Demand ‘thinner’ on Europe’s high streets, says Cushman

For European retail, the coming year will remain a tenants’ market with further falls in rents and capital values, says Cushman & Wakefield.

The firm says that demand ‘has clearly weakened’ for larger units of 1,000 m2 +, leading to rental reductions, while there is growing demand for turnover rents and substantial capex in many places.

Darren Yates, Cushman’s head of EMEA Retail Research & Insight, said: ‘In places like Brussels, Paris, Italian is fairly common to hear reports that these larger units are difficult to let and demand is thinner than it was 12-18 months ago.’

The firm expects development activity to spike this year driven by markets including Russia, Turkey and France before easing in 2021 with competition among schemes intensifying.  

‘Developers are focused on redevelopment and refurbishment, while landlords will continue to experiment with new hybrid retail formats, sizes and tenant mixes.  These trends will lead to even greater polarisation and more emphasis on the re-purposing of under-performing or failed retail space’, Yates said.

There is a trend towards mixed-use development, with a wide variety of pipeline projects across Europe, ranging from sizeable city centre regeneration initiatives, to entirely new neighbourhoods/urban districts, small community projects and the redevelopment of single buildings.  This rapid growth in mixed-use development will frequently be underpinned by residential.

Overall, 2019 was a weak year for retail investment activity and pricing, with investors generally ‘out’ on retail’, he said.  Preliminary figures for the year suggest that European retail investment volumes were down by around 25% on 2018.  

Yields meanwhile have been largely stable but have begun to soften in a growing number of markets, led by the UK - which Cushman believes now looks relatively good value compared with much of Europe.

‘While 2020 is not expected to bring a sharp upswing in investment activity or indeed much cheer for capital values, selective asset allocation will generate rewards, as will good asset management, such as attracting new occupiers and sectors to improve tenant mix’, Yates continued.   

The main areas of investor interest will remain prime locations in major city centres which benefit from strong footfall, whether from shoppers, workers or tourists.  Other key target segments will be convenience stores in urban locations and grocery stores, plus designer outlet centres and property with a focus on leisure or activity-based retailing. 


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