committed and pre-leasing is currently underway, though the final building permit has not yet been obtained however the exemption from the Plaza Stop law has been granted.