Shopping mall boom at an end


Recent years in the Czech Republic saw a major boom in new shopping centre development throughout the country. Now the boom is at an end. According to the daily Lidové noviny, 2011 will be the first year in two decades which will not see the opening of a single new large retail centre.

A little earlier Jan Velinger spoke about the reasons with Richard Curran of the Czech branch of real estate advisor CB Richard Ellis.

“I think that as the retail space per head of population catches up with Western levels, this decrease in development is part of a natural slowdown. That, coupled with the financial crisis which saw financing for new development –virtually all real estate, not just shopping centres – dry up, led to the massive reduction in new projects. I think developers to an extent are taking up new tactics.”

What will change?

Richard Curran
“Well the development of large-scale shopping centres will not cease entirely but will be very, very specific and opportunity-driven. Developers will focus on retail parks going forward, focussing on smaller cities with populations of 20,000 – 50,000 people that wouldn’t support larger-scale, modern shopping centres with a hyper-market anchor and 40 or so retailers. They will be smaller sites between 5,000 – 10,000 square metres which will have your shoe store, pharmacy, a couple clothing retailers and so on. The focus will be on smaller cities.”

If the market is just about fully saturated in the bigger cities like Prague, how are already existing malls doing?

“Certainly what we’ve seen in the last three years is the distinction between well-performing shopping centres and those that have done poorly. Going back seven or eight years when there was this rush in development and not enough space per consumer head virtually every shopping centre performed and traded well. As the market became more saturated we’ve seen a division between those that have continued to perform and those that are doing poorly and require re-direction and heavy asset management.

“We have even seen one case in Stodůlky being sold off and is now being used as a warehouse by a furniture company. Retail location is always a major factor: those sites that aren’t as well located or didn’t have the right location in the first place or just leased to the highest bidder and didn’t really think about it - or don’t have a clear structure within the site to attract customer flow throughout the centre - are clearly the ones struggling at the moment.”