International retailers across Europe: how are cities changing?

Within the Eurozone, retail trade will stand at +1.6% in 2018 and is expected to rise by +2.0% in 2019.

In the three largest European markets, in 2019, Germany, the UK and France, retail sales growth will continue to increase by more than 2%. Spain continues to benefit from economic recovery with a declining unemployment rate.

*Sources: Oxford Economics - BNP Paribas - November 2018

Whilst uncertainty surrounds the wider economy preceding the UK’s exit from the EU, London continues to attract some of the world’s most exciting brands. Despite fairly sizeable delays surrounding the delivery of Crossrail, with the estimated completion now set to be in autumn 2019, retailers are still drawn to the capital’s retail scene.

The £10m transformation of Bond Street completed in autumn 2018, which included pedestrian friendly wider pavements and a new public square. Perhaps more importantly, it heralded the reopening of seven stores such as jewellers Cartier and Chopard and the arrival of ten new brands including Italian jeweller Pomellato and womenswear retailer Chloe.

Regent Street has also welcomed several new retailers over the course of the year. Mulberry opened a new 5,000 sq ft fl agship store at 100 Regent Street, whilst French womenswear brand Maje took the former L‘Occitane store.

>>> Visit BNP Paribas Real Estate's UK website

NICK ROBINSON, RETAIL ANALYST - ASSOCIATE DIRECTOR BNP PARIBAS REAL ESTATE - UK

The Prague prime high street is performing very well, supported by growing numbers of incoming tourists and strong domestic demand. Prime rents are seeing sustained growth and in top locations are forecast to continue rising, both on the high street as well as in prime shopping centres.

New brands arriving on luxury Pařížská Street in 2018 include Valentino or Furla. Vapiano restaurant entered the Prague market last year, taking a property in Quadrio shopping centre. Vapiano has expanded since then opening this year in Myslbek in the city centre and in Centrum Chodov shopping centre.

New supply in the Czech Republic remains a constraint. The majority of construction activity will work to refurbish and remodel existing centres going forward.

>>> Visit BNP Paribas Real Estate's Czech Republic website

LENKA SINDELAROVA, HEAD OF RESEARCH BNP PARIBAS REAL ESTATE - CZECH REPUBLIC

The market among retailers and owners in Germany is characterised by uncertainty. Footfall and sales are declining whereas owners were spoiled in the past. They now have to deal with shorter contract terms, reduced rents and even site closures, through terminations. But it would be too much to talk about a crisis. Rather, flexible lease terms offer opportunities for new creative concepts, such as pop-up stores, which were initially represented online and now daring to go offl ine.

These can temporarily absorb vacancy and create an incentive to buy either through their short presence or a great presentation. Nevertheless, we have to adjust to vacancy also in the A locations.

Finding tenants at the same rent level is a challenge. New concepts for lease agreements are required here to enable tenants and owners to continue to come together in the future.

A recent model, for example, provides for a lower fixed rent to be paid. However, the landlord receives a top-up if the tenant has reached certain turnover or profitability limits. This also shifts operational responsibility somewhat more in the direction of the owner.

>>> Visit BNP Paribas Real Estate's Germany website

CHRISTOPH SCHARF, HEAD OF RETAIL SERVICES BNP PARIBAS REAL ESTATE - GERMANY

The global drive towards quality and good fundamentals in retail property is at play in Italy. Investors are becoming more selective and look for property that is sustainable in the medium/long term because of active management. This is especially the case for shopping centres.

The high street segment is seeing transactions of single assets passing from private individuals to institutional investors. This trend is especially noticeable in Milan, but can also be seen in Rome and in secondary locations like Venice and Florence. Driving this is the context of defined high street clusters that have important tourist flows and strong purchasing power focused on the area.

So far in 2018 the retail investment market in Italy has performed well with about €2 billion recorded; a 16% increase on the same period in 2017. Thanks to this result, retail is taking the largest share of investment volumes at 37% of total.

Positive signals can also be seen from retailers as new players are entering the market, especially in Milan, with innovative concepts (not present in other European capitals) that are generating an increase in rents.

>>> Visit BNP Paribas Real Estate's Italy website

CRISTIANA ZANZOTTERA, HEAD OF RESEARCH BNP PARIBAS REAL ESTATE - ITALY

Download the full report here.

Other content which you might be interested in:

• Expert view: the current European real estate investment market

• E-Commerce and Logistics: how is technology changing the sector?

• Breathing new life into an iconic building: the journey of BNP Paribas Real Estate and 28 Madeleine