It may not seem like it right now, but ““Several premium retail markets in Europe are recovering,” according to a new report from international property advisor Savills. And he said that, in particular, “luxury spending in Europe has proven more immune to the reduction in consumer spending seen this year.”
It has been helped by the resumption of international travel and the “excessive savings that certain consumer segments accumulated during the pandemic.” Proof of this is the solid year-on-year growth in footfall on Europe’s main luxury streets, which increased by 8.4% on average.
And that dynamism has also meant that Rental performance in Europe’s luxury high streets has been strong.
Across the 16 luxury streets that Savills tracks in Europe, average prime rents in the third quarter of this year are just 2% below where they were in the fourth quarter of 2019. Just two years ago they had reached related low levels. with Covid, but Savills data (and plenty of anecdotal evidence) in recent months has pointed to growing demand for space on the most popular luxury shopping streets in key cities.
The streets it traces include Bond Street, London; Avenue Montaigne, Paris; Via Monte Napoleone, Milan; Grafton Street, Dublin; Ortega y Gasset, Madrid; Paseo de Gracia/Portal de L’Angel, Barcelona; Avenida da Liberdade, Lisbon; Kurfurstendamm, Berlin; Neuer Wall, Hamburg; Königsallee, Düsseldorf; Goethestrasse, Frankfurt; Maximilianstrasse, Munich; Birger Jarlsgatan, Stockholm; PC Hooftstraat, Amsterdam; Kohlmarkt, Vienna; and Nedre Slottsgate, Oslo.
It is also interesting that Savills has said that the strong recovery “has been driven by those streets beyond the great luxury capitals such as Milan, Paris and London”, as in IIceland, Spain and Portugal. In these smaller luxury markets, average rents are actually 1% above 2019, “supported by tighter availability, but also by the fact that many of these smaller markets are predominantly driven for internal spending.”
The mass market accelerates
And Savills added that while luxury high streets were the first to see a post-Covid recovery, “momentum on Europe’s mass market high streets is also starting to accelerate.”
Vacancy rates in these locations are falling and are in fact slightly better than in 2019. Of course, this is putting upward pressure on rents in some markets, with mass market high streets beyond London, Paris and Milan reporting an average growth of 2.2%. since 2021.
Demand is also favored The reach of potential customers that can reach the high street has seen a recent influx of online brands securing their first brick-and-mortar stores, supported in part by rising online customer acquisition costs.
The report acknowledged this year’s cost of living crisis that has hit retail spending in many countries. But he also said that “it looks like conditions will improve. “European spending forecasts in 2024 point to a rebound with growth of 3.7% in real terms.”
And he explained that this year’s problems have not been felt uniformly across the retail sector: “Restricting consumer finances [have] Driven discounts and convenience-driven retail spending as consumers look to save on everyday items and head toward cheaper retail options. These changing consumer trends have also led to a prioritization of spending on leisure and eating out, which accounted for 54% of total European retail sales year-to-date this year, unchanged from its share in 2022. , and that this participation will increase to 55% in 2024.”
Larry Brennan, head of Savills’ European retail agency, said city center locations have returned to the fore ahead of many out-of-town regional shopping centers across Europe. There is “an appetite on the part of brands to be in city centers to improve their visibility to a greater number of customers, taking advantage of the strong resurgence in footfall on Europe’s main shopping streets. As a result, we are seeing unemployment fall on the main streets of several markets.”
And Marie Hickey, Head of Business Research at Savills, added: “All major European markets are expected to see a rebound in retail sales next year. 2023 growth markets Ireland, Spain and Portugal, which bucked the broader downward trend seen in Europe this year, will continue to see growth of over 2% in 2024. Vacancies will remain tight on prime high streets , with rentals Growth will continue, although it is likely to be limited to markets outside Germany and the Nordic countries over the next six months. High street demand for high footfall mass markets will further diversify, with food, drink and leisure becoming more pronounced and new entrants from Asia Pacific targeting flagship opportunities in London, Paris and Milan.”
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