Are shopping centres still justifiable?

“We see that the market is in flux,” said Mael Aoustin, Director of the Belgian property developer Galimmo. The firm operates 66 shopping centres for the Louis Delhaize grocery retailer (20,000 to 25,000 sq.m GLA) in average sized cities across Belgium, France, Luxembourg and Romania. For retail property owners, the unstable outlook is significant for many reasons, including increased competitive pressure from e-commerce. In the U.K., this will take 18% of retail sales in 2019. Non-grocery aisles of hypermarkets are suffering. Fashion retailers face a fall in spending except for small niche items like sneaker brands. It is no surprise that investment values for retail remain low. “The volumes invested are not great during the 12 months to late June 2019. They show a fall of 22% for retail across Europe”, said Patrick Delcol, Head of Pan-European Retail at BNP Paribas Property. The results are the same for Lydia Brissy, Head of Research at Savills: “Retail investments in Europe decreased by 19% in total over the period from January to October 2019. The situation is very particular in the U.K., with 3 times more retail sq.m per capita than elsewhere. In Western Europe, this sector is mature, with significant developments only in Eastern countries. Among the few ex-nihilo developments showcased in Mapic, examples were the Mall of Netherlands in Amsterdam (280 stores, 117,000 sq.m GLA, opening in 2020) and the Mall of Europe (123,000 sq.m GLA, opening in 2023). Both are designed by Unibail Rodamco Westfield. Cherrywood in Dublin is another, developed by Hines. In Paris, plans for the expected sprawling EuropaCity from Ceetrus (planned for 2027) were cancelled in November. The government requested plans with far more sustainability and ecology measures. As a result, recycling retail spaces is a growing trend in Europe. “Property companies like Ceetrus and Carmila know how to recycle their retail sq.m by lowering the size of the hypermarkets,” said Gontran Thüring, Director of the French Federation of Shopping Centers. “Indeed, a great advantage of the existing sq.m of hypermarkets is that they are authorised sales areas. Since there are no alternative sales spaces, these current areas have value.”