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C&W expect development upturn in Europe

Published:  06 October, 2011

An upturn in shopping centre development in Europe is on the horizon, according to a report from Cushman & Wakefield.

Although development has been subdued in some countries for the past few years, improving retailer demand and concerns about potential shortages of prime space are contributing to expectations of a rise in development activity in many European countries.

More than 2.1m sq m of new shopping centre space in Europe was completed in the first half of 2011, roughly equal to that of the same period in 2010. 71 new shopping centres accounted for 90 per cent of this space, while extensions of existing schemes made up the remaining 10 per cent.

If all the projects scheduled are finished on time, the development total for 2011 will be 26 per cent higher than that of last year when completion levels fell for the second consecutive year.

As with previous years, Central and Eastern Europe accounted for the majority (58%) of new space opened in the first half of 2011 with strong development levels in Russia, Turkey and Poland.

Elsewhere, notably in Germany and the UK, activity remains subdued. In the UK, the 2011 projected completion total is massively skewed by the 176,500 sq m Westfield Stratford City which accounts for 81 per cent of the pipeline for the second half of the year. Completions are expected to slow dramatically next year resulting in the lowest annual provision of new shopping centre space in the UK for more than 50 years.

Mike Rodda, head of cross-border retail investment, Cushman & Wakefield, said: “We are in a two-speed market where the core markets (UK, France and Germany), CEE, and increasingly Sweden are attracting the major focus. We have seen really significant yield compression in Poland this year, but the other markets are experiencing much thinner attention. Financing transactions is becoming increasingly problematic and will cause a number of deals to fall down before the year-end. However capital from new sources is growing as a number of larger transactions are attracting joint venture bids or co-investment between fund manager and the larger LP's."