PARIS — Italy’s biggest shopping attraction is taking shape — with a marquee French retailer as an anchor.

Galeries Lafayette is to open a 194,000-square-foot flagship in Westfield Milan, a future mall billed as Italy’s largest and viewed as something of a gamble, given the country’s downbeat economy.

This story first appeared in the June 13, 2014 issue of WWD. Subscribe Today.

The first phase of the development, covering almost 1.9 million square feet, is slated to open at the end of 2017 on a site in Segrate, 3.7 miles from central Milan and will contain about 300 stores. The second phase is to be completed in two to four years.

Galeries Lafayette said it reached an agreement with mall specialists Westfield and Arcus Real Estate, controlled by Stilo Immobiliare Finanziaria, to open the four-level, 194,400-square-foot unit, part of an accelerated international push and signaling that Europe’s department stores are stretching into new frontiers.

“It is the combination of a promising market and a commercial operator that is very active worldwide that has convinced us to sign this opening in Milan,” Nicolas Houzé, chief executive officer of Galeries Lafayette’s department store division, told WWD. “We expect to draw a clientele from all nationalities, European and international, from North and South America, Asia and China.”

While acknowledging that few European countries have been spared economic woes and a drop in consumer spending, he held out hope the economic situation on the continent will have improved by the time the mall opens in a few years.

“Milan is an attractive city, it has been one of the factors,” he said.

The French department store operator has opened locations in Berlin; Casablanca, Morocco; Dubai; Jakarta, Indonesia, and Beijing in recent years, and is plotting future units in Doha, Qatar, and Istanbul. It has 58 locations in France, including the Boulevard Haussmann flagship here that sprawls over 648,000 square feet and carries 2,500 brands in fashion, food and home decoration.

Asked about the performance of its foreign units, Houzé said: “Berlin and Dubai are two stores that are seeing a significant growth. Results are in line with our goals in Beijing. As for the Casablanca store, performances still need to improve.”

Galeries Lafayette is increasingly adopting an international view, and earlier this year held talks to acquire Britain’s House of Fraser. Nanjing Cenbest, a Chinese department store chain and a subsidiary of the Chinese conglomerate Sanpower Group, prevailed and acquired 89 percent of the U.K. department store group, as reported.

The wholly owned Milan unit is to showcase what Galeries touted as “its unique know-how in fashion, from accessible to luxury.”

“It will be a true department store with fashion, accessories, beauty, shoes, etc.,” Houzé said, noting the retailer is studying if it might also incorporate food and design objects.

In entering Italy, Galeries Lafayette is going up against Italian department store operator La Rinascente — whose Milan flagship spans about 250,000 square feet of selling space and who has plans of its own to expand outside national borders. Last year, on the heels of bids and counterbids launched to secure Printemps in France, the retailer said it was acquiring the Copenhagen-based department store Illum. At the time, La Rinascente ceo Alberto Baldan said the plan was “to create a collection of luxury stores, not a chain.” In fact, Illum is to maintain its name.

Baldan said then there were plans for additional such ventures in the near future in other major capitals. The acquisition was in line with strategies mapped out by La Rinascente’s owner, Thailand-based Central Retail Corp., which took control of the Italian department store chain in May 2011 with plans to expand globally.

Galeries Lafayette is the first anchor retail signing for Westfield Milan and, according to a Westfield spokeswoman in Australia, there is strong interest in the project from “major international and Italian retailers.”

Representing an investment of about 1.3 billion euros, or $1.7 billion at current exchange, Westfield Milan is to include a luxury village, 50 restaurants, advanced digital technology, tourist and leisure services — such as cinemas — as well as a parking lot accommodating 10,000 cars. The mall has a target market of more than 7 million consumers with a potential spending power of 4.9 billion euros, or $6.6 billion, according to Westfield.

Milan has one of the highest per capita retail spends in Europe but counts few major malls. Capitalizing on this potential, Westfield Milan is expected to reach sales in excess of 1 billion euros, or $1.3 billion, comparable with both Westfield London and Westfield Stratford City in the U.K., at 1.2 billion pounds, or $1.6 billion, each.

“This is an amazing project,” enthused Victor Busser Casas, general manager of Arcus Real Estate. “Imagine the Westfield project outside London — we want to do it bigger and better.”

Asked about the timing of the project, in light of the lackluster economy in Italy, Busser Casas said the group was “convinced the worst of the crisis in Italy is over. We are at the bottom of the cycle and we will see increments in the next months. The second half of the year will be better. We know it’s been a difficult period, but it is also a moment of opportunities.”

Busser Casas marveled that, despite Milan’s standing in fashion, “There are no stores over 65,000 square meters [702,000 square feet] in Milan.” He conceded the project is “a big gamble, but one that has been very much studied. Italy is culturally based on fashion and shopping. This will not be a regional mall, but a national shopping center.”

He underscored that Milan’s region, Lombardy, is the country’s richest, one that attracts 33 million tourists annually. The executive said the project has met with “huge interest,” and that the group is speaking to all main luxury brands. He declined to provide specific names at the moment.

“We are negotiating with top brands to anchor the luxury village and start active leasing,” he said, adding that youth and high-street labels will also be present.

According to a business overview by Global Blue, which offers international tax-free shopping services for tourists, in the January to April 2014 period, top spenders in Milan were shoppers from the Russian Federation, accounting for 32 percent of the total, followed by customers from China, representing 22 percent.

Regarding the agreement with Galeries Lafayette, Busser Casas said the idea is to “bring something different and new to the Italian market on the highest end. It’s a win-win.”

He underscored that the mall will be unique “in terms of quality, management, design, brands and luxury. There is nothing of this quality, and it will show the newest, best and most modern architecture with an Italian flair.”

Westfield Milan will be strategically positioned near the international Linate Airport, accessible to high-speed railway connections, and a new planned highway that will allow customers to drive from the center of Milan in less than 20 minutes.

“Westfield’s global strategy is to develop iconic centers in key world cities and the inclusion of Italy’s first full-line Galeries Lafayette department store in this location will be a key attraction for consumers seeking a real point of difference,” said Michael Gutman, managing director Europe at Westfield. “For our first mall on mainland Europe, we will bring all our experience from London and other international centers as we believe the Milan region is dramatically underserved by a quality retail and leisure attraction.”

“The center is located in a key area of Italy with an attractive domestic and tourist catchment for retailers,” added Antonio Percassi, chairman of Stilo Immobiliare Finanziaria. “The per capita income in the region exceeds the European average by 35 percent and attracts over 13 million annual tourists. We are extremely proud that Westfield Milan will also create thousands of new jobs for Italy.”

Armando Branchini, deputy chairman of Milan-based InterCorporate consultancy, said the project is “a big gamble,” given the current economy, but that “the group likely has hopes everything will change in three or four years.” He said Galeries Lafayette is a name synonymous with expertise and that it is a brand well-known to Italians and tourists alike, one that will convey “a boost in reputation,” and help draw customers to a mall that is not positioned in the center of the city.

“It is likely that such a mall will negatively affect wholesalers in cities nearby, such as Bergamo or Brescia, more than in Milan,” said Branchini.

The Westfield shopping center group employs about 4,000 people worldwide. It counts investments in 87 shopping centers across Australia, the U.S., U.K. and New Zealand, comprising more than 20,012 retail outlets and total assets under management of $68.3 billion.

Stilo Immobiliare Finanziaria specializes in large shopping centers and factory outlets. The first Stilo project with the Percassi name was the Oriocenter, a shopping mall opposite the airport in Bergamo, Italy. Arcus Real Estate develops high-end retail real estate projects, mainly in the luxury segment, and manages a surface area of more than 2.1 million square feet nationally, including the Sicilia Outlet Village.

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