Decline in retail space investments in the Central Europe in 2009

2010-06-09

Last year brought the largest decline in the volume of new shopping centre space in Europe in over a dozen years. The economic crisis hit the retail space market severely. Developers cancelled or halted a number of retail investments in Europe. The situation will now largely depend on the dynamics of the economic recovery in particular countries. Although in some states it is not expected to improve significantly in the short term, among several Central European countries, a “moderate optimism” has already appeared in the market.

In 2009 a total of approx. 7.4 million m² of retail space was completed in Europe, which reflects a slump of 19% in comparison with 2008, according to Cushman & Wakefield’s (C&W) recent report. The total European shopping centre GLA was pushed to nearly 128.3 million m². The majority of the space completed in 2009 (i.e. 89%) was new shopping centres, while refurbishments and extensions account for the remainder. There were 256 new developments on the retail space market of Europe. In 2010 approx. 6.1 million m² of new retail space is expected to appear on the market, while 2011 is to bring 5.0 million m² of shopping centre space, according to C&W. The value of transactions in retail properties in Europe in 2009 reached around €2.3bn, i.e. 32% less than in the previous year, according to data released by Jones Lang LaSalle.
In the opinion of C&W analysts, the situation will most probably improve the quickest in Russia, Turkey and Poland, as a consequence of favourable demographic factors and high demand among international retail chains. Out of 7.4 million m² of new space in shopping centres erected in Europe in 2009, 57% was built in the Central and Eastern European countries. In 2009, most of the central Europe’s countries observed a decline in the number of shopping centre completions, except Poland and Slovakia. Romania in contrast saw the most considerable drop in completions of -57%, according to C&W. The economic downturn caused optimisation and reduction of expansion plans by retail operators. Decreasing sales, downward pressure on rents and depreciation of local currencies had a marked negative influence on retailers’ financial standing as well as developers and operators of shopping centres.




Of the countries throughout Central and Eastern Europe, Poland managed to resist the damaging affects of the global crisis better than other states of the region. However, many investments in this market were suspended in 2009. Last year, over 650,000 m² shopping centre space was completed in Poland, according to King Sturge’s data. The pace of development is however much slower this year, when around 400,000 m² of new retail space is projected to appear on the market. On the other hand, Romania has experienced most of its planned retail developments halts and no new shopping centres constructions have been commenced over the last 18 months, according to C&W. While in 2008 750,000 m² of shopping centre space was completed, in 2011 only 130,000 m² of this kind of space is expected in this country.
In 2010 only 7 million m² of new retail space in to be completed in Europe, while 2011, according to C&W, is to reflect the full influence of the global recession and report only 5 million m² of shopping centre space. In addition, this year is expected to bring negative growth of retail sales in most European countries, which may be most visible in the markets hitherto enjoying the period of boom in retail, among others Romania and Slovakia. Nevertheless, over the longer period, the Central Eastern European countries are projected to report higher growths in retail, despite the current unfavourable situation. According to Jones Lang LaSalle Poland and Romania will reach 5% year on year growth of retail sales by 2012, with the reminder of the CE region also noting growths. Moreover, investors still seem to see the huge potential of the CE retail property markets and their interest in them is slowly strengthening, a fact which should be reflected in the improvement of CE retail investment next years.

Katarzyna Grabarz
Business Editor
PMR Publications