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Shopping Centers in Europe - Verdict Case Study


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Shopping centers is one of the safer bets for retail and development investment across Europe …

Shopping centers is one of the safer bets for retail and development investment across Europe
for the near future. This may be a bold statement given the continued uncertainty surrounding the
economy but the evidence in Verdict’s latest insight into shopping centers in Europe is compelling.

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  • 1. Case Study:Shopping Centers In EuropeInvestment And Development TrendsShopping centers remain a bright prospectin Europe’s retail landscape November 2012
  • 2. Case Study: Shopping Centers In Europe Investment And Development TrendsShopping centers is one of the safer bets for retail and development investment across Europefor the near future. This may be a bold statement given the continued uncertainty surrounding theeconomy but the evidence in Verdict’s latest insight into shopping centers in Europe is compelling.Vacancy rates among many of the continent’s major shopping centers are low, and larger centershave the advantages of putting the most desired retailers in one place. Add to this the power thatmajor shopping center management firms have in courting fresh, upcoming brands, often frominternational shores, and the convenience that the shopping center format offers to test exactlywhat works for which consumers, and where.Major management firms are also continually committed to refurbishing and extending theircurrent portfolios as well as, and often in preference over new builds, bringing these premisesmore in tune with modern shoppers in a lower-risk fashion. But new developments are stillimportant – with millions of sq m in the pipeline for the next year.All this makes for an innovative, refreshing and modern shopping experience that regularly offerssomething new, particularly compared to tired town centers and small malls.If future prospects aren’t convincing given the economic uncertainty, then the accelerationof shopping center developments springing up over the past 50 years or so offers significantevidence. By the end of 2013 Europe will have almost 7,000 shopping centers, a meteoric riseconsidering the headcount was 81 at the start of the 1960s. This means an average rate ofdevelopment of more than 130 shopping centers a year, and there is more to come. New shopping center development pipeline for major management firms HAMMERSON PLAZA CENTERS EUROPE LES TERRASSES DU PORT, MARSEILLES POLAND (56,000 sq m), April 2014 – 3 centers totalling 94,000 sq m ROMANIA LE JEU DU PAUME, BEAUVAIS – 8 centers totalling 352,000 sq m (23,000 sq m), 2014 HUNGARY EASTGATE QUARTERS, LEEDS – 1 center totalling 16,000 sq m (92,900 sq m), 2016 SERBIA – 2 centers totalling 110,000 sq m SEVENSTONE, SHEFFIELD GREECE (60,500 sq m), 2016 – 1 center totalling 26,000 sq m BULGARIASource: Shopping Centers in Europe 2012, – 2 centers totalling 64,000 sq mVerdict Research CZECH REPUBLIC – 2 centers totalling 75,600 sq m2
  • 3. Case Study: Shopping Centers In Europe Investment And Development TrendsCurrent uncertainties mean that schemes can be put on hold or delays may occur. Had all thescheduled developments for 2011 been completed on time, space provision would have been 15%up on 2010, but delays in several markets – mainly Italy, Russia and Turkey – meant that the growthrate was almost flat.Consequently, the 2012/13 pipeline focuses on central and Eastern Europe, which accounts for61% of scheduled development. Russia and Turkey take the biggest slice, with around a third(32%) of the total. Verdict pinpoints these two countries as prime prospects for shopping centerdevelopment. Openings over the past year have included AFIMALL city in Moscow, and MultiCorporation’s opening of its 10th center in Turkey, the Forum Kayseri. Multi subsidiary MultiDevelopment Turkey has one project under construction in the country, due to open next year, withfive more developments in planning.3
  • 4. Case Study: Shopping Centers In Europe Investment And Development TrendsShopping center investmentIn 2011 retail investment into shopping centers was worth almost €40 billion – 3.5% up on 2010. Bycountry, activity increased by more than sevenfold in Russia, while the UK retains its spot at the topof the investment pile with €12bn of retail assets, despite this being a 15% drop on 2010.But not all countries are inspiring confidence to invest – in fact some have experienced a significantdownturn. Spain and Portugal have seen huge drops. In Spain the value of transactions slipped61% (worth €733m), while in Portugal the €72m of transactions last year was an 80% drop to thelowest in over a decade. Investment in shopping center Movements in retail investment into shopping centers in 2011 assets was worth just under €22bn last year, a significant jump from €12bn in 2010 and €6.5bn in 2009. 2011 saw total transactions of €14bn in more than 50 deals worth at least €100m. Ten of these were worth more than €350m. € € The market concentrates on two investment strategies – focusing BELGIUM FINLAND on prime shopping centers in core CZECH REPUBLIC FRANCE markets or investing in assets with DENMARK GREECE short-term redevelopment potential. Investment is largely tipping towards GERMANY IRELAND the first, and concentrating on the ITALY NETHERLANDS largest, most productive shopping POLAND NORWAY centers in prime regions. Recent RUSSIA PORTUGAL examples include Capital Shopping SLOVAKIA SPAIN Centres securing full ownership SWEDEN UK of Manchester’s Trafford Centre SWITZERLAND at a cost of €1.8bn of shares, and Unibail-Rodamco’s €237.5m buy of Source: Shopping Centers in Europe 2012, Verdict Research the second half of Galeria Mokotow in Warsaw.4
  • 5. Case Study: Shopping Centers In Europe Investment And Development TrendsExtensions and refurbishmentsRefurbishing and extending existing shopping centers is predictably less expensive than buildingnew developments, but retailer strategies are increasingly focussing on the largest centers in primelocations, rather than peppering lots of outlets across the widest geographical bases.Refurbishments and extensions are not new trends for shopping center players across Europe,but they are increasingly taking center stage in development plans. Since the mid-1990s therate of extension activity has sped up. Extensions accounted for 10% of annual shopping centerdevelopment since 2007, but in three of the past five years this has risen to 16% or more.Extension plans PLAZA CENTERS: Extension of Arena Plaza, Budapest due for completion in 2015. CAPITAL CITYCON: SHOPPING CENTRES: Five extension and redevelopments Plans to redevelop Harlequin Watford worth over €80m scheduled to to create a center spanning 93,000 complete in 2012, with eight further sq m. Further extension plans for projects planned over next two years Lakeside, Nottingham, Braehead and estimated to cost €475m. Cribbs Causeway HAMMERSON: EUROCOMMERCIAL: Five potential extensions, including Plans for refurbishment and Centrale, Croydon and SQY Quest, extension of up to 20,000 sq m for Saint Quentin over next four years Eurostop, Halmstad. Source: Shopping Centers in Europe 2012, Verdict Research5
  • 6. Case Study: Shopping Centers In Europe Investment And Development TrendsMajor extension and refurbishment activity over the past year among the major players includes:• Unibail-Rodamco completing a major renovation of Parly 2, Le Chesnay, in November 2011, and a 2011 renovation of the 126,000 sq m La Part-Dieu in Lyon• Corio adding 12,500 sq m of gross leasable area to Kopspijker/Stadsplein, Spijkenisse, 18,000 sqm to Cityplaza, Nieuwegein and 12,500sq m to Middenwaard, Heerhugowaard during 2011• Altarea Cogedim adding 3,000 sq m to Cap 3000, Saint-Laurent-du-Var, providing space for 12 new stores and restaurants.Development pipeline budgets for some of the major players have significant allocationsfor refurbishment and extension. Unibail-Rodamco has earmarked €1.9bn of its total €6.9bndevelopment pipeline for extensions and renovations, while 44% of Corio’s €2.5bn pipelineinvestment will go to redevelopments and extensions.Capital Shopping centers has plans to enlarge and refurbish five of its fifteen of its shoppingcenters, having completed its full takeover of the Trafford Centre. The firm is starting with Lakeside(Thurrock), with plans submitted for a 30,000 sq m extension. This will be followed by the Victoriaand Broadmarsh centers (Nottingham) and the Harlequin (Watford). At least one of the projects isaimed to be on site in 2014.Corio plans to refurbish Palazzo del Lavoro to a 28,000 sq m Favourite Meeting Place shoppingcenter, and Eurocommercial’s acquisition of Europstop in Halmstad has sparked plans forrefurbishment and an extension of up to 20,000 sq m, subject to planning consent6
  • 7. Case Study: Shopping Centers In Europe Investment And Development TrendsThis case study was taken from Shopping Centers in Europe – a Verdict Channel Strategy Report.For more information on this report please email, visit or call +44 (0)20 7551 9664Shopping Centers in Europe 2012IntroductionWe expect that the majority of European shopping centers to remain viable and to provide anoutlet for capital seeking a secure and profitable home. Older and/or poorly located shoppingcenters, especially those serving regions particularly badly hit by unemployment, will suffer andsome may be badly degraded by retailer flight or even have to close down.Features and benefits• Understand which areas of Europe are attracting the most shopping center investment and why.• Find out how changes to individual country populations and consumer economies have affected the viability of shopping center investment.• Examine the portfolios of the major shopping center operators, owners and investors.HighlightsIf all the shopping center projects scheduled for 2011 had been completed on time, provisionacross Europe would have increased by 15% to 6.8 million sq m. However, delays in severalmarkets – notably Italy, Russia and Turkey – resulted in the amount of new shopping centerspace totaling 5.9 million sq m, nearly identical to that of 2010.The pipeline for European shopping center development pipeline for 2012/13 is 10.9 million sqm, with 6.4 million sq m scheduled for completion in 2012. Central and Eastern Europe accountsfor most (61%) of the pipeline. Russia and Turkey top the list, accounting for 32% of newshopping space scheduled.Investors are increasingly focusing on maximizing the value of their assets instead of investingin new developments. Many centers built in good locations now require investment to continueto generate high revenues, and both the cost and investment risk of refurbishment andredevelopment is lower than the construction of a new center.Your key questions answered• Who are the largest investors, owners and operators of shopping centers in Europe?• What methods are shopping centers in Europe using to differentiate themselves from the competition?• What has been the impact of the European debt crisis on shopping centers? What would the worsening of the crisis mean for shopping centers?7
  • 8. Case Study: Shopping Centers In Europe Investment And Development TrendsAbout VerdictVerdict is a retail information specialist within the Informa Group. With almost 30 years’experience, Verdict publishes unrivalled independent analysis. We provide a complete pictureof the UK and increasingly the international retail arena, helping retailers, manufacturers, servicesuppliers, analysts and consultants to fully exploit opportunities within the