Shopping Centers Today International

MAR 2016

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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notes, they typically attract two or three times that number. Gunn concurs. "We've got a lot of institutional investors and corporate investors coming into the industry," said Gunn. "It's very, very vibrant at the moment." Part of the reason for the focus on new properties is that few insti- tutional investors have the patience or courage to finance new schemes. "Most funds won't put money up at this stage due to the planning risk, particularly in countries like the U.K., France and Germany," Mem- brey said. The approvals process can take a minimum of two or three years and cost upwards of €1 million (roughly $1 million), he says. There are exceptions: Membrey's group re- cently secured approval for a designer outlet village north of Birmingham. A British property company funded the application process, he says. Last year saw the smallest amount of additional floor space since 1994, with less than 50,000 square meters (about 538,000 square feet) added to the to- tal across Europe. But Europe's outlet industry — numbering 222 centers — enjoyed strength in other respects. The outlets, totaling some 3.4 million square meters, achieved €11.8 billion in revenue (turnover). Overall sales are up by 86 percent since 2008, according to FSP Retail. In 2016, several shopping centers will expand and new ones will open, adding some 100,000 square meters of floor space to the total, most of this in southern and central Europe, accord- ing to FSP. Last November McArthur- Glen, the market leader in terms of gross leasable space, announced plans to expand its total global retail foot- print to nearly 900,000 square meters by 2019, up nearly 50 percent from to- day, through eight new shopping cen- ters and eight expansions, all but one of these in Europe. Executives at the London-based company estimate that the expansion will extend the centers' catchment area by about a third, bring- ing 144 million Europeans within a 90-minute drive of a McArthurGlen outlet center. FSP estimates that the market could support perhaps another 60 outlets. Moreover, as Gunn notes, finding the right site is becoming more difficult in some areas. The opportunity varies considerably by region. Although the typical penetration rate for outlet shop- ping in Europe is 141 people per square meter of outlet retail, this covers a con- siderable range — from 87 people per square meter in Switzerland and 88 in Portugal, to 273 in Germany and 2,014 in Russia. Daniel Losantos, CEO of Madrid- based outlet giant Neinver, sees oppor- tunity ahead in Germany and France but says the markets will require pa- tience to develop. "Although they offer a great opportunity for us to develop new outlet centers, the licensing pro- cesses can take very long, in many cases a few years," he said. In the past, lobbying by retailers against new schemes has kept many proposed outlets out of Germany, says Gunn, who also suggests that attitudes toward outlets are beginning to change. Membrey, for one, says it sees great po- tential in the market. Investors are likely to be quite active this year, either expanding their current portfolios or forming new ones. One important investor, TH Real Estate, a unit of U.S. pension fund TIAA-CREF, is already the largest owner by revenue share (18 percent) and by floor area (11 percent). A longtime believer in out- lets, TH Real Estate has enjoyed steady success with outlets for more than a decade. Launched in 2014, TH Real Estate's €2.3 billion European Outlet Mall Fund includes investments in malls operated by McArthurGlen and Neinver. It is a successor to an earlier 40 S C T / M a r c h 2 0 1 6 "We've got a lot of institutional investors and corporate investors coming into the industry. It's very, very vibrant at the moment." R I O J A D E V E L O P M E N T S ' M I L L G R E E N D E S I G N E R O u T L E T C E N T R E , I N C A N N O C

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