Global Recession, Credit Crunch Stall Europe’s Shopping Center Pipeline

Shopping center development plans in Europe have done an about face, according to real estate services firm Cushman & Wakefield’s latest European Shopping Centre Development report. The recession and the scarcity of financing have forced projects to be placed on the back burner or scrapped altogether, which, come 2010, will have caused the first decline in new shopping center space in five years. Approximately 10 million square meters of new space–most of which was planned two or so years ago when demand was high and financing free flowing–is presently on target to come online this year, denoting a 1 million-square-meter increase over the 9 million square meters that delivered in 2008. But it’s all downhill after this year. Cushman anticipates that shopping centers accounting for a total of just 7 million square meters will debut in 2010, marking, at that point, the end of a five-year run of consecutive development growth. Looking back, 2008 was a banner year for Russia, having topped the list with the opening of 1.65 million square meters of space. Turkey was second in line, with the U.K., Spain and Romania rounding out the top five. But they’ll all feel the burn in the upcoming years, some more than others. The report concludes that Russia, for example, will be hard hit, but Turkey is not expected to experience as strong an impact. Cushman forecasts more projects will be shelved in Turkey in the upcoming months, but presently the country is on track to complete 2 million square meters of new shopping center space by the close of 2010, more than is expected in any other European country. And while its economy is in a downward spiral, the fact that Turkey has only a modest stable of modern shopping properties to accommodate its sizeable population of 75 million continues to draw retailers to the region. Although the ongoing inaccessibility of financing and retailers’ recession-induced retreat from expansion are strangling European shopping center development, a certain amount of confidence remains. “It is a real pity that some very promising schemes are being put on hold for these reasons,” Boris van Haare Heijmeijer, European retail partner with Cushman, noted in a prepared statement,” but we can be sure that the best of these will ultimately be developed once economic conditions are more favourable.” In the meantime, the development pipeline decline is not being viewed as a negative for all of Europe. In certain emerging countries where shopping center growth ballooned within a short time frame, the drop in construction plans will allow for analysis of the current state of supply and demand.