A Decade of Change in Italy’s Shopping Centers

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

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.

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-

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.

Table 6-1

Economic Outlook for the Group of

Eight (G8) Industrialized Nations*

Key Economies

Canada

Germany 3.1 0.9 0.3 1.3

France 2.0 0.0 -0.2 0.8

Italy 0.4 -2.4 -1.8 0.7

Spain 0.4 -1.4 -1.6 0.0

Japan -0.6 1.9 2.0 1.2

United Kingdom 1.0 0.3 0.9 1.5

United States 1.8 2.2 1.7 2.7

2.5% 1.7% 1.7% 2.2%

2011 2012 2013F 2014F

* Year/Year Annual Percent Change in Real Gross Domestic Product

F= Forecast

Source: International Monetary Fund, World Economic Outlook, June

2013 Update

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

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center GLA, are concentrated in the North (57%).2 Three

centers that can be classified as very large (i.e., with a

GLA larger than 80,001 sq m) are in the Center and

South, while most large shopping centers (with a GLA

ranging from 40,001 and 80,000 sq m) are in the North

(22 out of 35 total large schemes). (See Table 6-2.)

Nearly half (46%) of the total resident population lives

in the North, where 54% of total national consumption

takes place. Considering the total stock of existing GLA,

the commercial density3 in Italy is equal to 310 sq m per

thousand inhabitants. Density is significantly higher in the

northern (387 sq m) rather than the southern (229 sq m)

provinces. (See Table 6-3.)

If stand-alone stores next to a mall are counted, the

largest Italian shopping center is Etanapolis in Sicily, with

102,000 sq m of GLA; excluding this adjacent freestanding

space, the largest centers are Roma Est (98,000 sq m)

and Porta di Roma (97,000 sq m), both in the nation’s

capital.4 However, if centers are ranked by the number of

retailers, the largest malls are Porta Di Roma (241 shops5)

and Roma Est (210 shops). (See Table 6-4.)

According to shopping-center developer Sonae Sierra,

nearly all Italian shopping centers6 are anchored by

grocery operators of different sizes. At the same time,

leisure components such as cinemas, bowling, fitness

clubs or organized playgrounds are becoming increasingly

present. However, the number of shopping centers that

currently host a leisure tenant is still quite low (169 out of

1,071 schemes), representing 15.7% of the total.

The grocery format most represented in Italian

shopping centers is the hypermarket, with a sales area

larger than 2,500 sq m. More than four out of five (85%)

shopping centers larger than 5,000 sq m of GLA contain a

hypermarket. Shopping centers that opened in the past 10

years tend to be larger than their predecessors, boasting a

growing number of specialized tenants. This trend has

affected especially large and very large hypermarkets,

which started to witness losses in non-food related sales.

Table 6-2

Number of Shopping Centers, Factory Outlets and Retail Parks by Macro Region, 2013

Source: UrbiStat (www.urbistat.com)

Table 6-3

Gross Leasable Area (GLA) and Densities by Macro Region, 2013

Count Euros

GLA per Thousand

Inhabitants

(Square Meters)

Consumption

per Square

Meter of GLA

North 27,194,765 €523,291,001,272 10,533,968 387 €49,677

Center 11,591,705 19.5 196,042,107,784 20.4 3,175,794 274 61,730

South and Island 20,640,762 34.7 241,818,274,834 25.2 4,730,454 229 51,119

Total 59,427,232 100.0 961,151,383,891 100.0 18,440,216 310 52,123

45.8% 54.4%

Macro Region

Commercial Density

Total GLA

(Square Meters)Share of

Total

Population

Share of

Total

Total Consumption


2 Data provided by UrbiStat, a leading European retail software house. For comparative purposes, Italian regions are collected into larger macro

regions throughout this article. These geographic divisions are formally recognized by the Italian national institute of statistics (ISTAT). For simplicity

here, the Northeast and Northwest macro regions and South and Island macro regions are aggregated. This geo-aggregation is widely accepted in

Italy. The macro regions are centered around the following key cities: Milano (Milan), Segrate, Venezia (Venice), Genoa, Ravenna, Villese, Brescia,

Vinovo, Parma, Verona, Bolzano, Sarzana, Castelli Calepio, Jesolo, in the North; Roma (Rome), Firenze (Florence), Bologna and Barberino di

Mugello, in the Center; and Bari, Naples, Partinico, Reggio Calabria and Salerno, in the South. 3 The commercial density, or per-capita space, is calculated based on the total stock of GLA divided by total resident population. 4 UrbiStat. 5 According to Corio’s website. 6 97%, excluding retail parks and factory outlets.

Less Than

15,00015,001 < 40,000 40,001 < 80,000

Greater Than

80,001

North 398 181 22 0 15 112 728

Center 161 46 4 2 9 28 250

South and Island 153 94 9 1 8 34 299

Format Total 712 321 35 3 32 174 1,277

Format Share of National Total 56% 25% 3% 0% 3% 14% 100%

TotalMacro Region

Traditional Shopping Centers (Square Meters)Factory Outlet

Centers

Retail

Parks

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http://www.corio-eu.com/corio-italia-78.html

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The Industry State of the Art

Hypermarket sales began to decline in Italian shopping

centers long before the more recent intense phase of the

economic crisis, according to the quarterly sales index7

elaborated by the Italian Council of Shopping Centers

(Consiglio Nazionale dei Centri Commerciali, or CNCC).

During 2011, quarterly sales in the sampled hypermarkets

declined by 6%; traditional shopping centers, by 3%.

During 2012, however, malls’ quarterly sales declined at

approximately the same pace as those of hypermarkets.

Traffic in Italian shopping centers decreased in 2012 by

a monthly average of 1.7% compared to 2011. This

footfall indicator8 shows that Italian consumers cut the

number of trips to shopping centers; however, it does not

consider traffic in other emerging retail formats, such as

retail parks and factory outlets, as well as shopping

centers smaller than 20,000 sq m of GLA.

New GLA delivered to the Italian market decreased

considerably after the economic crisis hit the country in

2009. Approximately 131,000 sq m of GLA are expected

Macro Region Municipality Name

Gross Leasable

Area (Square

Meters)

Number of

Shops

South and Island Belpasso Etnapolis 102,000 130

Center Roma Romaest 98,000 220

Center Roma Porta Di Roma 97,000 241

Center Campi Bisenzio I Gigli 82,787 124

North Grugliasco Shopville Le Gru 78,500 165

North Orio Al Serio Oriocenter 75,204 184

North Busnago Il Globo 71,500 155

North Martignacco Citta' Fiera 70,800 186

South and Island Marcianise Campania 68,800 200

South and Island Nola Vulcano Buono 68,600 159

Center Fiumicino Leonardo 61,690 209

North Marcon Valecenter 59,839 130

North Cortenuova Le Acciaierie 57,100 152

South and Island Misterbianco Centro Sicilia 56,000 140

South and Island Palermo Conca D'Oro 54,890 100

North Carugate Carosello 52,842 130

7 Based on a sample including 300 shopping centers and some 3 million sq m of GLA. 8 The Italian Footfall Index, compiled by Experian Footfall, is based on data collected in 30% of all shopping centers larger than 20,000 sq m of GLA

and located throughout the Italian peninsula, including the two major islands.

Table 6-4

Largest Italian Shopping Centers, 2013

* Includes traditional shopping centers, retail parks and factory outlets. F=Forecast


Macro Region 2008 2009 2010 2011 2012 2013F

North 504,392 558,942 226,320 382,886 111,400 97,100

Center 182,975 130,474 64,178 36,438 20,758 17,625

South and Island 214,534 274,219 255,174 348,588 162,218 16,246

Total 903,909 965,644 547,682 769,923 296,388 130,971

Table 6-5

New GLA Added by Macro Regions (Millions of Square Meters)*


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to come onstream in 2013, representing nine newly

opened centers. (See Table 6-5.)

The Italian pipeline of new shopping centers is difficult

to estimate due to several announced projects that were

either canceled or postponed due to financing difficulties.

Most announced projects are in the North or Rome.

Foreign investors remain willing to develop large or very

large shopping centers, including new entrants such as

InterIkea and Westfield. By the end of 2013, InterIkea

will open the first IKEA-anchored shopping center in Italy,

in the Northeastern region. The company has two more

large projects in the pipeline. Westfield partnered with

local investor Percassi to develop Westfield Milan. The

project, just outside Italy’s fashion capital in Segrate, next

to Linate Airport, showcases some 170,000 sq m of GLA

with more than 500 shops for a total investment of more

than €1 billion,9 as seen in Table 6-6.

Trends in the Italian Shopping Center Industry

Expansion and Refurbishments

Although the pipeline of new shopping centers was

significantly reduced following the recession, local and

institutional investors are still willing to strengthen their

presence by expanding or refurbishing their existing

assets, as seen in Table 6-7.

According to Sonae Sierra, 149 expansions of shopping

centers took place in Italy during the last 10 years.

Moreover, 69 expansions or refurbishments are planned to

be delivered in the next two to three years, adding some

300,000 sq m of new GLA to the existing stock.

Among these expansions, the most significant is taking

place at Citta’ Fiera, a shopping center in the Northeastern

region, which is jointly owned by Corio and local developer

Bardelli Group, boasting about 94,500 sq m of GLA and

generating an annual traffic of 6 million visits.10 Among

other destinations,11 the nearly 80,000-sq-m expansion

project includes a fashion outlet of some 30,000 sq m and

a large area entirely dedicated to home furnishing.

One example of successful expansion and refurbishment

is Valecenter (see Figure 6-1), a shopping and leisure

center in the Northeastern region in Marcon, a suburb of

Venice. The shopping center, built in 1993 and acquired by

Sonae Sierra in 2005, comprises about 40,000 sq m of

GLA and 80 shops. Its 3,500-sq m expansion in 2007

added approximately 40 tenants, bringing the total to 124.

The €37-million project created 363 new jobs. The center’s

performance improved dramatically both in terms of traffic

and sales, leading to the prestigious ICSC European

Table 6-6

Shopping Centers in the Announced Italian Pipeline


Gross Leasable

Area (Square

Meters)

Year

North Villesse Villesse Shopping 90,000 2013

Center Roma Laurenino 60,500 2014

North Vinovo Mondojuve 58,000 2014

North Parma Parma Urban District 49,600 2014

North Castelli Calepio Castelli Calepio 39,347 2014

North Venezia Marghera 38,800 2014

North Jesolo Jesolo Magica 38,000 2014

South and Island Bari Barinova Shopping Center 37,545 2014

South and Island Salerno Le Cotoniere 31,732 2014

North Segrate Westfield Milan 170,000 2015

North Brescia Brescia Shopping 85,000 2015

Center Roma Aurelia 50,000 2015

North Verona Verona Porta Sud 42,385 2015

North Milano Cascina Merlata 40,000 2015

South and Island Partinico Partynico 35,711 2015

Center Roma Pescaccio Corio 220,000 2017


9 Westfield. 10 Corio. 11 Data on expansion of Città Fiera from the center’s Web site.

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http://www.corio-eu.com/corio-italia-78.html

http://www.cittafiera.it/progetto-ampliamento

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Shopping Center Award in 2010 in the category

“Refurbishment and Extension.”12

Factory Outlets and Retail Parks

Beside expansions and refurbishments, Italy’s

shopping-center industry witnessed in the last 10 years

the rapid development of factory outlets and retail parks

as new forms of retail destinations. Factory outlets and

retail parks help to maximize consumer time and money

through clear value propositions.

Similar to their counterparts in North America, factory

outlets in Italy are usually developed in a “village style”

and located well outside urban areas near highway exits.

Their retail proposition is to sell fashionable and luxury

brands at discounted prices. Moreover, they offer

organized entertainment, transforming the visit into a

family gathering and weekend destination.

The oldest of Italy’s 32 factory outlets, Designer Outlet

Serravalle, opened in 2000. Developed by McArthur Glen,

it is currently owned by Henderson Global Investors. The

outlet forms, together with an adjacent shopping center in

the Northwestern region, one of the largest aggregated

retail destinations in Italy with nearly 100,000 sq m of

GLA.

Italy’s 124 retail parks (the European counterpart to

North American power centers) are open-air structures.

While initially occupied by large, specialized category

killers, they are now often located near shopping centers

complementing their offer or integrated with eating

facilities in order to make visitors stay longer and

stimulate synergies with other activities.

Among Italy’s retail parks with a GLA larger than 5,000

sq m, the oldest is Centro Navile. Opened in 2003 with a

GLA of 23,300 sq m, this retail park in the Northeastern

region is owned by Henderson Global Investors and

features seven large, specialized tenants and two

restaurants.

Table 6-7

Renovations and/or Expansions in the Announced Italian Pipeline


12 See “ICSC European Shopping Centre Awards 2010,” retrieved June 11, 2013.


Additional Gross

Leasable Area

(Square Meters)

Opening

South and Island Reggio Calabria Porto Bolaro 13,700 2013

North Sarzana Centroluna 9,600 2013

North Venezia Auchan Mestre 16,500 2013

North Milano Bicocca Village 9,000 2013

Center Barberino Di Mugello Barberino Designer Outlet 6,000 2013

North Bolzano Twenty 13,000 2014

North Bussolengo Auchan Bussolengo 9,827 2014

North Vimodrone Auchan Vimodrone 2,682 2014

North Ravenna Esp 17,000 2014

South and Island San Giovanni Teatino Centro D'Abruzzo 3,006 2014

North Roncadelle Le Rondinelle 15,000 2015

North Savignano Sul Rubicone Romagna Center 7,787 2015

North Bassano Del Grappa Il Grifone Shopping Center 12,100 2015

North Martignacco Citta' Fiera 82,000 2016

Figure 6-1

Valecenter, Exterior View

Source: Sonae Sierra. Used with permission.

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Airports and Railway Stations

Shopping centers, factory outlets and retail parks

represent the main shopping destinations in Italy. Their

total sales (grocery excluded) account for €33.3 billion or

2.1% of the national GDP.13 However, retailers are also

increasingly expanding in unconventional places such as

airports and rail stations.

The largest retail space in an Italian airport is at the

Leonardo da Vinci International Airport, or Rome Fiumicino

Airport. Its nearly 25,000 sq m of GLA consists of 140

units and 30 restaurants. In 2012, shops at the airport—

the nation’s largest—were visited by 41 million

passengers, while recording €25 million in cumulative

purchases.14

The largest retail space in an Italian railway station,

Milan’s Centrale, comprises 80 shops and restaurants. It

receives approximately 120 million passengers on an

annual basis.15

Evolution of e-Commerce

Despite the ongoing economic crisis, Italian consumers

are finding alternative ways to maximize time and money.

In addition to traditional stores, they are increasingly

shopping online, though mainly within certain

merchandising categories.

According to Casaleggio Associati,16 the amount of

online retail sales in 2012 was €21.1 billion, up 12% from

2011. However, that increase was smaller than the growth

rates registered in 2011 or in the previous years. (See

Chart 6-1.) This is clearly a sign that online sales, not just

traditional retail sales, are influenced by the overall

macroeconomic environment.

Furthermore, Italian online sales are strongly influenced

by purchases done for traveling and gambling, accounting

for 73.5% of total online retail sales, according to

Casaleggio Associati. That statistic demonstrates that

Italians still prefer to shop in traditional stores for some

retail items such as fashion apparel, grocery, home

furnishing and health/personal care.

What Lies Ahead

During the past 10 years, Italy witnessed an increasing

presence of medium- and large-sized shopping centers,

lifting its commercial density closer to the European

average. Still, most existing shopping centers tend to be

smaller, anchored by a grocery store and lacking any sort

of leisure component, including modern food courts.

Italy shows potential for additional shopping centers,

especially in its more affluent central region. However, the

current adverse macroeconomic environment has limited

the pipeline of new projects. Large and very large centers

are still being constructed by national and international

developers, especially in the North, which has attracted

the interest of institutional investors.

The economic crisis that began during 2008 has

hampered Italian purchasing power and caused a steep

decline in consumer confidence. The results of this

negative environment are visible in the 2012 shopping-

center sales and footfall indexes elaborated by the CNCC

and Experian Footfall, with overall sales decreasing by

12%.

Nevertheless, investors are reinventing their assets.

Expansions and/or refurbishments will continue to

strengthen or create new competitive advantages through

adding leisure activities, creating or enhancing food courts,

downsizing underperforming hypermarkets, and

incorporating new brands or category killers that are

entering or expanding in the Italian market.

Even amid the current crisis, new formats such as retail

parks, factory outlets, airports and railway stations’

galleries all provide consumers with the best value in the

most convenient destinations.

Digitization provides always connected, increasingly

savvy consumers with tools to investigate products and

services before purchases. The challenge for the industry

is to leverage these new tools and to create the most

convenient and exciting destination for consumers to shop

in the mall.

Chart 6-1

E-Commerce Sales in Italy, 2004-2012

Source: Casaleggio Associati

13 “Shopping Centres, Retail Parks and Factory Outlets—Italy 2012,” UrbiStat, retrieved August 2, 2013. 14 Data from Aeroporti di Roma, retrieved August 2, 2013. 15 Data from GrandiStazioni, retrieved August 2, 2013. 16 Casaleggio Associati, “E-commerce in Italia 2013 – I trend dell’e-commerce e le opportunità del mobile.”

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Francesco Terra is a manager in the Market Intelligence department of Sonae Sierra, a leading

international shopping-center developer with over 70 assets under management with an open-market

value of €5.8 billion. He has worked in the retail industry for over 10 years, researching shopping

centers and focusing on development conceptualization, consumer dynamics, merchandising mix and

rental sustainability. Mr. Terra earned his Master’s in Business Administration in Marketing from

Youngstown State University, Ohio, and currently manages a team of experienced researchers,

conducting market feasibility studies in the EMEA (Europe, Middle East and Asia) and South America

regions. He can be contacted at: [email protected].

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Real Estate

A Decade of Change in Italy’s Shopping Centers