 |
 |
 |
 |
 |
 |
 |
 |
Shopping Centers Today -> April 2004
 PRINT THIS STORY: |
  CHANGE TEXT SIZE: |
|
ITALY ATTRACTS FOREIGN MALL DEVELOPERS
BY DEBRA HAZEL
 |
Photo: Jon Hicks/CORBIS |
| Galleria Vittorio Emanuele II — where it all started. |
Given that Italy has no super-regionals and that shopping centers of any kind are hard to build in its highly regulated environment, the country has largely missed out on “typical” malls thus far, especially in the south. So when Corio, a Dutch investment and development firm, opens Campania next spring, it will be a big step in the evolution of the Italian shopping center industry.
“Generally, [things are] not favorable to development in Italy,” said Gino Antonacci, leasing and property director at Milan-based Corio Italia SRL, which has four existing centers in Italy, amounting to about 700,000 square feet of retail space. (Corio Italia’s Dutch parent, Corio, a leading shopping center owner in the Netherlands, France and Spain, is a relatively new investor in Italy. It owns four existing centers as well as Campania.) “It is difficult to obtain permits.”
Corio, which acquired Campania last May from another developer, also owns and manages the largest center in the Piedmont region, Shopville Le Gru, a 645,720-square-foot enclosed mall in Torino.
It is ironic that Italy’s shopping center development has lagged the rest of Europe so, given that the Galleria Vittorio Emanuele II, which opened in Milan in 1877, has been cited as an inspiration for the modern enclosed mall. The first Italian enclosed mall of modern times, Cittamercato, opened in Brescia in 1972. But by 1987 only 40 centers larger than 53,000 square feet had opened on the peninsula, according to London-based Cushman & Wakefield Healey & Baker’s 2002 Italian Shopping Centres report.
By the close of the 1980s, development accelerated, however, and today Italy has 430 shopping centers, totaling 67.4 million square feet. But taking into account a national population of nearly 58 million, that amounts to 1.2 square feet of retail space per capita, compared with 2.3 square feet per capita in the United Kingdom, 2.2 square feet per capita in France and 1.3 square feet per capita in Germany, according to Cushman & Wakefield Healey & Baker. (The United States has 21 square feet of retail space per capita, according to ICSC.)
Furthermore, most Italian centers are small by North American standards because of a dearth of department store anchors and because the centers are located in or near urban areas. Only 16 projects exceed 428,000 square feet, says Cushman & Wakefield (see table).
Not surprisingly, then, Italy’s shopping center deficit is attracting the attention of retail real estate developers and investors from around Europe and North America, some of whom are finding Britain, France and Germany increasingly saturated.
Campania is just one of up to 75 new centers that could open by 2006, according to Jones Lang LaSalle Europe.
“Certainly, in the last four or five years, we’ve seen enormous changes and an accelerated pace,” said Patrick Parkinson, director of capital markets at Jones Lang LaSalle Europe.
New projects are opening at the rate of 30 to 40 annually, says Marco De Stefani, a partner and head of retail in Italy for Cushman & Wakefield.
“The main impulse for growth is the need for hypermarket retailers to locate in Italy,” De Stefani said. These include Auchan and Carrefour, both of France.
Foreign capital (including German pension funds) is also stimulating growth, says Carlo Vallardi, a vice president at Gruppo Finim, an Italian shopping center developer, third-party manager and consulting firm.
“Now shopping centers in Italy are considered very attractive for European investors, including Corio, [London-based] Pradera and Deutsche Bank,” Vallardi said.
Projects are getting larger to accommodate international retailers such as H&M, Mango and Zara, or such big-box operators as Ikea and Media World.
The growth has begun to attract large U.S. mall developers. In December Simon Property Group formed a nearly $1.1 billion joint venture with Italian department store and hypermarket operator Rinascente Group to own and manage centers throughout Italy. Simon owns 49 percent of the entity, which has 38 existing centers and is developing six more, with as many as 14 additional projects in the pipeline.
 |
|
| Dutch investment and development firm Corio’s 80,250-square-foot Il Maestrale mall (above), built in the resort town of Senigallia in 1999, and its Shopville Gran Reno (right), a 139,000-square-foot center in Bologna that opened in 1993. The company currently has four retail properties in Italy. |  |
The rest of the industry is looking at the Simon-Rinascente deal with interest.
“In the end, the perception is that Simon Group will have a passive role,” said Davide Dalmiglio, director of retail capital markets at Jones Lang LaSalle Europe. He says he believes that Simon will let Rinascente, with its local expertise, take the lead in developing and managing the properties.
The Mills Corp., too, is pursuing development in Italy with a variety of local partners, says Edward B. Vinson, the company’s executive vice president of international development. Mills now has five centers in the works: two in Rome, two near Milan and one in Florence.
“Basically, our goals have been to put one or two centers in the pipeline on an annual basis,” Vinson said. “But we’ve been active on four centers in the last 36 months.” The fifth is still in the planning stage.
To date, the bulk of all shopping center space has been concentrated in such northern cities as Bologna, Milan, Rome and Torino. About 63 percent of developments are located in the north, 19 percent in the central part of the country and 18 percent in the south, says the Cushman & Wakefield report. The reasons are simple.
“In northern Italy, you have the population base, but also the greatest income,” said Vinson.
Among the northern projects is Gruppo Finim’s 374,500-square-foot center going up in Cremona, anchored by a hypermarket and scheduled to open in the spring of 2006. (Finim also manages some 60 projects around the country.) Portuguese developer Sonae Imobiliária has announced plans to build a 300,000-square-foot center in Brescia. Unusually for the country, this will be a two-level project, to fit into an urban location just 15 minutes from the city center. The still-unnamed center will also be more upscale than many others in the country.
“Italy is a very sophisticated market, able to appreciate the upmarket,” said Pietro Malaspina, a Sonae Imobiliária managing director.
The factory outlet industry has taken hold too. BAA McArthur Glen opened Serravalle Outlet, near Milan, in 2000 and Castel Romano, south of Rome, in October 2003. Value Retail opened Fidenza Village, also near Milan, in June 2003. As many as 15 outlet centers are in the planning stage, including projects by BAA McArthur in Florence and Venice, and other centers by Value Retail and Gruppo Percassi.
As the north builds out, some developers are beginning to look to the less developed areas in the south, including Naples and Sicily. About 36 percent of the new supply of shopping center space through 2006 will be located in southern Italy — in Calabria, Campagna, Puglia and Sicily, according to Jones Lang LaSalle’s 2003 The Shopping Centre Market in Italy.
“We see major projects developing in cities in the south of Italy,” said Corio’s Antonacci.
Gruppo Finim plans to build about 80 projects by 2006, for itself and for clients, divided evenly between north and south, Antonacci says.
There are potential pitfalls, though.
“The south is a more interesting market, [being] the least developed,” said Sonae’s Malaspina. “But the cost of building a shopping center is the same, and the purchasing power is significantly lower.”
Accordingly, southern centers are not targeting the designer consumer, Parkinson says.
And all this activity belies a significant challenge for every developer: the 1998 Bersani Law. This law has eased the permit process for shops smaller than 250 square meters (2,690 square feet) while requiring local authorization for the building of stores between 250 and 2,500 square meters in size. Projects larger than 2,500 square meters are subject to local, provincial and regional authorities.
“Now you don’t have one law, you have 20 different laws,” said Rita Fiori, secretary general of the Italian Council of Shopping Centers, referring to the 20 regions that encompass, in turn, a total of 105 provinces and 8,000 communities.
But even if Italy is living up to its reputation for bureaucracy, its reputation for corruption is undeserved, argues Malaspina.
“I’ve been in retail for 35 years and never met a problem of that kind,” Malaspina said. “There is no need for corruption — the laws are so complicated that it takes a lot of effort.”
 | Current Issue March 2010 |