- Development of new retail parks to increase 50% in 2016 compared to floorspace added in 2015
- Nature of retailers changing as new entrants diversify from traditional high street locations
- Development pipeline increasing across Europe, led by France, UK and Italy
- Last year saw the most investment since 2006 with 39% more investment into retail warehousing than 2014
London, 3 August, 2016 – Increased retail park development across Europe is set to deliver 1.3 million sq m of new space to market by the end of the year, up 50% on 2015’s total, according to new research from Cushman & Wakefield.
The firm’s European Retail Park Development Report reveals a further 1.1 million sq m of new retail park space is scheduled for delivery in 2017. This is also significantly more than the 863,000 sq m of space added across Europe in 2015.
If all the new space is delivered as planned it will take the total retail park floorspace in Europe from 37.3 million sq m at the start of 2016 to nearly 40 million sq m by the end of 2017. Of the potential 2.41 million sq m to be added, 2.06m is in Western Europe and 0.35m is in Central and Eastern Europe (CEE).
As it was in 2015, the retail park pipeline for 2016/2017 is dominated by France which accounts for 54% of total new space in Western Europe, followed by the UK with 17%, Italy with 10%.
The top three in CEE are Russia, Poland, Czech Republic – although the pipeline of potential floorspace is considerably lower than in Western Europe.
Martin Supple, EMEA Out of Town Retail Partner at Cushman & Wakefield, said: “The demand for well-located and accessible retail parks is strengthening, and is being met with the addition of upmarket food operators and an improved quality of redevelopment and refurbishment. There has also been an increase in new entrants, as many retailers traditionally associated with the high street – such as H&M, Zara and CCC – look to test the water and trial retail parks as part of their portfolios.”
The report identifies a number of key retail park trends:
- The quality of the retail park offer is improving with redevelopments and refurbishments paving the way
- Growing consumer and retailer demand for well-located and accessible retail
- Expanding retail range, leisure and entertainment mix are key success factors for schemes
- Increasing levels of smaller-scale schemes servicing local catchment areas
- Reorientation of tenant mix with a growing proportion of newcomers to the retail park market that previously only took space in high street locations or shopping centres
- Addition of upmarket food operators
- Growing franchising in several sub-sectors, including fashion, white good retailers, leisure and entertainment operators in order to limit new format risk
- Increasing footfalls and decreasing vacancy rates
Martin Supple, added: “In general, there is growing occupier demand for retail parks across Europe – reflected in low vacancy rates – driven by relatively low costs, flexible floor layouts, better logistical structure for supplying the stores, click-and-collect services and the opportunity to test new formats and concepts.
“At the same time, customers are being drawn in by one stop shopping, free parking and an increasingly wide range of retailers. Improved designs and style and a focus on experience reflected in the presence of leisure and entertainment operators are also having a positive impact on footfall. This is reflected by an increase in development pipeline primed to deliver new units to market to meet appetite.”
Although 2015 saw a slight dip in development terms, it was the biggest year since 2006 for investment into retail parks and retail warehouses with €9 billion invested across Europe. This was led by the UK – which accounted for 55% of the total – followed by France and Sweden. French investment was up 69% on 2014 while Sweden’s €594millon represented a new record investment.
Transactional activity has been at a lower level thus far in 2016. Limited primarily to smaller deals in several Western European countries, the bulk of this investment has been located in France where retail parks remain a highly sought-after asset type. UK investors have been the most active both domestically and across the continent.
Patrycja Dzikowska, Associate Director, Consulting & Research of Cushman & Wakefield in Poland, said: “Retail park development has picked up over the last five years in Poland. Although by the end of 2010 only 500,000 sq m of retail park space came onto the market, the provision of new space doubled in the years 2011–2015 with the average annual supply at around 100,000 sq m. The retail park pipeline for 2016/2017 is expected to deliver another 280,000 sq m.
“The growth of the retail park sector is driven largely by growing developer interest in smaller towns. More than half of the 2016/2017 retail space supply will be delivered in smaller cities with less than 100,000 inhabitants. Retail park development is also spreading to towns with less than 50,000 inhabitants. Benefits of this retail format include lower construction costs and shorter delivery times, favourable rents and lower service charges.
“The pool of tenants in Polish retail parks is limited compared with that in better developed markets of Western Europe. Having said that, there is a stable group of well-known and popular brands for which retail parks provide excellent opportunities of growth, entering smaller local markets and expanding their customer base.”
The full report and data breakdown is available upon request.