In a tough economic climate with consumers conserving their money, it is the value retailers that are going to do well. Across Europe, the likes of Primark, Aldi and Lidl have been thriving and expanding.
These strong international retailers are also outperforming their local competition by having the clout to cut costs. Big discount fashion retailers have become the ‘must-haves’ within shopping centre developments, in particular in Iberia, where they have been expanding aggressively.
Luxury brands will also continue to do well as people who have money refuse to trade down, says Nadja Savic de Jager, associate director of European Research, CB Richard Ellis. Apple is one such retailer that is sought after by developers.
Even in the middle-tier market, growth is happening. For instance, the UK’s Marks & Spencer’s, which has franchises in 30 countries from the Czech Republic to Dubai, is said to be in talks to open in France.
With Russia’s development pipeline remaining the strongest in Europe, retailers there look keen to be back on the market after a two-year break, according to Cushman & Wakefield’s latest Marketbeat report Q310. The report states that the most active players are food retailers, cafés and restaurants as well as vendors of children’s clothes and sporting goods. It adds that many mergers and acquisitions deals took place as major retailers expanded their base. Leasing activity in the third quarter improved, as shopping centre deals came close to being finalised, in both prime and secondary markets.
Investors eye Russia
Foreign retailers continue to show a strong interest in Russia. While few new projects are planned, some retail projects that were put on hold have been renewed. These, combined with relatively healthy domestic demand, has pushed up rents in prime locations, such as Tverskaya Street, up by 14.3% year on year, although they remained unchanged elsewhere.
In the Baltic States, consumer confidence and stability is said to have risen over the past few months. Investment is starting to flow again and Estonia has committed to adopt the euro in 2011. According to speakers at the ICSC Baltic States Retail Real Estate Conference held in Riga, Latvia last month, there are significant opportunities for retail investment in the Baltic States, but the conference’s over riding message was that the region must shout louder about its successes.
Conference chair Marcis Budlevskis, director of leasing and development at Linstow Center Management of Latvia, said that there “is a golden opportunity for multi-national retailers seeking to establish a global reputation to introduce their brand into the Baltics at low risk, and for professional franchisees to create successful businesses. This region represents a first-class opportunity.”
According to Alvydas Zabolis, managing partner at Zabolis Partners of Lithuania, who also spoke at the conference: “Local capital continues to fund development. We have capital available and the banks are continuing to work with people who have shown they can perform. For those looking long term, land is now affordable and retailers are more willing to talk because supply is low. For a sound business, there is no lack of money.”
The same positive sentiment was also evident at another ICSC conference – the Czech Republic and Slovak Retail Real Estate Conference held in September. Dusan Mrozek, retail director of Marks & Spencer in the Czech Republic, and Markus Pinggera, Austria expansion manager of shoe retailer Deichmann, both spoke at the conference. They confirmed that they are actively expanding.
‘Stay ahead of competitors’
Pinggera said: “Our strategy is to be ahead of our competitors. We went into Croatia four years ago, we entered Spain this year and sales figures are good. We are also in Romania, Bulgaria, Slovakia, the Czech Republic and Slovenia.”
Mrozek said: “The room for Marks & Spencer’s expansion is immense. We want to open 15-20 shops every year for the next three years.”
With the slowdown in the development pipeline and an uncertain economic outlook, refurbishment and asset management have become a priority for the region’s developers.
Walter Wolfler, head of development east at Immofinanz, Austria, told the conference: “International retailers are gaining market share here, and retail concepts from the US and across Europe are still keen to enter the region. As we refurbish, we are creating larger retail unit areas to meet their requirements. It’s not always about big centres gaining market share over the smaller centres, either, it’s about the clarity of concept. A shopping centre can be small and successful, provided the catchment area is understood.”
But across Europe all eyes will still be on how economies perform in 2011. As Savic de Jager says: “Retail in countries where the fiscal rebalancing is less severe, leading to stronger consumer spending, will clearly outperform [in the coming months].
“The European periphery, especially Greece, which in addition to the severe government debt problems has a big shopping centre pipeline, will suffer further rental declines.”
