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News Release

Kiev

Russia and Ukraine outside the European top 10 for density of quality shopping centre stock

Both countries are undersupplied with quality shopping malls compared to the majority of European countries


Kiev, 08 June, 2015 – JLL has analyzed the dynamics of new shopping centres construction and the stock density of quality retail premises in Europe[1]. According to JLL experts, Russia and Ukraine take leading positions for announced retail objects and those under construction, however they still suffer from a lack of quality retail space compared to European countries.

The density of quality retail space in Europe amounts to 199 sq m per 1,000 inhabitants on average at Q1 2015. It should be mentioned that this indicator varies substantially depending on the region. For instance, Western Europe is characterized by 260 sq m per 1,000 inhabitants, while Eastern Europe runs up only to 134 sq m.

The leader in quality shopping centre stock density in Europe is Luxembourg, with 625 sq m per 1,000 people. Still, total stock in this country is the lowest due to the country's small population. The Netherlands is ranked second with 517 sq m per 1,000 inhabitants. This is explained by the high quality shopping centre stock on the one hand – it is among top 10 biggest European retail markets - and relatively thinly scattered population on the other. The third place goes to Ireland with a small number of inhabitants and small shopping centre supply. Nevertheless, its density indicator is 478 sq m per 1,000 inhabitants.

Such developed European countries as the United Kingdom (234 sq m per 1,000 inhabitants), France (248 sq m per 1,000 inhabitants), Italy (261 sq m per 1,000 inhabitants), and Germany (179 sq m per 1,000 inhabitants), lead terms of total existing retail stock in Europe, however do not make the top 5 list in terms of density. They are only ranked among 15 most saturated European markets due to considerable population size as well as the fact that the significant part of retail space in countries of core Europe is located in street retail rather than in shopping centres.

Russian new retail space expanded by 500,000 sq m in Q1 2015, which is a historical record as twice as much as in Q1 2014. Nonetheless, despite this high level of completions, Russia remains below the density level of the majority of European countries, taking 19th place with 127 sq m of quality retail space per 1,000 inhabitants at the end of Q1 2015, left behind by Turkey, Romania, and Hungary.

Ukraine with only 59 sq m per 1,000 inhabitants holds the 23rd place, being slightly below Greece, Belgium, and Bulgaria. If the forecasted amount of shopping centres is completed, Ukrainians will reach 85 sq m of quality retail space per 1,000 inhabitants by the end of 2015.

Shopping Centre Density in Europe

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Source: JLL

Russia and Ukraine's low density compared to core Europe countries is explained by the relative immaturity of commercial real estate markets with the construction of quality shopping centres in both countries starting only in the past decade and mostly in the largest and developed cities.

"By comparison, total shopping centre stock in United Kingdom in 2008 almost exceeded 18m sq m, while in Russia it was just 9.5m sq m and in Ukraine just 1.5m sq m. Over the past six years Russian quality retail market expanded by 9.8m sq m, making it the second largest in Europe in terms of total quality retail space supply. In 2013-2014 Russia has overtaken such countries as Italy and France with 15.7m sq m and 16.5m sq m correspondingly," - Maria Shpakova, Retail Market Analyst, JLL, Russia & CIS, comments. – "The Ukrainian retail market has also increased by more than 1.5 times since 2008 and now its total volume equals to 2.6m sq m. As a result, nowadays Ukraine is ranked 12th among European countries in terms of total shopping centre stock."

European Shopping Centre Stock

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Source: JLL

JLL estimates that about 6.3m sq m of retail space are to be delivered in 2015 in Europe. The largest share (55%) of new shopping centres for 2015 in Europe is assumed to be completed in Russia (1.7m sq m), Turkey (1.2m sq m), and Ukraine (570,000 sq m), which lead the field in Europe in 2015 shopping centres pipeline.

2015 European Shopping Centre Pipeline

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Source: JLL

It should be emphasized that Russia and Turkey have maintained strong positions in European shopping centre completions since 2008: thus, the average share of Russia amounted to 25% in the period 2008 - 2014, for Turkey this indicator stands for 18%. Ukraine attained top 3 for the first time. It is vital to point out that it is only forecast and many schemes in Russia and Ukraine may be postponed, as the current economic conditions can result in a reduced number of completions.

 "Nowadays the dynamics of shopping centre construction is under pressure due to the current economic environment: projects under active construction are gradually delivered, while planned ones are not being started yet. At the same time, the need for quality retail premises can still be seen on the market. For instance, even in Moscow there are several locations suitable for quality shopping centres construction including large formats which certainly will be in high demand after the economic situation stabilizes," - Tatyana Kluchinskaya, National Director, Head of Retail Department, JLL, Russia & CIS, notes. – "Great potential is seen in implementation of quality neighbourhood shopping centres with average GLA of 5,000-15,000 sq m. Such niche in Moscow is undersupplied. Whereas, regional markets that have recently been affected more seriously by the decline of purchasing power are supposed to regain their attractiveness for developers and retailers in the long term perspective due to undeveloped local retail sector, particularly in the cities with population less than 500k people."

"In our mind, Ukrainian retail market has great potential using forward thinking approach – perhaps, one of the highest in Europe. It is explained by retail market immaturity and reduced volume of quality shopping centres, particularly in Ukrainian regions, as well as by insufficient presence of global retailers. Over the last year, we have observed a decrease of activity in the retail market on the back of sharp decline in personal real income. As a result, we do see new projects frozen and projects in advance stage delivered gradually, however we expect pent-up demand on the market and consumer activity intensification in the future", - Anna Chubotina, Head of Retail Department, JLL, Ukraine, adds.

[1] In the frames of the retail market analysis 24 European markets were examined by JLL concerning gross leasable area (GLA) in shopping centres.​