FEATURES


A Decade of Change in Italy’s Shopping Centers


New Retail Forms Take Shape, Even in Troubled Economy FRANCESCO TERRA*


Abstract: The Italian shopping-center industry witnessed impressive growth during the past 10 years. The current economic crisis, while slowing the pipeline of new centers, has not diminished the appetite of investors for expanding or refurbishing retail properties. New forms of retail destination are evolving, while the growth of e-commerce has not yet threatened the performance of shopping centers.


Introduction Over the last several years, Italy’s economic difficulties


(which are intertwined with its sovereign debt crisis) have negatively affected the consumer and retail real-estate development environments that shape the nation’s shopping-center industry. According to the International Monetary Fund (IMF),


2012 represented one of Italy’s worst years for its economy. As shown in Table 6-1, Italy’s real GDP tumbled by 2.4% in 2012 and the IMF projects that economic activity will shrink by another 1.8% in 2013 before a meager 0.7% recovery in 2014.


Table 6-1


Economic Outlook for the Group of Eight (G8) Industrialized Nations*


Key Economies


Canada Germany France Italy Spain Japan


United Kingdom United States


2011 2.5%


3.1 2.0 0.4 0.4


-0.6 1.0 1.8


2012 1.7%


0.9 0.0


-2.4 -1.4 1.9 0.3 2.2


2013F 1.7%


0.3


-0.2 -1.8 -1.6 2.0 0.9 1.7


2014F 2.2%


1.3 0.8 0.7 0.0 1.2 1.5 2.7


* Year/Year Annual Percent Change in Real Gross Domestic Product F= Forecast Source: International Monetary Fund, World Economic Outlook, June 2013 Update


The 2013 economic landscape was complicated by


political uncertainty in the early part of the year. In February, the parliamentary elections were inconclusive, ultimately resulting in a new government, which was not


formed until late April, when Enrico Letta’s new left-right coalition government took charge from Mario Monti. Observers hoped that the new prime minister’s government would implement much-needed structural reforms to stimulate economic growth and to address labor and taxation issues. However, Letta’s government already is struggling as the Bank of Italy announced in mid-July that it expects the unemployment rate to be close to 13% in 2014 and it sees further downside risks to Italy’s economy. The Bank of Italy’s July 2013 projections for its economy anticipates household consumption will contract by 2.3% in 2013 following a drop of 4.3% in 2012. The Bank’s estimate for 2014 household consumption is essentially flat (-0.1%). Admittedly, severe problems linger in Italy. However, it


is important not to lose sight of the country’s long-term prospects. Italy boasted a 2012 per capita GDP at purchasing power parity (PPP) of $30,100 (IMF, World Economic Outlook, April 2013), just slightly below the average for the European Union. Moreover, with approximately 59.5 million inhabitants distributed among 20 regions, it continues to be on the radar screen of retailers and developers who want to tap into a base of sophisticated consumers in one of the world’s most industrialized countries.


Overview of Italian Shopping Centers Italy has nearly 1,300 modern retail destinations1


totaling about 18.4 million square meters (sq m) of gross leasable area (GLA). The existing stock is composed mainly of small shopping centers (56% of the total) with an overall average of 14,234 sq m of GLA and 31 shops. Retail parks, which account for 14% of the total shopping-


* Manager, Market Intelligence, Sonae Sierra 1 “Modern retail destinations” include factory outlets, retail parks, leisure centers, lifestyle centers, theme parks, etc.


INTERNATIONAL COUNCIL OF SHOPPING CENTERS 27 1 RETAIL PROPERTY INSIGHTS VOL. 20, NO. 2, 2013


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