Stockholm is the best city in Europe for investment in shopping centres, thanks to its safe haven status and wealthy population, according to new research by Savills, the international real estate advisor. The Swedish capital is closely followed by Warsaw, London, Amsterdam and Paris.
Savills’ analysis of shopping centre investment opportunities in 23 European cities looked at market size, market stability, retail prospects and potential returns. Stockholm was a clear winner, said Lydia Brissy, Director of Savills European research: ‘Taking into consideration all the factors that make up our benchmark results, it is the best performer and yields are also higher than in both other safe haven cities of London and Paris.’
Stockholm was found to have the best balanced market in terms of size, stability, prospects and returns, making it attractive to a wide variety of investors seeking to put money into shopping centres. It is a small but wealthy city, with a GDP per capita of €59,000 and an annual retail spend per inhabitant of €10,080, the fourth highest in Europe after Dusseldorf, London and Paris.
The Swedish economy is doing well and retail sales in the capital are expected to grow by an average of 2.6% a year until 2021. Shopping centre stock is already substantial at 1.4 mln m2 and is expected to grow by 2.3%, thereby providing investors with more opportunities.
Polish potential
Warsaw ran Stockholm a close second, despite its small retail sales volume, because opportunistic investors see good potential returns. The inhabitants of Poland’s capital already spend more per capita compared to their GDP, and retail sales are expected to increase by 5.6% a year in the next five years. Savills predicts that ‘Warsaw will become the biggest retail spending city per inhabitant by 2021, with a per capita spend of €11.650.’
Savills’ research reveals how the sector has changed in the last few years because of demographic shifts, the urbanisation trend and evolving consumer behaviour. London, which in 2011 was the undisputed leader in Europe accounting for 26% of total investment in shopping centres, has seen its share shrink from 26% then to 9% now, despite maintaining the highest GDP per capita.
Other cities in the study included Athens, Berlin, Dusseldorf, Lodz, Milan and Vienna.
‘This year we are expecting to see increasing appetite for shopping centres in non traditional markets such as Warsaw and Amsterdam,’ said Oli Fraser Looen, Director, Savills Cross Border Retail. ‘With relatively small market sizes but solid market fundamentals, both offer value for money for investors. We also believe that the Nordic market, particularly Stockholm, has the potential to attract investors with different profiles and strategies at competitive prices compared to what is offered by the likes of London and Paris.’
Country boundaries are ‘no longer seen as a barrier to entry’, he said, and cross-border activity is set to increase as investors target cities with strong long term fundamentals.