Development in Western Europe continues to focus on large cities, while activity in the Central and Eastern European market is focused on smaller cities and suburban areas
European retail park floorspace increased by 2.2% in 2018, reaching 50.1 million sq.m
Physical retail undergoing significant evolution due to the growth of online shopping
New research from Cushman & Wakefield has revealed European retail park floorspace increased by 2.2% in 2018, reaching a total of 50.1 million square metres (sq.m), with France and Spain leading the way in terms of new schemes.
Cushman & Wakefield’s ‘European Retail Parks: What’s next’ report states that 995,000 sq.m of new retail park space was completed in Europe last year, down 15% on 2017. A stable development trend is expected going forward, with 1.4 million sq.m of new retail park space scheduled for opening in 2019/2020. Nevertheless, quick and easy construction and a growing number of schemes below 5,000 sq.m are expected to boost the number of openings.
The report has highlighted that physical retail is very much alive - but it is undergoing a significant evolution because of the growth in online shopping and the out-of-town market is not immune. However, the retail warehouse market has so far proved resilient, with affordability, flexibility, convenience and accessibility the main attractions for new retail park occupiers and shoppers.
As the retail park market moves towards maturity, development trends vary across Europe. In Western Europe, development remains focused on large cities with strong catchment areas and high pedestrian flows. However, some retailers are also developing their own small retail parks, offering spaces to other brands and activities.
In Central and Eastern Europe, development is turning to smaller schemes in smaller cities and suburban areas, in addition to secondary and tertiary locations. In countries such as Bulgaria, market conditions are now changing, and retailers are looking to expand in second and third tier cities. This provides an opportunity for small-to-medium sized retail parks with easy access, affordable rents and good quality tenant mix.
The report states that the location strategies of big box occupiers in some countries are evolving to incorporate smaller units in suburban areas in order to get closer to potential customers, as public transport use takes priority over the car in very large cities and some shoppers focus increasingly on convenience and proximity.
Top ten countries for new retail park space in 2018 (Source: Cushman & Wakefield Research)
Report author Silvia Jodlowski, Senior Research Analyst at Cushman & Wakefield, said:
“There are two stories surrounding retail park development in Europe. In Western Europe, we are seeing the market slowly reach maturity, with many cities now having adequate provision. In Central and Eastern Europe, however, the retail park market is still in its infancy. The relative under-supply of retail parks in the region, coupled with their ability to operate in small catchment areas, indicate further growth potential for the format.”
Total retail park floorspace in Western Europe amounted to 44.4 million sq.m as of 1st January 2019, with Germany, the UK and France remaining the largest markets in the region, accounting for more than 74% of total retail park space. Overall, 1.3 million sq.m of new retail space is expected to open in 2019/2020, a 21% decline on 2018/2019.
While retail park development in France has been decelerating, down 22% from 2017, the volume of annual completions surpassed that of shopping centres which has been declining at an increasing rate (-28%). The improved design of the new generation of retail parks has also contributed to the appeal of these schemes to occupiers and visitors alike. This is reflected in the development pipeline, with 782,000 sq.m of new retail park space currently under construction and expected to open in 2019/2020, representing 54% of the total development pipeline in Europe.
Retail park development in the UK is set to remain stable, with consumers still attached to the convenience and accessibility provided by out-of-town retail locations.
Southern Europe has seen varied trends in regard to development. Spain experienced an exceptionally strong year for development in 2018, with 165,000 sq.m delivered - four times higher than in 2017. In Portugal meanwhile, there was limited activity.
Central & Eastern Europe
In 2018, 219,000 sq.m of new retail space was delivered in Central and Eastern Europe, representing a 17% increase on 2017. The Czech Republic, Romania and Poland remain the largest retail park markets, accounting for 66% of the total retail park market in the region. The report states that there is an ongoing shift towards local retail park schemes serving only their primary town or the closest regional catchment.
Development activity was strongest in Romania, where 76,000 sq.m of new space was delivered. The size of the market in Romania is comparable with the Czech Republic, although with twice the population, retail park density remains at a lower level.
Over the last two years, retail park development in Poland has accelerated. Approximately 74,000 sq.m of new retail park space was completed in 2018 - representing a 21% annual increase - as the format becomes increasingly positioned as a way of attracting shoppers. Development is also rising in Slovakia, where interest is supported by demand from consumers in smaller towns and suburban areas who are looking for more convenient shopping facilities.
Silvia Jodlowski added:
“Weaker consumer demand and rising costs are forcing retailers to explore new formats and concepts and retail parks represent a viable option for many operators. Cheaper rents, lower service charges and more flexible floorspace are the main factors attracting retailer interest.
“While retail development is decreasing, retail park space as a proportion of total retail space has increased. Across Europe, we are now seeing developers and landlords experimenting with different formats to keep pace with changing consumer demand. In times of economic uncertainty, retail parks have proved to be an efficient alternative to shopping centres, but if landlords want to succeed, they must offer customers more reasons to visit. This could be achieved by broadening the tenant mix to include more food and beverage operators, as well as leisure and fashion retailers.”
Małgorzata Dziubińska, Associate Director, Consulting and Research, Cushman & Wakefield Poland, said: “Retail park development in Poland is gaining traction, accounting for approximately 8-9% of the nation’s total retail stock. Going forward, however, this proportion is likely to rise by the year. By comparison, in Western Europe this figure exceeds 20% on average.
Last year, approximately 74,000 sq m of retail park space was completed in Poland, accounting for around 19% of the annual retail supply; in 2019, this proportion is likely to hit nearly 25%. Development continues to focus on small schemes below 10,000 sq m on the outskirts of large urban areas and on markets with a population below 100,000 where retail space density is at its lowest.
Shoppers value accessibility and convenience afforded by such schemes, while tenants are attracted by relatively low service charges, flexible floorspace and simple logistics solutions”.