Europe experiences a boom in retail parks

24 Jan, 2008, Milan

• France is the European country with the most retail warehouse floorspace. However, only 5 per cent of this is accounted for by integrated retail parks, as against single units/clusters.

• The UK is Europe’s most mature market, but its share of the total retail park floorspace in Europe has fallen from 80 per cent five years ago to its current 43 per cent as development continues apace elsewhere in Europe.

European Retail Warehousing 2008, a report by global real estate consultant Cushman & Wakefield, shows how the European retail warehousing market has begun its long-awaited transformation from being dominated by single units and clusters to see the emergence of a more sophisticated retail park format offering better accommodation for occupiers and consumers, as well as a more viable asset class for investors.

The UK is the most mature retail warehousing market in Europe, with 55 per cent of provision accounted for by integrated retail parks. However, it has seen its share of total retail park floorspace in Europe fall from 80 per cent five years ago to its current 43 per cent as development continues apace elsewhere in Europe.

At present, the only other country where retail parks account for more than half of total retail warehouse provision is Spain.

European Retail Warehousing 2008 analyses the markets of 15 European countries, taking into consideration factors including existing provision, as well as rents, rental growth
and yields.

Koen Nevens, Partner, European Retail Warehouses, Cushman & Wakefield, says: “We are seeing a structural shift in the retail landscape across Europe as the roll-out of the retail park format gathers pace. The total retail park pipeline, not including single-unit or cluster retail warehousing, is set to reach just over nine million square metres over the next two years.”

France has more square metres devoted to retail warehousing than any other country in Europe, with a total of 23 million sq m. However, only 5 per cent of this total is comprised of integrated retail parks rather than single units or clusters. It has around

4.4 million square metres of space proposed for the next two years, although a proportion of this total has yet to receive the appropriate permits.

Christian Dubois, Head of Retail, Cushman & Wakefield in France, says: “France may have one of the highest existing provisions of retail warehouse space, but most of this is in the form of clusters and stand-alone units. What we are currently seeing is an explosion of purpose-built retail parks, with key schemes coming onto the market such as the 43,000 sq m family village in Aubergenville.”

On a per capita basis, Poland and Italy have the lowest levels of retail warehousing. In Italy, just under 800,000 sq m across 30 schemes is planned to be completed over the next two years, mostly in the north of the country, but also with important developments in the centre and south. In Poland, Ikea is the clear market leader in the development of purpose-built, integrated retail parks.

Country	Gross Leaseable Area (square metres) of total retail warehousing space per 1,000 of population*
Ireland	431
France	378
Austria	354
Belgium	289
Netherlands	285
UK	244
Germany	212
Denmark	174
Sweden	166
Czech Republic	117
Hungary	90
Spain	87
Portugal	47
Poland	34
Italy	30

* Figures date from December 2007 and exclude food stores.
Source: Cushman & Wakefield.

In terms of occupiers, we are seeing a hard core of around 20 international retailers emerge in a number of countries across Europe, says Darren Yates, Associate, European Research & Consultancy, Cushman & Wakefield. In particular, these retailers include UK, German, French, Austrian and Swedish DIY (do-it-yourself) and furniture operators, which are also among the most active in the newly emerging markets for retail warehousing in Romania, Bulgaria, Russia, Turkey and the Ukraine.

The tenant base for retail warehousing is broadening, continues the report, from a predominance of DIY and furniture retailers, and discount retailers, to include more traditional in-town and shopping centre names looking to extend their presence out-of-town, as has been happening in the UK over the last decade. “Such retailers are attracted by lower occupancy costs and larger units, as well as good accessibility and easy parking,” adds Darren Yates.

Looking forward, Koen Nevens, says: “Over time, we will see a greater overlap in the tenant base between high streets, shopping centres and retail parks. With the further deepening and broadening of tenant demand, we also expect to see stronger rental growth, with scope for further, albeit limited, yield compression an added attraction for investors.”

Other key findings of Cushman & Wakefield’s report include:
• Ireland experienced the highest rental growth over the year to September, at 9.4 per cent, followed by Spain with 8.7 per cent and Germany with 6.4 per cent

• On a European level, annual rental growth is relatively low, at around one per cent, considerably lower than for high streets and shopping centres

• The highest rents are achieved in the UK - at €540 per sq m a year (bulky goods), this is more than 50 per cent higher than the €350 achieved in Ireland in second place. In Continental Europe, Italy recorded the highest rents, at €230. Indeed, the top rents in UK fashion parks are approaching €1,000 sq m/year.

• Average yields (all Europe) were at 5.46 per cent in September 2007, down from 5.88 per cent 12 months ago, with a considerable degree of convergence between markets.

• The UK is the most liquid and transparent investment market, with nearly €6bn of transactions in the first nine months of 2007. Other markets remain small in comparison, albeit that Spain, France and Germany are now seeing average investment volumes approaching €200-300mn a year.

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