“2016 was the third year of consecutive growth in consumer and retail spending in Europe, driven by low inflation, an increase in employment levels and wages due to people having higher disposable income. Looking at London specifically, significant increases in occupational costs in 2017, as a result of the rating revaluation and an anticipated rise in inflation, are likely to curb any further rental growth over the coming year. Retailers are still focusing on cost reduction, turnover is still under pressure and it is expected that short-term and more flexible agreements (for example leases based on turnover rent) will become more popular,” explains Paul Souber, Colliers’ Co-Head of EMEA Retail.
“Nevertheless, with considerable demand for space from both domestic and international brands and high overseas visitor spending due to currency depreciation, the outlook for retailers in the UK’s capital remains positive. In addition, UK-based brands selling abroad should benefit from overseas sales, especially through their e-retailing platforms. In addition, high occupancy costs did not discourage luxury retailers from expanding as numerous new opening and re-launches of refurbishes stores also took place in the capital city.”
Etienne Van Unen, Co-Head of EMEA Retail at Colliers continued: “On the other side of Europe, continued political uncertainty, especially around elections in the Netherlands, France and Germany, might well dent consumer and business confidence across this region. Additionally, the impact of e-retailing continues to take its toll on markets, and other countries may follow the evolution of the Dutch market. The Netherlands continues to grapple with structural vacancy across regional markets. Further rental declines are expected, despite strong demand growth for the key destination city of Amsterdam, which bucks the national trend.”
Other key findings from Colliers’ EMEA Retail Snapshot inlcude:
- EU retail spending is forecast to increase by 2.2 per cent year-on-year in 2017.
- Ethically motivated shopping is another increasingly important growth market.
- The highest growth was recoded in Luxembourg (14 per cent), Romania (13.3 per cent), Lithuania (6.7 per cent), Poland (6.4 per cent) and the UK (5.5 per cent). Outside the EU, Serbia (7.1 per cent) and Turkey saw sold growth (4.4 per cent), which Russia recorded a further decline (-4.6 per cent).
- Retail spending growth in Dublin was one of the highest among European cities. This resulted in strong occupier activity with domestic and international retailers actively looking for premises. Occupancy rates improved on many high streets in the past few months.
- The closure of several retail chains in The Netherlands over the last two years has contributed to structural vacancy across the country. This, combined with a rather slow recovery in retail sales, is putting downward pressure on rents. That said, although prime rents in regional Dutch markets decreased or remained flat in 2016, Amsterdam high-street rents recorded a minor increase and are expected to see further growth in 2017.
- General conditions for retailers in Germany were stable in 2016. In the five years leading up to 2015, strong prime high street rental growth was recorded in key German cities, ranging from 15 per cent in Munich and Dusseldorf to 36 per cent in Berlin. In 2016, most of the markets cooled off, with the exception of Berlin and Munich, which saw further rental growth on the back of strong retailer demand.
- The decline in international visitors to Paris had a negative impact on both tourism and retail, but demand improvements in Q4 2016 point to a more favourable outlook for 2017. The increasing number of tourists from China and the Middle East, which are the biggest international spenders, bodes well for France’s capital city. It remains one of the top luxury locations in the world, resulting in the opening of more luxury shops, including the first Vivienne Westwood store.
- Although Russia has seen a decline in new supply volumes compared to previous years, it continues to have the highest volume of retail space under construction in Europe. Furthermore, uncertain economic conditions have not scared off luxury retailers which keep flocking into Moscow.
- In Scandanavia, Stockholm led the region on retail spending growth, at 3.2 per cent year-on-year.
- The economic recovery in Southern Europe (Lisbon, Barcelona and Madrid) is visible in the retail sector, in both the occupier and investor market.
Changes to consumer spending capacity, consumer choices, and the rapid accession of technological adaption are re-structuring shopping behaviour.
Paul Souber concludes: “We continue to see the influential impact technology has on the retail sector, and how it is affecting consumer behaviour, with payments and shopping via mobile devices still acting as the primary tools of change. The in-store experience still holds significant value to brands but retailers must continue to embrace technology within their marketing mix to drive sales. Understanding how people shop in individual markets is not only of relevance to local retailers, but also to those brands operating across borders.”