With much of Western Europe more focused on asset management than new mall openings, Mark Faithfull looks to the East at those markets bucking the trend.

The entrance hall at Dubai Shopping Mall

Anyone in doubt about the importance of scale need only consider the fortunes of Europe’s three largest cities: London, Moscow and Istanbul. London has enjoyed unprecedented economic success, while the latter two are many people’s top picks for future potential, with a raft of new schemes supporting expansion. Further east still, fresh - and often grandiose - plans are springing up once again in the Middle East.

Russian retail development was undoubtedly hit by declining investor confidence after the 2008 financial crisis, but there is a distinct change in the air. Projects that were put on ice are back under construction with definitive completion dates attached, and more schemes are coming to market.

Andrey Vasyutkin, head of research and consulting at Moscow-based consultant Magzin Magazinov, says: “This year may become record-breaking for Russia in terms of commissioned retail space, provided that all the announced projects are open by the end of the year. The Russian retail property market has also seen landmark investment transactions, with [shopping centres] Metropolis in Moscow and Aura in Novosibirsk sold.”

Vasyutkin points to the upcoming mega-malls as a sign that space will become more readily available in Russia, especially in Moscow.

One such example is Avia Park, which will be the largest mall in the world outside Asia when the 2.4 million sq ft gross leasable area (GLA) project completes around this time next year. Amma Development’s four-level shopping centre will include hypermarket Auchan, a flagship Debenhams, German electronics store Media Markt and DIY store Obi. Also to open in Moscow in 2014 is Vegas Crocus City. The 1.16 million sq ft GLA scheme is located at Crocus City, close to Moscow’s densely populated north-western district.

James Dolphin, lead director of international retail at Jones Lang LaSalle, says strong retail performance is attracting new names: “Last year we saw Debenhams and Hamleys entering the Russian market, while Tommy Hilfiger opened at Kuznetsky Most in Moscow,” he says. “Galeries Lafayette is also looking to expand into the country, focusing primarily on Moscow where the major development pipeline supply for 2013/14 exceeds 10.7 million sq ft.”

The €250m (£211.3m) Okhta Mall in St Petersburg city centre, developed by Finnish-backed SRV and Russia Invest, will have a GLA of 807,000 sq ft, underground parking levels, a hypermarket and four floors above ground. It will open in spring 2016.

Julia Gordeyeva, senior analyst at Sberbank Investment Research, says: “Russia’s commercial real estate market has staged a healthy recovery since the crisis, enjoying two years of record investments. High occupancy rates
at Moscow’s quality shopping centres are keeping rental rates stable for the time being. Last year also saw internet retailers taking up significant space in the Moscow metropolitan area, in addition to the traditional retail and logistics operators.”

Turkish delights

Turkey - and Istanbul especially - is at the top of the list for many retailers and shopping centre developers looking for growth thanks to its young demographic, burgeoning middle class, love of consumerism and location between emerging Europe and the Middle East.

Consumer demand has been the prime driver behind the strong growth of the retail sector and the size of the prize continues to increase for international chains. Deloitte Turkey Corporate Finance forecasts that sales in the Turkish retail sector of $313bn (£193.5bn) in 2012 will be boosted by 10% growth per annum until 2016.

According to figures from Jones Lang LaSalle, despite this year’s demonstrations in Istanbul, Turkey beat all European countries in shopping centre development in the first half of this year, with a staggering 6.25 million sq ft of new space completed in just six months. And 2014 promises to be no less active, with an estimated 14 million sq ft of shopping centre space in the pipeline.

One of the stand-out projects is Emaar Square, a mixed-use scheme being built on the Asian side of Istanbul. Situated in Çamlica, Emaar Square will cover 710,400 sq ft and form a whole new city neighbourhood.

As well as 1,000 luxury homes and a five-star hotel, developer Emaar Turkey’s scheme will also deliver the country’s largest shopping centre - the 1.6 million sq ft Emaar Square Shopping Mall.

Commercial developer Multi Corporation is also busy in Turkey, with one centre - Forum Gaziantep - due to open by the end of this year, and another four in various stages of development. These projects, in Adana, Çanakkale, Diyarbakir and Elazig, represent a major investment by Multi Corporation and will deliver more than 1.65 million sq ft of new retail space.

The largest of the new schemes, Forum Diyarbakir, is taking shape in the ancient city in the east of the country. The three-storey centre will provide 80 stores, restaurants and cafes, a hypermarket, a DIY store and an eight-screen cinema.

Middle Eastern mega-projects

Earlier this year signs that the Middle East was re-establishing its retail credentials were confirmed when two major retail schemes were mooted in Dubai. Debt-ridden developer Nakheel said it is “evaluating finance options” in a bid to raise the nearly $900m (£556.5m) needed to fund its latest Palm Jumeirah retail developments after Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum ordered work to start on the Nakheel Mall and The Pointe.

The Nakheel Mall project will be built on the beachfront at the bottom of the trunk of the Palm Jumeirah at a cost of $700m (£432.8m)and will stretch over an area of 1.1 million sq ft.

Sheikh Mohammed also ordered the commencement of The Pointe project, overlooking the Jumeirah Beach Hotel and the Atlantis Resort, at a cost of $220m (£136m). It will include shops, computer-controlled fountains, a marina and a public walk on the tip of the palm-shaped island.

Abu Dhabi is also preparing for a new super-mall. The Galleria, a 355,000 sq ft GLA luxury shopping and dining destination developed by Gulf Related and Mubadala, will include more than 100 retail outlets and offer more than 500 retail, leisure, dining and entertainment options.

Featuring designer labels and high-end brands, the centre is on Al Maryah Island, home to Abu Dhabi’s new central business district. Aspinal of London, Jimmy Choo, Marc Jacobs, Mulberry, Paul Smith, Alexander McQueen, Moschino, Thomas Pink and Emilio Pucci are among the brands making their store debuts in Abu Dhabi when The Galleria opens in 2017.

Such schemes demonstrate how much development has picked up since the downturn, when perceived risk put the brakes on expansion. In 2014, expect to see the creation of some of the biggest mega-projects in the world.

Beyond the BRICs

A host of emerging markets beyond the BRIC countries could represent the next generation of major growth markets for retailers. Olaf Schmidt, global sector head of retail, real estate and hotel investments for IFC (World Bank Group), which helps retailers fund expansion in new markets, points to a rise in global middle classes and massive urbanisation as transformational for economic opportunities around the world.

“We see the most dynamic opportunities around urbanisation in Latin America, the Middle East and North Africa region and sub-Saharan Africa,” he says. “We have identified the best countries for doing business based on transparency and demographic trends and in our research we already count 45 countries ahead of the BRICs regarding these factors.”

Dr Ira Kalish, chief global economist at Deloitte, also believes some largely sidelined markets offer strong promise. “Mexico is back,” he says, pointing to the country’s economic reforms and proximity to the US in terms of low-cost manufacturing and supply chain potential. He adds that the Philippines offers sturdy fundamentals and is in “a very strong position”.