European Shopping Centres: One Size fits All? August 2008 Hypermarkets remain the key shopping centre anchor with a presence in 75% of all major new schemes in 2007-2008. Large-scale fashion stores are also increasing in popularity Retail provision in shopping centres is becoming formulaic, driven by an increase in cross-border retail The East-West gap between shopping centre design and location is narrowing and developers are offering more than a simple retail experience, although formats vary considerably Sustainability is moving up the agenda for many shopping centre developers and investors.
Transcript
European Shopping Centres: One Size fits All? August 2008
Hypermarkets remain the key shopping centre anchor with a presence in 75% of all major new schemes in 2007-2008. Large-scale fashion stores are also increasing in popularity
Retail provision in shopping centres is becoming formulaic, driven by an increase in cross-border retail
The East-West gap between shopping centre design and location is narrowing and developers are offering more than a simple retail experience, although formats vary considerably
Sustainability is moving up the agenda for many shopping centre developers and investors.
European Shopping Centres: One Size fits All? August 2008
Shopping centre development is booming in Europe like never before, particularly in the emerging markets to the east. With cross-border retailers actively expanding into these markets and Eastern Europe increasingly adopting development trends from the west, does this mean we are moving inexorably towards a cloned European shopping centre?
European Shopping Centres: One Size fits All? August 2008
• Europe is heading towards a clone shopping centre from an occupier perspective. In the last 12 months Carrefour opened in Turkey and Romania, Albert unveiled new stores in Belgium, Czech Republic and Poland, and Tesco also opened in Poland, as well as Hungary and the UK. And, unsurprisingly, hypermarkets anchored 75 % of all major new schemes in 2007-2008.
• Fashion anchors are becoming more popular as shopping centre owners look to maximise their rental income and footfall. And the same fashion anchors are increasingly found across Europe, with H&M, for example, taking major shopping centre units in Italy, Czech Republic, Hungary, Poland and the UK last year.
• Overall retail provision is also becoming formulaic, reflecting the growing internationalisation of the retail sector and a desire to replicate a ‘winning’ formula. Fashion retailers for instance, took about half of the units in each of the shopping centres opened, and of these, cross border retailers dominated - accounting for 84% of fashion units in Palladium (Prague) and 80% in St Stephens (Hull). Zara, Pull & Bear and Bershka were found in over 50% of all new schemes, whilst H&M, Promod, Levis and Esprit were present at 40% of new schemes.
• The Leisure and entertainment mix is also looking increasingly familiar across Europe. In spite of a few new attractions such as an aquarium in Forum Istanbul, Turkey and plans to mix a Grand Prix motor racing circuit with retail in Pescara, Italy, there are no clear new trends emerging.
• Cinemas remain by far the most popular leisure anchor, present in 85% of the new schemes, more even than hypermarkets (75%). But it is increasingly clear that there is no ‘next big thing’ to replace the cinema, although cinema operators are looking at how best to re-invent themselves, including the use of 3D digital screens and VIP suites.
• However, other aspects of new shopping centre development are not quite so formulaic. There is a big locational difference between east and west, driven by the difficulty in accessing town centre sites in eastern Europe and a move towards town centre regeneration projects and ‘town centre first’ planning policies in western Europe. Over 60% of major new schemes in Western Europe were located in town centres, compared with just 28% in the East.
• The creation of a Third Place is a key trend in shopping centre development in Western Europe – a place where people no longer go purely to shop but rather to shop when they are out. Retail as an element of mixed-use schemes is part of this trend and has become a common feature of Western development, often linked to urban regeneration. Princesshay in Exeter being a good example of this. This trend is also gaining momentum in CEE, with many of the largest mixed-use projects found in this region.
• Catering is also central to the concept of a Third Place. The provision of restaurants and cafes is slightly less in the east compared with the west, but their importance in enhancing a centre’s environment and increasing dwell time are universally recognised. The key theme here is a drive towards quality with more restaurants located throughout the centre. Turkey is leading this trend in the east, with for example, Wagamama and Kitchenette located in the Kanyon shopping centre, Istanbul.
• On the same theme, luxury brands are entering shopping centres at higher rates, notably in Turkey, Russia and Poland. And in London, Louis Vuitton, Tiffany and Mulberry have signed for the soon to open Westfield London.
• Shopping centre design is becoming more sophisticated. In the west, sympathetic integration into existing town centres and improving the public realm is key, whereas in the east, innovative design is helping to create a competitive advantage in the face of an ever increasing supply of new schemes.
• Sustainability is now high on the agenda for a number of shopping centre developers and owners, but there is little market evidence to show that green issues are influencing market pricing or the ability of a scheme to attract retailers. This will surely change.
• Ultimately, the consumer has choices. They can choose where to shop, where to relax, where to interact. With these choices comes the need for developers to offer an environment that encourages consumers to shop and more importantly a place which is more appealing than competing shopping experiences, including the internet. Creating and evolving a unique identity is central to this strategy and will ensure that one size will never fit all, even if the tenant line-ups look increasingly similar.
European Shopping Centres: One Size fits All? August 2008
Jones Lang LaSalle has examined the evidence from recently opened large scale developments around Europe and looked at emerging trends in new projects to see if one size really does fit all.
The context of the report is depicted in the graph below. It shows the provision of shopping centres in Europe and the relationship between market maturity and current growth rates. For example, Romania is shown to have a relatively low retail market size and prime shopping centre stock, but that the market is growing rapidly. Spain has a relatively large market size and is still seeing some growth to its largely developed prime shopping centre market.
This highlights two things: firstly that market maturity varies enormously around the region, and secondly that new development is heavily focused on Eastern Europe, but it also shows a significant level of new development taking place in the more mature markets – The Netherlands, for example, is due to see an 8% increase in stock between 2007 and 2009.
The first part of the report provides an objective overview of current occupier trends in the shopping centre market, based on an extensive assessment of a pan-European cross-section of large schemes (GLA >30,000sqm) that have opened over the last 12 months, plus analysis of some of the most high-profile and innovative shopping centres planned for 2008 & 2009.
The second part is more qualitative and covers key trends in shopping centre location, mixed use schemes, the importance of leisure and catering, sustainability, the shopping environment including the drive towards quality and developing a ‘sense of place’.
There is a perception that consumers are constantly seeking a sense of ‘retail uniqueness’ but in reality the shopper expects a core of high-street retailers to be present at any new scheme. At the same time Leisure and Entertainment has become an integral component in creating a ‘retail’ destination.
This section examines recent shopping centre completions across Europe and establishes what the key occupier trends actually are.
Anchors and Key Tenants Hypermarkets remain the key Anchors
The presence of Hypermarkets as a key attractor remains commonplace, with over three quarters of new schemes assessed featuring this type of store as a primary anchor. The dominance of hypermarkets in Central and Eastern areas is still evident, though there are signs of the concept spreading further North and West with, for example, ING Real Estate’s St. Stephens scheme in Kingston-upon-Hull which opened in September 2007 with a 13,500 sqm Tesco Superstore as key anchor.
The importance of hypermarkets looks set to continue with over 70% of the new projects assessed confirming their presence at the scheme. In some markets, however, supermarkets are becoming more popular. In the more upmarket Polish schemes, smaller format supermarkets together with delicatessens are preferred. Not only do they provide a more attractive environment for consumers, with less shopping trolleys around, they also free up space for fashion and they pay higher rents than hypermarkets (a supermarket/deli in Poland for example would be expected to pay over double the rent/sqm compared to a hypermarket). In Spain, supermarkets have become more popular to overcome licensing issues. In any event, the
importance that developers still place upon the convenience offer as a driver of scheme success in most of Europe is clear, and for out of town or peripheral developments it remains a must.
Presence of Anchor / Key Tenants in New Schemes by type of Retailer
0% 10% 20% 30% 40% 50% 60% 70% 80%
Homewares
Sports
Department Store
Electricals
Fashion/Clothing
Hypermarket
% Schemes where present Source: Jones Lang LaSalle
Fashion & Clothing
Fashion/Clothing retailers were the second most common choice as anchor or key tenant and were present in over 70% of new schemes assessed. There is growing evidence of the ‘fashion focused’ shopping centre, with many featuring multiple fashion anchors or key tenants, albeit supported by a hypermarket or electrical superstore, or both.
H&M was the most popular flagship retailer (see table below), with presence at 6 out of the 21 new schemes assessed and consistently commanding large spaces at new schemes across Europe. This is not an isolated case with fresh International brands becoming increasingly sought-after to anchor new shopping centre developments in most markets, especially in Central & Eastern regions, where only a few years ago the attitude was that the consumer would not be receptive to anything but Local and National retailers.
Increasing cross-border activity of Western based fashion retailers as they expand out of their saturated home markets, and a growing awareness by consumers of international brands are the main reasons for this. Thus traditionally strong brands in home markets such as Inditex Group, H&M, Peek & Cloppenburg and Next now command similar gravitas abroad. But it is not just brands from the West that are expanding internationally. Polish fashion retailer Reserved already trade in ten countries, including Czech Republic and Ukraine, and has recently taken a major unit at the new Baneasa Mall in Bucharest.
European Shopping Centres: One Size fits All? August 2008
Although the UK remains an important target for many International retailers, demand has decreased whilst in contrast it is flourishing in markets such as the resurgent Germany and the fast growing CEE markets. Poland saw Massimo Dutti and Sprider amongst others enter in the last 12 months, with plans afoot for GAP, Cortefiel and TopShop to follow suit. In addition, retailers are looking to consolidate their supply lines and reduce costs by buying out domestic chains in foreign markets, often with venture capitalist backing.
In a bid to distance themselves from the notion of ‘clone Europe’, new shopping centres will be on the lookout for the next retail giants to anchor their schemes. Primark are set to follow up their successful move into Spain with expansion into the rest of continental Europe, highlighting Germany, Portugal and Benelux region as priority markets. Trans-Atlantic brands such as Abercrombie & Fitch or Banana Republic could perhaps emerge as key players following recent European activity, whilst brands from Poland’s LLP Group such as Reserved and Cropp Town are set to continue their expansion across CEE, as are children’s wear retailer SMYK.
Electrical stores
Electrical superstores are regarded as the third most important key tenant by shopping centre developers, with almost 50% of schemes assessed featuring this type of retailer as an anchor.
Electrical stores feature as an anchor primarily in Eastern regions, largely due to a lack of quality retail warehousing - the traditional location for this type of retailer. This can again be related to cross-border expansion and with brands like Saturn and Electro World taking large units at schemes such as Złote Tarasy in Warsaw and Arena Plaza in Budapest.
Department stores – will Continental Europe follow the UK trend?
Department Stores acting as anchors of new shopping centres was limited to only a few markets, including Turkey, the UK and Poland. They have been – and still are - very much a Western European and namely British trend, with key players typically first to commit to any significant new scheme (e.g. John Lewis, M&S and House of Fraser at Westfield Stratford – due to open 2010), although in Germany this once traditionally strong market does appear to be in terminal decline.
The rest of continental Europe has less of an affiliation to the department store as shopping centre anchors, with, as we have seen, the Hypermaket/Fashion/Electrical line-up the common format. There is, quite simply, a lack of strong local department store operators in Southern and Central Eastern Europe. But also the growing desire among shopping centres owners to drive income means that they are more likely to split floorspace that could be taken by a department store into, for example, a Peek & Cloppenburg, Zara and H&M, thus achieving higher rents.
Adding to this, cross border expansion is logistically difficult for Department Stores, and there appears to be a strong emotional attachment at a National scale – with consumers loyal to their own stores brands and less receptive of new international entrants. The preferred location is also often the high street and so, despite some ambitious expansion plans by operators such as Debenhams (albeit via franchise), previous attempts to enter shopping centres have not always been successful (e.g. The Field’s in Copenhagen) and as such Department Store presence in shopping centres across wider Europe is unlikely to see radical change. This is a shame in that a concept so successful in arguably the most sophisticated market in Europe, the UK, has not been more widely adopted elsewhere. More than any other retailer, a department store can provide a sense of identity for a scheme (for example, Selfridges at The Bull Ring) and could add variety to the limited number of major anchors operating around Europe.
European Shopping Centres: One Size fits All? August 2008
Source: Jones Lang LaSalle Fashion and Footwear retailers dominate
As expected, Fashion and Footwear was the most prevalent retail category across our assessment of recent shopping centre openings, taking an average of 48% of units per scheme. The range however was broad with some schemes such as Echo Investments’ triple-level Pasaz Grunwaldzki in Wroclaw seeing up to 66% coverage whilst Sonae Sierra’s 8a Avenida, an extension to the existing Modelo Shopping Centre in S. João da Madeira opened with a 40% Fashion & Footwear provision.
Restaurants and cafés took a significant 12% of available retail units whilst Health & Beauty, Services & Telecommunications and Jewellery & Watch stores were also well represented, taking an average of 8% of available units each. On the whole their was little difference between splits in Eastern and Western Europe, with Restaurants and cafés the most notable, recording a 10% vs 16% split respectively.
There are some significant exceptions to this formulaic mix, with household goods centres an obvious example. Following schemes such as the Bowfounds MAB’s ‘Domus’ furniture theme centre on the outskirts of Paris, ING Real Estate’s Inspira Deco ‘furniture boulevard’ is a themed habitat outlet centre scheduled to open in Madrid in 2009 which could ignite further development of this type, particularly around the principal Spanish cities. The project could however face delay as furniture and household retailers begin to limit expansion plans in response to more difficult trading conditions.
Leisure & Entertainment The ‘next big thing’ for Leisure and Entertainment at shopping centres is still to emerge - Cinemas are still regarded as the essential lesiure component to any significant new retail scheme. Almost 85% of new builds assessed featured a multiplex, more common even than hypermarkets. Cinema City were the most active operator in terms of taking up new space, whilst Multikino also continued their expansion plans across Poland and now operate 130 screens across 14 cities, the majority of which are located within shopping centres.
There are many similarities in the type of leisure facility being adopted across Europe (see provision graph below). However, the peripheral locations of large-scale Central and Eastern European developments allow for a greater use of leisure space. The Ice Rink at Teraspark, Denizli, (amongst presence at other schemes) is a good example of this, as is the Casino at Akropolis in Kaunas, Lithuania.
Provision of Leisure Anchors - East vs. West
0%10%20%30%40%50%60%70%80%90%
Cine
ma
IMAX
Bowl
ing
Bing
o
Exhib
ition
Aren
a
Thea
tre
Ice S
katin
g
Child
ren's
Enter
tainm
ent
Casin
o
Gym/
Fitne
ssCl
ub
Billia
rds/P
ool
% of
Sch
emes
whe
re pr
esen
t East West
Source: Jones Lang LaSalle
Children’s Entertainment Areas were popular across both regions with presence in 26% of all schemes assessed, as were arenas for hosting cultural events such as music gigs or exhibitions. These had a presence in a third of new schemes studied, although the figure is heavily weighted towards Eastern Europe, testament to a lack of existing venues to support the growing trends of popular culture and an attempt to recreate the down-town feel that inner-city areas in Western Europe tend to have automatically.
The analysis of recently opened schemes has shown that leisure is now an integral part of most large centres but it has also shown that there has been little real innovation in terms of leisure mix or new concepts. Increasing dwell times in a shopping centres, the traditional role of leisure, is now being overtaken by the need to create a sense of place. This is explored in more detail in the next section.
European Shopping Centres: One Size fits All? August 2008
This section examines the aspects of shopping centre development that look beyond the retail, those features that shape the purpose, positioning and feel of a scheme.
In, Edge or Out of Town The division between the more functional shopping centres in Eastern Europe and the more sophisticated retail destinations of Western Europe are narrowing as Central and Eastern markets mature and Western retail evolves existing concepts
A matter of East vs West?
Over 65% of the new developments assessed in Western Europe were located in-town, with a further third being built at edge-of-town locations. In the East, the dominant positioning was peripheral with 58% of the sample. In-town locations accounted for 42% of the new schemes assessed.
Location of new Shopping Centre developments - East vs. West
58%
33%42%
67%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Eastern Europe Western Europe
% of
new
sche
me a
sses
sed
Edge/Out of Town in town
The broad trend of locating away from the city centre in the East is set to continue, a function of the rapid development of retail in primary and secondary towns in markets such as Russia and Ukraine. For example, Prizma Beta Group’s 64,000sqm Sky mall – bordering out of town Kiev – will look to use the size its out-of-town location affords as a main selling point in attracting major Western brands.
But the dominant out of town scheme is not just the preserve of Eastern Europe. Amorium/ING Groups 122,000sqm Dolce Vita Tejo in Lisbon is due to open in the Autumn 2008 and will be competing with the nearby Colombo Shopping Centre. A similar scenario is set to play out in Zaragoza, Spain where the Plaza Imperial and Puerto Venecia retail parks will see shopping centres of 83,000 sqm and 73,000sqm respectively added to their existing retail park space, despite being located only several km apart. Puerto Venecia will also feature 50,000sqm of leisure upon opening in 2009.
In Western Europe there is a drive for quality and distinctiveness, characterised by strong links to leisure and lifestyle which aim to create a place for social interaction. Inner-city developments and extensions to existing schemes are at the fore of this trend, strongly related to the extensive urban regeneration currently being experienced across the region as a result of Government ‘town-centre first’ policies.
Feest & Cultuurpaleis, Oostend
There is often greater scope to create a sense of identity in town centres by complementing the existing urban fabric. A good example of this is the Feest & Cultuurpaleis in Oostend Belgium, a 5,555sqm joint in-town redevelopment by ING Real Estate, AGSO & Wilma. Opened in April 2007, the ICSC nominated project saw the transformation of an old city-owned museum into 17 prime retail units, providing a good example of the joining up of a town’s retail offer whilst remaining sympathetic to the existing cultural environment.
European Shopping Centres: One Size fits All? August 2008
The difficulty of securing inner-city land in Eastern Europe is driving development to edge or out of town locations. This is evident in major and secondary towns/cities such as Istanbul, Bucharest and Cluj (although there are still a number of inner city projects planned, such as Sema Park in Bucharest).
Within our broad definition of Western Europe, Spain and Italy are exceptions to the general East/West trend, with the majority of retail development taking place in out of town or peripheral locations. In the under supplied Italian market this is due primarily to the lack of suitable town centre sites for large scale development, but new schemes such as Gruppo PAM’s 87,000sqm Roma Est in Rome are also catering for the growing trend towards suburban living in Italy.
Conversely, the ICSC credited ZloteTarasy scheme in Warsaw and Palladium shopping centre in Prague, both inner-city mixed use projects, are recent examples of regeneration extending its geographic reach as some of the primary markets in Central and Eastern areas begin to mature and follow trends set by the West.
Planes, Trains and Football Stadiums…
It is not just about in town/out of town though. Other retail destinations, while not necessarily new, are evolving. Multi Development opened their I Petali di Reggio shopping centre in May 2007, combining retail as part of a football stadium complex, a concept being further developed elsewhere with planning now advanced for the site of Club Brugge’s new football stadium in Belgium to incorporate a 40,000sqm shopping centre. The retail element essentially funds the stadium development and in doing so creates a unique destination.
I Petali di Reggio, Reggio Emilia
Transcending both Eastern and Western regions is the growth of low-cost travel. This has acted as a catalyst for the development of retail around transport terminals. St Pancras International in London is a prime example of the high street entering the rail station (M&S, Monsoon, La Senza et al. all have units) whilst schemes such as Arena Plaza in Budapest have been developed with the proximity to a transport interchange a major consideration. In Poland, there are a number of tenders being carried out by PKP, the Polish railway, to provide retail and the Czech Republic is also following a similar trend.
Away from rail, DEOL Partners Kiev Airport City will combine 186,000 sqm of retail and office space with hotels and other mixed use facilities on the site of Boryspil Airports new International Terminal D, due for completion within the next three years. London Heathrow’s Terminal 5 opened in March 2008 with some 20,000 sqm plus of retail floorspace featuring high-end brands such as Paul Smith and Gucci, and introducing retailers like Prada to the European airport scene
Blurring of retail formats
The agglomeration of several retail formats to create unique retail critical mass is a familiar scenario in Spain in schemes such as the La Nueva Condomina and Thader in Murcia, but it is gathering pace elsewhere, particularly in Eastern Europe. In Romania, for example, Modus/Nova Imobilaire’s Colloseum Center in Chitilia, Bucharest, will combine a shopping mall (60,000sqm) with a retail park (54,000sqm), whilst the existing Baneseasa shopping city to the north of Bucharest combines a retail park (IKEA, Mobexpert, Bricostore, Flanco ), Carrefour with retail gallery and shopping centre anchored by Peek & Cloppenburg, Zara and Reserved.
The ‘hybrid scheme’ concept, where retail boxes are actually attached to malls is quite commonplace in Poland and is being widely adopted in Russia with MEGA schemes such as the newly opened MEGA Samara in Samara comprising a shopping mall flanked by IKEA and a hypermarket (in this case Auchan). With GLA’s typically in excess of 100,000sqm, the focus here again falls on creating critical mass.
European Shopping Centres: One Size fits All? August 2008
The concept of a Third Place – accessible social surroundings that are separate from the home and the workplace – has led shopping centre developers to explore ways of using retail as an anchor for community life; creating a place people no longer go purely to shop, but rather to shop when they’re already out. Mixed use developments, leisure & entertainment and catering are all central to the creation of a place where people simply want to spend time…...and shop.
Mixed-Use
Mixed-use facilitates easy movement between home, work and leisure, and they are becoming an almost standard consideration in the development industry. Strongly linked to Government policy of ‘town-centres first’, but also evident in out-of-town or peripheral locations, they are central to the trend of urban regenerations we are seeing across Europe, with retail acting as a key component in creating a rounded lifestyle concept.
Many examples of mixed-use developments with successful retail elements can be found across Europe with mature markets such as the Netherlands and the UK amongst the most active. Land Securities’ pedestrianized and open-air Princesshay scheme in Exeter is a good example, integrating residential, retail and public space within the Roman urban fabric of the town, and receiving an ICSC award in the process.
We are seeing mixed-use as a growing trend in Eastern regions, with notable schemes due for completion in Istanbul, Krakow, Bucharest and Moscow over the next 18 months (see previous table). Office space will be a key component of these to not only drive daytime retail trade but also to support leisure & entertainment facilities in the evening. And in Poland a housing boom is creating new residential districts (e.g. Warsaw - Miasteczko Wilanów is a new quarter for approx 30,000 - 40,000 inhabitants) which will be supported by retail and service provision.
Princesshay, Exeter
Leisure & Entertainment
Analysis seen earlier in this report highlights the importance that developers place on leisure to drive footfall, increase dwell times and create a unique destination. Leisure & entertainment at a scheme also facilitates creative social interaction and thus is one of the main contributors if the shopping centre is to be a Third Place in which people want to spend time.
Although leisure and entertainment remains a key component to shopping centre development through the remainder of 2008 and 2009, at this stage we are seeing little innovation in the types of facility appearing in the project plans. The range of facilities closely follows findings from our assessment of the recent shopping centre openings, with Ice rinks, bowling alleys and children’s entertainment areas all recurring themes, whilst cinemas are confirmed at over two thirds of the future projects assessed.
Scheme Completion Retail GLA (M2)
Non-Retail Description
Bonarka, Krakow 2009 90,000 Residential of c.1,000 flats & Office
Sun Plaza, Bucharest 2009 76,000 8,500 sqm office
buildingCotroceni Park,
Bucharest 2009 75,000 c.100,000 sqm Offices
Forum City Park, Istanbul 2008 175,000
Residential, Hotel & Offices totalling
100,000sqm
Avia Park, Moscow 2009 163,400 Residential, Office & Public Parks
European Shopping Centres: One Size fits All? August 2008
Multiplex cinemas have been anchoring shopping centres for over 15 years and are still as important to the leisure offer of a scheme as hypermarkets are to the retail aspect. This is in spite of the fact that cinemas are not always popular with shopping centre owners, as rents are low, they take up a lot of space and they can provide unwanted competition with retailers for car parking space. ECE, for example, do not include cinemas in their schemes.
Although there are no signs of the Cinema trend slowing, there are indications of saturation in some markets. Spain has seen over 230 closures between 2004 and 2007, although the majority of these were older, traditional screens on the high street. Around 15 however were located at shopping centres including those at schemes in Gijon (2005) and Castellon (2007). Two cinemas have closed in shopping centres so far in 2008, both located in Burgos. Converting a failed cinema, with its sloping floor, has always been a financial issue, but not an insurmountable one. At Garbera o El Mirador de Santa Justa in Seville the old cinema was re-let as a Media Markt, and at Abaco Parque, Burgos, a conversion will house part of a large El Corte Ingles department store.
The growing risk of saturation is leading to more cases whereby multiplex operators are adapting their offer to reflect an increasingly competitive market. For example, Movieplex have recently upgraded all of their cinema screens at Plaza Romania in Bucharest to Dolby 3D Digital. Other operators have introduced ‘VIP’ suites offering luxury viewing, a concept recently trialled by Vue at Lakeside in Thurrock, UK. ‘Sense Screens’ which compliment the viewing with appeal to the wider senses such as smell, or allow you to feel sound effects through seats are also emerging on the continent.
IMAX is proving an increasingly popular concept for shopping centre developers and this screen format has been introduced in some screens across Turkey and Hungary, with plans to extend Russian coverage from the existing locations of Moscow, St Petersburg and Kazan over the next three years. Contraceni Park in Bucharest, due early 2009, is set to be anchored by a 20 screen multiplex plus IMAX, highlighting the growth of the concept in Romania. IMAX is a relatively established concept in many Western Europe markets , though presence in shopping centres remains uncommon.
New Leisure
No new definitive leisure trend has emerged, but there are a number of new attractions. Multi Turkmall’s Forum Istanbul is due to open later this year with an 8,000sqm aquarium as its main leisure anchor, in addition to large expanses of public open space for sports & cultural activities, whilst Grand Prix One in Pescara, Italy, promoted by Merlino Progetti, plans to merge motor racing and retail, featuring a full-size Formula 1 test track and showrooms. Elsewhere, Sonae Sierra & Fonciere Euris’s much credited Alexa scheme in Berlin features one of
the worlds largest model railway exhibitions. And Merlin Entertainment have ambitious European expansion plans for their Madame Tussaud’s, Lego Land, Dungeon and Sea Life attractions, of which shopping centre locations are an active consideration.
Model Railway at Alexa, Berlin
This range of new concepts is good news for the consumer, but perhaps less favourable for the investor. A relatively new scheme with modern design and standard formula of tenant mix is likely to generate strong interest, but add to that a big box leisure facility and the risk arguably increases. It is difficult therefore to see any of the facilities mentioned sparking a key future trend – the trend is towards leisure as an entity, not a specific. Snowdomes are a good example of this, at one stage touted as the next big thing but stalling in their development, the reality being that the concept does not transcend all markets and there is often limited interest for what can be regarded as a specialist hobby. Their environmental credentials are also increasingly difficult to justify.
Restaurants & Cafes
Food & drink is central to the concept of a Third Place. The catering aspects of shopping centres are now going beyond the traditional food courts and rather creating culinary destinations that encourage increased social interaction. There is certainly a trend of increased quality in shopping centre catering provision (which is further explored later), but increases in the volume of places to dine is not a uniform trend - there were higher proportions of Restaurants & Cafés in the new Western European schemes (16%) compared with the East (10%). In Poland for example, the biggest food court areas are limited to about 10 - 12 units with some additional cafes and restaurants spread across the centre. But the divide is narrowing. The in-town Palladium Shopping Centre in Prague for example has an above average catering provision, and it is also clear that catering facilities in shopping centres are popular with CEE shoppers, and help to drive footfall.
Romania and Bulgaria are also perhaps exceptions with food courts often acting as an anchor and serving as more of a lifestyle element akin to the Latin culture of Southern Europe. This then alludes to an additional North/South axis to consider, with the climates and culture dictating greater popularity of catering within the Southern markets.
European Shopping Centres: One Size fits All? August 2008
The challenge of creating a place people want to be has led to a drive towards quality, in both an occupier and physical design sense.
Occupiers
The increasing affluence of consumers is evident across the majority of CEE markets, with retail expenditure showing solid year-on-year growth, particularly in the Eastern European markets of Russia, Turkey and Romania. With this has followed an increase in the brand quality of tenants and levels of cross border retail activity, leading to local brands being increasingly replaced by stronger National or Western retailers. A similar cycle was seen in Western Europe during the mid to late 1990’s when brands such as Zara began entering foreign markets.
Luxury brands are beginning to expand their operations in order to service rising demand, and shopping centres are becoming an increasingly popular choice of location for this type of retailer, especially in the East where traditional high streets are often regarded the weaker pitch areas.
The Capital Partners/Unibail-Rodamco Metropolis Shopping Centre in Moscow is scheduled to open later this year with a strong line-up of more upmarket retailers whilst Istinye Park, which opened in September 2007 in Istanbul houses Dolce & Gabbana, Fendi, Gucci and Jimmy Choo amongst other luxury brands within its open air ‘lifestyle centre’ section of the scheme. Other shopping centres have begun to reposition themselves as more upmarket to reflect the change in consumer demand, with centres such as Klif in Warsaw successfully attracting brands such as Marella, Fred Perry & Bugatti, and other schemes such as Palac Flora in Prague starting to implement a similar strategy.
The trend is not exclusive to Eastern Europe, with Westfield’s London White City, set to open in September 2008, hoping the much publicised ‘Village’ area will challenge the established luxury districts of London by attracting additional high-end retailers to complement the already signed Louis Vuitton, Tiffany and Mulberry. Conversely, Spain is actually seeing a decline in luxury retailer demand as market conditions become tougher.
Catering is also seeing a drive towards quality, with Turkey leading the way in converting fast food chains into quality restaurants (e.g. Wagamama and Kitchenette at Kanyon Shopping Centre, Istanbul) and the emergence of aesthetic traditional markets selling local produce are proving a popular concept here and also in Russia.
Luxury retailers at Istinye Park, Istanbul
Design
An improvement to overall shopping centre design and aesthetics is evident across Europe, with developers focusing on the quality of materials, layout, the ‘space between the shops’ the use of natural light, and ceiling heights (if there is one) to increase the ambience of the shopping centre environment and experience.
In Western regions, design has long since evolved from functional to a more sophisticated approach, with integration of the structure into the existing town centre and improving the public realm central to the overall concept.
In Central and Eastern areas, the improvement to design comes less as a case of remaining sympathetic to the existing urban fabric, but rather an attempt to create a competitive advantage in what are primarily edge of town developments.
The influence of Western architects and developers has ensured that new shopping centres in Central and Eastern regions are at the fore of contemporary design and give the perception of openness through use of natural light and thoughtfully designed space, despite being typically closed or under cover. The transparent undulating roof at Zlote Tarasy, Warsaw shows how elements of design can become iconic, creating a sense of identity, whilst the contemporary architecture and use of public space of Baneasa Shopping Centre, Bucharest, highlights the trend towards developers engineering a European ‘piazza’ feel in peripheral locations.
The trend in Western areas is towards a more open design, largely a function of town centre regenerations which aim to complement the existing urban fabric. The focus here is on creating an inviting environment in which people want to spend time, of course strongly linked to the concept of the Third Place. Grosvenors £900 million Liverpool One project in Liverpool, UK, is a retail led mixed-used development which concentrates on optimising pedestrian flows and maximising the use of public open space. As part of the scheme, the Chevasse Park which is planned for October 2008 epitomises the vision and hopes to recreate a New York Central Park feel, complemented by surrounding dining and leisure.
European Shopping Centres: One Size fits All? August 2008
Sustainability concerns appear to be moving up the agenda for retail developers across Europe.
Upstream, the strategic sustainability consultancy arm of Jones Lang LaSalle, note that whilst companies such as Sonae Sierra and British Land have been applying their own sustainability standards to new projects for several years now, more recently companies such as Unibail-Rodamco, Klépierre, Corio and Redevco have also begun to make public commitments to sustainability, and pilot projects for “green” retail developments are starting to appear in various countries within both Eastern and Western Europe. Internally, the number of commercial property companies setting ambitious corporate responsibility programmes is rising, calling for a greater need of advice from sustainability specialists such as Upstream. This trend is set to continue with the ICSC initiative to develop a Pan European green building rating system for retail based on the UK’s BREEAM (Building Research Establishment Environmental Assessment Method), which aims to launch the BREEAM Retail Europe in Autumn 2009.
Reasons for the push are largely commitment orientated, with EU legislation requiring any building over 1000m2 that is sold or leased from October 2008 to have an energy-performance certificate. Rising energy prices are also driving the search for alternative solutions, coupled with the pressures on companies to demonstrate visible commitment to attain or maintain a leadership position in the industry. Developers are also becoming aware of the increased marketability of a project in the eyes of investors, and the effect it has on market value in the short to medium term. The Meydan Shopping Centre in Umraniye Istanbul for example, which opened in August 2007, employs geothermic energy for temperature control in addition to natural ‘meadow’ rooftops. A strong tenant line-up which includes Nike, Mango and Turkey’s first Media Markt soon followed with the green focus of the scheme most likely a contributing factor.
Meydan Shopping Centre, Umraniye
In the medium term, rising energy prices and legislative pressures are likely to increase the need to find sustainable solutions at the development stage, particularly through building design. These solutions will need to allow reasonable pay back periods and be proven to increase operational efficiency. Standards such as the BREEAM Retail Europe, assuming that it does take effect next year, may well be adopted by property developers as a means of providing a framework for sustainability implementation and boasting publicly recognised sustainability credentials. The longevity of the standard will depend on the extent to which it is successfully adapted to national and/or local contexts and the added value that can or cannot be derived from it. In other words, whether or not it proves to make buildings more attractive to investors and occupiers.
European Shopping Centres: One Size fits All? August 2008
In summary, and returning to the main theme of the report, it is clear that one design doesn’t fit all, although certain aspects of shopping centre development do transcend all European markets
As we have seen, achieving distinctiveness from an occupier sense is challenging. The fundamentals of retail anchor and tenant mix follow a similar formula across Europe, based on the developers’ experience of what works and what doesn’t. The influence of Western developers and tenants moving East has acted as catalyst for this convergence, but it has also led to a more condensed development cycle in Central and Eastern Europe.
Functional retail in this region is arguably being delivered as successfully as in Western markets, though as the rapid pace of development continues, the level of competition will increase and the next challenge will be one of differentiation, in line with the cycle we have seen in the West. This doesn’t mean we will see a replication of Western development, but rather an evolution away from functional retail towards Third Place creation that intrinsically fits its host environment.
Glossary of Terms
New scheme openings are defined by a cumulative assessment undertaken of 21 new European shopping centres with a GLA of 30,000sqm or greater that Jones Lang LaSalle know to have opened between January 2007 and February 2008. In addition, a cross-section of new scheme openings falling within the same time period, with a GLA of under 30,000sqm, were also assessed though quantitative data from this exercise was excluded from any grouped figures and used as reference only. No shopping centres to open in Russia were included in this part of the quantitative analysis.
Future scheme openings (also referred to as ‘future projects’) are defined by a cumulative assessment undertaken of all European projects in plan or under construction that are due for completion before the end of 2009 with a GLA of 45,000sqm or greater and whereby information was available and known to Jones Lang LaSalle.
Differentiation means different things in different markets and the difficulties in securing a unique retail offer has led to the non-retail aspects of shopping centres becoming the main differentiators. Previously, developers would look to ‘destination’ facilities, such as the Multiplex to perform this function, but now with an almost omnipresence of this type of attraction, the design, location, and unique leisure & entertainment facilities – optimised for local demand – are all used to create an ambience and vibrancy.
Ultimately, the consumer has choices. They can choose where to shop, where to relax, where to interact. With these choices comes the need for developers to offer an environment that encourages consumers to shop and more importantly a place which is more appealing than competing shopping experiences, including the internet. Creating and evolving a unique identity is central to this strategy and will ensure that one size will never fit all, even if the tenant line-ups look increasingly similar.
Anchor / Key tenants have been defined either by direct reference from the shopping centre owner/developer/leasing agent or through analysis of physical floor plans.
Eastern Europe in the context of this report refers to the contemporary geographic definition of Central and Eastern Europe, including Greece and Turkey. Western Europe is defined as all countries to the West of Germany, Austria and Italy inclusive.
Contacts
James Dolphin Head of European Retail Agency Retail Agency Jones Lang LaSalle London +44 20 7852 4623 [email protected]
Chris Powell MRICS Chairman Retail EMEA Jones Lang LaSalle London +44 20 7409 2199 [email protected]
Neville Moss National Director European Retail Research Jones Lang LaSalle London +44 20 3147 1187 [email protected]
