Large-scale expansion is still on the agenda for international retailers next year, in spite of the challenging consumer environment and an increasing share of shopping being done online, according to new research from CBRE.
Nearly three quarters of international retailers (71%) are planning to open more than five stores in the Europe, Middle East and Africa (EMEA) region by the end of 2012, with 20% of retailers looking to open 40 stores or more in 2012 compared to 18% in 2011.
CBRE's annual research report, 'How Active are Retailers in EMEA?', reveals that retailers are targeting a wide range of countries in both mature and emerging markets in 2012, but are largely focused on opening stores in countries where they already have a presence a similar strategy to that adopted in 2011.
For the first time, Italy leads the way as the most targeted country for retailer expansion moving up from eighth place in last year's rankings. Italy is followed by Germany, Russia, Spain and France, to make up the top five 2012 retailer hotspots, with more than 30% of retailers targeting each country.
In recent years, retailers have focused on Germany, the United Kingdom, France and Spain, but many are now searching for new opportunities. Although the prospect for consumer spending growth in Italy is modest, there is a clear opportunity for retailers to expand into a market that is under-represented in terms of international brands and where a considerable amount of new retail development is taking place. Germany's relatively strong economy continues to attract new retailers, while Russia has moved up from sixth position to third on the back of a strong economy and the prospect of further growth in consumer spending.
The Middle Eastern markets of Saudi Arabia, Kuwait and Qatar have also seen a significant increase in retailer interest compared to last year, with 15% or more of the surveyed retailers targeting these countries in 2012. High levels of wealth, more robust economies than those in Europe, and a relative lack of international brands are proving an attractive combination for retailers looking to grow their businesses. New shopping center development is also allowing retailers to realize their expansion ambitions.
Although retailers have been targeting a wide variety of markets they are still seeking to minimize risk. More than half of retailers (52%) are aiming to open stores in new cities, but in markets in which they already have a presence - a similar proportion to last year. The number of retailers planning to open additional stores in existing cities is also up from 9% last year to 17% this year, as retailers focus on the markets they know best. In spite of this caution, almost a third of retailers (30%) intend to enter new markets in 2012 - a similar proportion to last year's survey.
Peter Gold, Head of Cross-Border Retail - EMEA, CBRE, commented: "Retailers have had to cope with a more challenging consumer market than expected in 2011 and adopting a cautious approach to expansion has proved to be sensible call. The euro zone crisis has affected investment decisions in all industries, with retail no exception; however, this has not stopped retailers seeking new opportunities in 2012. Far from it, expansion plans for 2012 are just as extensive as they were in 2011.
"More than ever, retailers are prepared to cross borders to grow their business, seeking out the best locations in the major cities - the country is arguably less important. This is partly a result of current economic challenges, with retailers focusing almost exclusively on prime locations, but it also suggests that retailers have confidence that their brand can succeed in a range of diverse markets.
"While economic uncertainty persists, occupier demand remains firmly focused on prime retail space and there is little evidence that this will extend to more secondary locations. With virtually no vacancy in prime retail locations, and little new development, the challenge for many retailers is accessing the space they require."