Europe’s most luxurious high streets recorded another year of robust rental growth in 2015, according to research from Cushman & Wakefield.
Rents on Via Montenapoleone in Milan expanded by 41.2% in a single year, making it the fastest growing high street rental market in Europe in Q4 2015, ahead of Rome’s Via Condotti (37.5% growth) and Barcelona’s Diagonal (33.3%).
Elsewhere, smaller but sharp increases have been seen in Paris, London, Dublin, Venice, Lisbon and Madrid. As a result of this extraordinary growth, high street retail is now the only commercial real estate sector in Europe where rents on a weighted average basis are above their previous peaks and yields are below pre-recession levels.
Retailers’ focus on key city locations is a response to the growing significance of urban living, driven by changes in lifestyles and demographics as well as city tourism.
Monika Sujkowska, senior analyst in Cushman & Wakefield’s investment strategy team, said: “The result of this re-urbanisation trend is more densification but also a strive for smarter, more creative urban designs and more effective transportation, allowing for healthier, less stressful environments as well as better accessibility and proximity at an affordable cost. From the retail perspective, mixed-use, centrally located schemes and high street shops in close proximity to culture, business, education, restaurant and tourism hubs appear to be ideal solutions to these challenges as they allow residents to not just shop but also work and socialise – all in the same place - while granting retailers the benefits of high natural footfall.
“It’s not just a matter of footfall and turnover, however. In a multi-channel world, the impact of physical property and its location on brand has become more important, with the right property moving up the retailers’ value chain. By extension, the brand of the retail submarket and the city is of greater significance and greater potential value. This explains the trend towards large statement outlets in city centres but also a parallel trend towards establishing presence in emerging shopping districts and the best streets in second-tier cities, in an attempt to spread and strengthen brand awareness.” added Sujkowska.
Michael Rodda, head of European retail investment at Cushman & Wakefield, said: “Growth in demand for centrally located retail space has been extraordinary but has not been geographically even. As retailers seek new expansion opportunities, this growth will spread further from established shopping destinations such as the key luxury high streets in Paris, London, Rome, Milan, Barcelona and Madrid to second-tier cities and smaller countries in 2016. Retailers are likely to target the streets that are best placed to reap the benefits of increasing economic power and wealth growth in their local markets.”
Anthony Selman, partner, CE Capital Markets at Cushman & Wakefield, said: “Across Europe investors are competing to invest into the fabric of the city. The vibrant heart of cities where people shop, work, eat and live. CEE and specifically Poland's major cities offer a great opportunity for International capital looking to invest into city centre real estate backed by urban life.”
