Author: Ken Gunn, 02 November 2017

A new normal for European retail

With the European economy showing positive signs of growth and consumer markets improving, this year’s MAPIC is set to be an interesting one. At FSP, we’re already seeing lots of opportunity for investment, especially in shopping centres.  

Dundrum

Peripheral vision

For a view on where the European consumer market may be headed, we need to go back to where the UK was pre-Brexit. Diversification prevails, with both the bigger centres and much smaller convenience-driven centres performing well, with those in the middle needing to explore where their place is in the market.

As with all retail, the key driver is technology; Europe’s slower digital uptake has meant landlords haven’t faced the same challenges as the UK in terms of retail fall-out.

If we take France, there’s been a shrinking of brand presence in peripheral towns, with the likes of Printemps closing in smaller towns like Poitiers. Such centres still have a strong role to play but landlords need to realise what their role is, and how to adapt their mid-tier and lower tier offers to this new environment.  From an investor perspective, this means there’s likely to be a large amount of supply in the market – key to picking the right one will be identifying those with clear opportunity to reposition themselves and getting the tenant mix right.

Rosada Fashion outlet

A strong centre

Meanwhile, Europe’s powerhouse centres remain largely untouched by the pressures of digital. Experiential city centres such as Copenhagen, Berlin and Paris are simply not under same pressure as regional counterparts, as they’re powered by the international expansion of brands.

The challenges for investors in these mature markets is extracting more growth, against a backdrop of increased online retailing and falling footfall. Looking at market share growth, by pulling more customers in from competitors, will be key to growing asset value here. 

Looking ahead

While uptake of digital lags behind that experienced in the UK, it is clearly a developing area. This is impacting traditional models such as retailer galleries, traditionally found adjacent to hypermarkets, on the continent. Smart investors are already mapping out their response, and adapting their centre offers.  This means securing leasing support, understanding customers, adapting tenant mix as well as positioning centres to reflect local characteristics.

Together with the team, I look forward to sharing how FSP can help our clients navigate this shifting European market.  Do come and meet us at Stand R7, C26 at MAPIC in Cannes from 15th to 17th November 2017.

 

MAPIC 2017

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