New research suggests competition from low cost online retailers may not yet be a determining factor in rents for prime retail space in Europe and the Middle East.
But most of the data seem to be limited to the most prestigious high streets and shopping centres in various capital cities. The research says little about rental values in regional and secondary markets.
The data are contained in a new report from global real estate advisers, Colliers International.
They show what are described as ‘prime headline rent changes’, in other words how rents have moved in the leading high streets and shopping centres in some 20 capitals over the past year..
On this basis London is seen as leading high street rental growth in the past year, as rents on Bond Street rose 48%. Moscow’s Bolshaya Dmitrovka came second with 32% rental growth, but Moscow’s leading shopping centre fared poorly with a fall of 10%.
Across most of Europe prime high street rent changes were similar, ranging from 4% in Munich to 11% in Milan, with higher growth in Dublin, Stockholm, Edinburgh, Moscow and London, and falls in Frankfurt and Belgrade.
Prime shopping centre rent changes were also mainly positive, varying between 8% in Copenhagen and 18% in Bratislava with higher growth in Vienna and Munich, and falls of between 8% and 13% in Moscow, Milan, Hamburg, Minsk and Belgrade.
Rent changes for prime high streets were +25% in Cairo, around +5% in Dubai and Jeddah and -22% in Istanbul, while prime shopping centre rent changes were -10% in Cairo and Tbilisi and -29% in Istanbul.
The researchers acknowledge retailers’ fears that e-commerce is undermining brick and mortar stores, commenting that “the impact of e-retailing continues to take its toll on (rental) markets, and other countries may follow the evolution of the Dutch market”.
Several retail chains have closed in the Netherlands in the past two years and “prime rents in regional Dutch markets decreased or remained flat in 2016”, says the report.
Colliers does not explicitly link this trend in the Netherlands to e-commerce, but it gives figures for “e-buyers’ share in 13 capitals”, and in Amsterdam the share is 74%, higher than in any other capitals except London (83%) and Stockholm (76%). Perhaps in the Netherlands’ crowded environment, stores have difficulty competing with online retail on the strength of the shopping experience.
There is no obvious link in this research between rental changes and “e-buyers share”. The share is predictably lower in southern and eastern Europe and lower still in the Middle East, where rental changes (as recorded by Colliers) have also tended to be less positive overall, except in Cairo and Moscow.
However, the researchers would need to collect rental data for a wide range of shops and stores in secondary as well as primary markets – not just for premier locations – before any conclusions can be drawn.