Harper Dennis Hobbs (HDH) has updated its ranking of European towns and cities by retail spend. London’s West End still tops the table and there are no changes in the top six retail centres – which include Paris, Madrid, Rome, Munich and Berlin – but the rankings identify a shift in growing markets and what influences retailers should take into account in tailoring their expansion strategies.
The research finds that global events and volatile economic conditions are impacting significantly on retail hubs, with changes in local consumer spending levels, retail expansions and competing developments also affecting which centres are on the rise or decline.
Jonathan De Mello, Head of Retail Consultancy at HDH commented:“These rankings take into account both retail sales growth and new retail development, allowing retailers to comprehensively understand which centres are on the rise and plan accordingly. The rankings are therefore particularly useful for identifying growing markets. While the level of consumer spend coming to a city is a key factor in its success, other elements, such as out-of-town developments, can significantly impact the performance of a centre. These rankings are a crucial insight into Europe’s current retail hierarchy.”
Most notably this year, Barcelona has replaced Istanbul in 8th place, as a result of improving sales in Spain and the opening of flagship stores for brands such as H&M and Zara, alongside a thriving out of town shopping centre market in Turkey, which has had a negative impact on the centre of Istanbul. Centres such as Akasya Park (which won the ICSC award for best large shopping centre development in 2015) and Axis Istanbul, plus the country’s volatile currency fluctuations and worsening geo-political climate, has impacted retail sales growth negatively.
Further down the rankings, Leeds moves up one place to 20, following the opening of John Lewis, which anchors the new Victoria Gate. In Russia, both Moscow and St Petersburg fell heavily in the rankings, due to ongoing political instability, volatile oil price swings, the devaluation of the Ruble and the aftermath of Russia’s economic recession. Major Russian cities have also been impacted by significant out of town retail developments, such as the 38,000 sq m Metropolis Mall extension and the opening of the 60,000 sq m Oceania Mall. Strong consumer spending growth for Dublin, Marseille and Lyon have pushed them up the rankings, giving them similar market size to Hamburg, Copenhagen and Oslo, which have experienced relatively lower retail sales growth in the past year.
The opening of the 45,000 sq m Docks Bruxsel on the Bassin Vergote (Brussels), featuring brands such as Levi’s, MAC Cosmetics and Michael Kors, has had a dampening effect on spend in the city centre, and Brussels’ market size has fallen by 1.7% as a result. However, it still increased by two places due to St. Petersburg falling. In Southern Europe, Greece’s retail market is still afflicted by the very deep economic recession, with the economy fluctuating between positive and negative GDP growth throughout 2016. While such volatile swings wreak havoc on consumer confidence, Ermou and Voukourestiou Street – Athens’ two main shopping streets – have seen consistent rental growth in 2016, and are seeing higher levels of demand from international retailers.
Back in the UK, both Cardiff and Newcastle have grown in market size by over 1%, moving ahead of Athens. Warsaw has been another strong performer, with above average retail sales growth and an increase in its market size of over 3%, pushing it above Antwerp and Helsinki in the rankings. While no major developments opened in 2016, the opening of Galeria Północna, a 64,000 sq m shopping centre with 220 shops, may reduce Warsaw’s market size when it opens in 2017.
While there is ongoing uncertainty following the UK’s ‘Brexit’ referendum, positive retail sales growth in January, make it the 45th consecutive month of year-on-year growth for the UK and the EU economy also grew as a whole. However, the triggering of Article 50 is expected to have a wide-ranging impact on European retail, and the ambiguity may result in some retailers limiting their exposure to the UK. Notwithstanding this, we still expect London to remain Europe’s pre-eminent retail centre for some time to come, with supply of trail stock still outstripped by significant – and ever growing – demand.
Although there were no new entrants in the top 50, several cities improved their market size in Europe. Sofia in Bulgaria, for example, currently has a low density of out-of-town malls competing with the city centre, and retail sales growth has been improving. Looking forward, large scale developments may impact the rankings, such as Westfield Milan, expected to open in 2019, the Westfield London extension opening later this year, and Galeria Północna in Warsaw, also due to open in 2017.
Andrew Bathurst, Director of HDH’s International team commented: “These rankings provide a unique perspective on the changes in the European retail environment in the past year. Harper Dennis Hobbs’ analytical knowledge, and experience of global retail property, has helped to produce a clear representation of Europe’s best centres, which retailers can use to evaluate their portfolios and tailor their expansion strategies in the future.”
The research analyses 15,000 towns and cities across Europe and calculates the flow of spend to each via a ‘gravity model’.