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MILAN ÉLAN

The city that invented the mall is about to get more of them

By Steve Bergsman

It is an irony that Milan has so few malls, given that the city invented the format (and the now ubiquitous term “galleria”) with the Galleria Vittorio Emanuele II, which opened in 1878 and remains perhaps the most elegant indoor shopping space in the world.

And it would be hard to find a city more fascinated with shopping. Rome’s population may be bigger and richer than Milan’s (2.5 million versus 1.3 million, respectively, in the cities proper), but no one shops like the Milanese. “There are over 3,200 square feet of retail [297.2 square meters] for every 1,000 residents in Milan,” said Paolo Bellacosa, director of the investment department at the Milan office of CB Richard Ellis. “That compares with the Italian average of 1,915 square feet and about 1,000 square feet in southern Italy.”

Milan is the No. 1 retail market in the country by far, says Marco De Stefani, a partner at the Milan office of Cushman & Wakefield. But there are only 19 major malls in the metro area, according to Cushman & Wakefield, and none of these measure more than 40,000 square meters, though some are in the process of redevelopment that will nearly double them in size.

“In Milan we do not have big shopping centers,” said Davide Dalmiglio, national director of capital markets at the Milan office of Jones Lang LaSalle, drawing a contrast with the large retail parks elsewhere in Europe. But that is about to change. “In the medium term, three to five years, there will be bigger shopping centers built than exist now.”

New shopping centers are planned for the outskirts of the city and its suburbs, and redevelopment will bring more shopping to Milan’s dense and very upscale High Street retail scene. Cushman & Wakefield counts 12 shopping centers in the planning and development stages, including two at over 93,000 square meters. (Sources note that until the centers are built, true numbers are hard to get; even those of the city’s brokerage firms vary wildly. Dalmiglio says a shopping center under development in the northern suburbs of Sesto San Giovanni will contain over 93,000 square meters of leasable space, while De Stefani says it will be about a third that size.)

Nevertheless, there are a number of consistencies among existing shopping centers in and about Milan and throughout Italy. First, they are indoor, and some landlords have only recently added big-box stores around the central mall. The big retailers include the ubiquitous European chains Castorama (home improvement), Decathlon (sports and sportswear) and Toyscenter. Malls in Italy are never anchored by a department store, but rather by a grocery superstore. Dominating the older malls around Milan are Auchan, Carrefour, Il Gigante and Ipercoop. These will be inhabiting the newer shopping centers too, though the Italian grocery superstore Esselunga will be muscling into a few developments as well. American clothing chains are almost nonexistent in the malls.

Changes are afoot in Italy, however. “We don’t have a great experience in Milan with retail parks, but now developers are trying to build this kind of concept and are looking to the European experience, how they have been built in Spain, the U.K. and France,” said Dalmiglio. “The market is changing, because this is a product developers, investors, investment funds and property companies appreciate.”

Nonmall retailers are not about to take any challenge lying down, however. In the fall La Rinascente finished up a major renovation of its most famous store, across from the Duomo in Milan, in the heart of the city’s major shopping district, referred to as the Golden Quadrangle.

In the Golden Quadrangle can be found almost every high-end retailer from the U.S. and Western Europe, including Armani, Bulgari, Hermès, Prada, Tiffany and Tod’s. Rents on Monte Napoleone and Via Della Spiga are the highest in Milan and can exceed $6,000 per square meter, says Bellacosa, versus about $650 per square meter in some of the city’s other shopping street locations. Milanese shopping centers charge anywhere from $500 per square meter to about $1,100. Little wonder that such rents exist. “The vacancy rate for retail in Milan is about 2 percent,” said Bellacosa.

Dalmiglio agrees. “It’s very difficult to find a vacant unit in a Milan shopping center,” said Dalmiglio. “You have rotation of tenants, but the store would not be vacant for more than two or three months.”

One of the reasons for the slower development of shopping centers in Milan has been the continued strength of its High Street retail and, adds De Stefani, its “powerful lobbying” against new projects.

Nevertheless, a host of new redevelopment schemes will shake up the High Street retail experience in Milan. First, there are two large-scale, mixed-use projects getting under way within the city limits and near the Golden Quadrangle. The first of these is the Norman Foster-designed Milano Santa Giulia, which will create offices, retail and leisure on an old Milan industrial site. The developer is locally based Risanamento. Houston-based Hines Interests is building an even bigger project on the city’s old railroad yards. Its name has changed a few times and is currently being called Garibaldi Repubblica Varesine ed Isola Lunetta. The 350,000-square-meter project will include office, residential, hotel, exhibition space, a park and over 20,000 square meters of retail.

Garibaldi Repubblica will serve as an extension of the Corsa Como, a street of clubs and hotels, says Manfredi Catella, CEO of Hines Italia, a Milan-based real estate services firm. “It’s a vibrant neighborhood,” Catella said. “We expect to attract more shops, art galleries and boutiques. It will be more an urban European shopping area. I believe we can attract good brands, because there is already an established shopping area in the immediate vicinity.”

Not as big as Milano Santa Giulia and Garibaldi Repubblica but possibly more important for retail are two singular buildings being redeveloped as shopping centers within the Golden Quadrangle and scheduled to open in 2009. On the Via Bagutta, an eight-story parking garage will be converted into an indoor mall with just under 10,000 square meters of space. The second High Street development will be the conversion of an old office building on San Babila Street into a 28,000-square-meter mall.

Some say this latter project will house a Harrod’s, the famed British department store. If true, the inclusion of such a store would mark a break with Italian tradition. In terms of style, however, both malls will continue in the tradition Milan established with its Galleria nearly 130 years ago.

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