Slump puts damper on surge in shopping mall construction
The economic decline has brought a halt to many shopping mall projects, reversing a trend of more such centres in many locations.
“Projects are being moved, changed, or cancelled, but it is too early to say how widespread this is”, says Juhani Pekkala, managing director of the Federation of Finnish Commerce.
Pekkala says that ideas for new concentrations of retail business might be taken out of mothballs when times get better, but that some of the ideas that were hatched when the economy was booming are to be scrapped completely.
“Commerce observes very closely how consumer demand and consumer confidence will develop this year, and it doesn’t look very good right now”, Pekkala says. He adds that there are fairly big problems in project financing right now.
Sharing this view is Juha Tiuraniemi, executive director of the Finnish Council of Shopping Centers.
“Of course the cyclical situation, and the finance crisis in particular, have affected investments, and starts for new projects.”
Last autumn the Ministry of the Interior collected information on 196 projects, of which half were large units for retail trade, or concentrations of shops. Of these, 45 were classified as hypermarkets. A total of 5.4 million square metres of floor space for business premises are being planned, which is equivalent to a third of today’s retail premises.
Tiuraniemi notes that of those approximately 200 projects, only 29 were actually new shopping centres.
“The market has changed considerably in the past six months. Not enough financing is available, or then the conditions set for the financing are such that profitability comes into question. A project really has to be really amazing, if it is to be carried out”, Tiuraniemi says.
In his view, projects which have capital of their own, or financing that has already been set, and a good number of properties with lease contracts, will be launched.
However, many will be postponed.
One example of a project experiencing problems is the Rinteenkulma shopping mall in Rovaniemi, where construction was suspended in December because of late payment of millions of euros. Nordea Bank cut off the cash supply.
The large retail chains Kesko and SOK plan to push their construction plans to completion in spite of the slump. SOK Director General Arto Hiltunen said shortly before Christmas that the S-Group will not scale back its investment plans worth EUR 600 million. in addition to building nearly 100 new shops, SOK is investing in a large service centre to be set up in Kajaani in a factory vacated by the paper manufacturer UPM.
Terho Kalliokoski, CEO of Ruokakesko, says that Kesko opened eight new Citymarket megastores last year, and five more are under construction.
“No decisions have been made on postponing construction, but in some locations there are discussions about costs”, Kalliokoski says.
A 100,000 square metre Ideapark shopping mall is to be opened at Kiiminki near Oulu on November 1st, 2011. The project is headed by Toivo Sukari, owner of the furniture retail chain Masku. Sukari’s company has agreed on building the “business city” on a 30-hectare plot of land. The trees have already been cleared away, and construction is scheduled to begin in the spring.
“I am 110 per cent certain that it will be a factor pulling people to the whole arctic area.
Once the Kiiminki Ideapark is built, Sukari plans to sell it and start planning a new one in the eastern town of Pieksämäki. A similar project in Vihti in the south of Finland has been on hold because of resistance by Minister of Housing Jan Vapaavuori.
Previously in HS International Edition:
Plans to erect 100,000-square-metre shopping mall near Oulu meet with scepticism (5.8.2008)
Federation of Finnish Commerce