Turkey and Russia are top two growth markets for new CEE shopping centres

Turkey and Russia were the top two most active countries in Central & Eastern Europe in the development of new shopping centres, Cushman & Wakefield data shows, as landlords and investors increasingly adapt to the polarisation of the shopping centre market.

Cushman, in its annual ‘European Shopping Centre: The Development Story’ report, says developers are focusing efforts on redevelopment and refurbishment projects in an effort to retain their market positions.

This morning, we take a closer look at the shopping centre market in Central & Eastern Europe.

Central & Eastern Europe

Turkey was the most active country in Central & Eastern Europe, delivering 525,000 sq m of new space. The amount of new supply was down almost 50% on 2017, as developers begin the transition towards smaller schemes and focus on the renovation/optimization of existing centres.

In Russia, the second most active European market for development activity in 2018, the volume of completions reached 436,000 sq m. While this is the lowest figure in 15 years, there is expected to be an increase in 2019/20, with 1.8 million sq m currently under construction.

Report author Silvia Jodlowski, Senior Research Analyst at Cushman & Wakefield, said:

“Opportunities for new shopping centre development are seen mainly in two types of schemes. Dominant innovative schemes with a strong leisure element, in place of aging unattractive schemes, or smaller convenience/community retail schemes, where distance to the store, the presence of a food operator and appropriate tenant mix are crucial factors for a scheme’s success.”

The positive economic backdrop in Poland has provided a solid platform for retail development. In 2018, approximately 300,000 sq m of new space was added to the market, the third highest figure in Europe. As is the case in Western Europe, the growth of e-commerce means competition is strengthening, forcing landlords to focus on making their schemes more attractive to visitors.

Elsewhere in Central Europe, development has been stable. In Bulgaria, the Czech Republic, Slovakia and Hungary, markets are approaching maturity. Potential new opportunities lie within mixed-use schemes, downtown areas and hubs of public transport sites. In 2019 and 2020, 4.4. million sq m of new shopping centre space is expected in Central & Eastern Europe.

Top five Central & Eastern European cities for development pipeline 2019-2020 

(Source: Cushman & Wakefield Research)

Silvia Jodlowski added: 

“We do not expect to see much further shopping centre development in the traditional sense. In its place, we anticipate a growing number of redevelopments and reconfiguration projects to cater for the growing demand for flexible space.

“Mixed-used schemes are quickly becoming more and more popular as investors realise the true potential they hold. As we see in parts of Europe, with France being a prime example, shopping centre developers are trying to diversify with new formats such as retail parks and hybrid formats including offices, hotels and residential.”

james.wallace@realassetmedia.com